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Large numbers of UK universities are at risk of falling into financial deficit due to a sharp decline in international students after hostile rhetoric by Rishi Sunak’s government, the head of the sector’s main lobby group has warned.
Vivienne Stern, the chief executive of Universities UK, which represents more than 140 universities, said the sector was facing the prospect of a “serious overcorrection” thanks to immigration policies that deterred international students from coming to study in Britain.
“If they want to cool things down, that’s one thing, but it seems to me that through a combination of rhetoric, which is off-putting, and policy changes . . .[they have] really turned a whole bunch of people off that would otherwise have come to the UK,” Stern told the Financial Times.
Stern’s plea came as it emerged that some top universities including York, which is a member of the elite Russell Group, were being forced to soften their entry requirements in order to maintain numbers of overseas students.
“The government needs to be very careful: we could end up with, from a policy point of view, what I would consider a serious overcorrection,” she added.
With the £9,250 domestic tuition fee effectively frozen for the past decade, UK universities have become increasingly reliant on non-EU students to make ends meet, with fees from non-EU students now accounting for nearly 20 per cent of sector income.
Universities are warning privately that numbers have softened sharply this year following a series of hostile policy moves by the government, with indications that enrolments may have fallen by more than a third from key countries including Nigeria and India.
One senior university insider told the FT that the sector as a whole had been “spooked” by data that showed the number of international students taking up places in January 2024 was “way below the bottom end of projections for everyone”.
In January, Sunak highlighted changes in government policy to stop international graduate students from bringing family members to the UK, adding the policy was “delivering for the British people”.
The government also announced in December that it was reviewing the so-called “graduate route” enabling international students to work in the UK for two years after they graduate and announced a crackdown on “low-value courses”, even though only 3 per cent are failing to meet criteria set out by the regulator.
Data from Enroly, a web platform used by one in three international students for managing university enrolment, showed that deposit payments were down 37 per cent compared to last year.
New analysis for UUK by consultants PwC found that the combination of falling international student numbers, frozen tuition fees, rising staff wage bills and a softening in UK student numbers was leaving the sector facing a perfect storm.
“You take those things together, and you’ve got a big problem,” Stern said, warning that the government needed to wake up to the risk posed to a sector that contributes £71bn to the UK economy every year.
The PwC analysis was based on 2021-22 financial returns for 70 UUK members in England and Northern Ireland and found that about 40 per cent are expected to be in deficit in 2023-24, falling to 19 per cent by 2025-26.
However, Paul Kett, a former senior Department for Education official who now advises PwC on education, said the numbers reflected assumptions about spending and income growth that now looked highly optimistic given the policy environment.
The PwC analysis found that if the growth in international students stagnated in the 2024-25 academic year, the proportion of universities in financial deficit would rise from 19 per cent to 27 per cent — but if numbers started to fall between 13 and 18 per cent then four-fifths would be in deficit.
On the other side of the ledger, it found that increasing fees 10 per cent for UK undergraduates in 2024-25 would shrink the share of universities in deficit from 19 per cent to 7 per cent.
The report said the effects of declining international enrolments could be compounded by other negative shocks, such as a rise in spending growth or a fall in domestic student numbers. It warned that mounting financial pressure could force universities to cut provision and delay investment, compromising quality for students.
Stern argued three interventions were necessary to put the sector on a stable footing: uprating tuition fees in line with inflation, increasing government teaching grants and stabilising the international market by dialling down negative rhetoric and ending question marks over the graduate route.
“You can take these individual scenarios that PwC looked at, and think that any one of them could tip a large number of institutions into a very difficult position, but the problem is that lots of those things are happening at once,” she said.
Robert Halfon, higher education minister, said: “We are fully focused on striking the right balance between acting decisively to tackle net migration, which we are clear is far too high, and attracting the brightest students to study at our universities,” he added.
