The Office for Students warns that nearly three-fourths of British universities could be in deficit by 2025, with one in four leading institutions already cutting staff and budgets. These reductions threaten the global standing of British universities, considered to be among the best in the world.

What caused the current financial crisis?

The crisis stems from a combination of factors:

Stagnant ‘home’ student fees: The UK government sets tuition fees for domestic students, and raising them has proven to be politically unpopular. These remained frozen at 9,250 pounds for nearly a decade, before a modest 250 pound increase was approved recently.

Professor Dame Sally Mapstone, Principal and Vice-Chancellor of the University of St Andrews, noted that if indexed to inflation, the fees for each student should ideally be in the 12,000-13,000 pound range.

Meanwhile, universities face rising operational costs, staff salaries, and pension payments, widening the gap between fees and actual education costs.

“The reality in the UK is that public universities are inadequately funded,” Professor Sir Peter Mathieson, principal of the University of Edinburgh, told The Indian Express. “The research that we do is not adequately funded. Research funders give us money for consumable costs and equipment and some salary costs, but they don’t pay the full cost… It’s also true that home (local) students are not adequately funded.”

This structural underfunding forces universities to rely on international students — who pay up to 26,000 pounds annually — to subsidise operations.

“I suppose any business becomes dependent on its markets,” Professor Sasha Roseneil, Vice-Chancellor of the University of Sussex, told The Indian Express. “So when international student numbers were growing, universities grew their staff accordingly and became dependent. And in the context of lower levels of income from UK students because of the frozen fees, that dependency on international students has been greater.”

In 2022/23, international student fees contributed 11.8 billion pounds to UK universities, amounting to 23% of their total income, up from 5% in the mid-1990s.

Visa restrictions & increased global competition: Last year, the Tory government under Rishi Sunak imposed restrictions on international students bringing dependents to the country, and threatened to discontinue the graduate visa route, which allows graduates to work in the UK for two years. ‘’

Although the latter survived, the “unwelcoming” message caused international enrollments to plummet. Professor Mapstone notes many institutions experienced significant drops, creating major financial strain given international students’ disproportionate revenue contribution.

Simultaneously, other English-language education destinations have also become more attractive in recent years. “Australia and Canada competing far more aggressively for that taught student market has really impacted that market considerably,” Professor Mapstone said. “The Chinese government is also not encouraging its students to study abroad like it used to.”

How significant is the drop in enrolment of international students across universities?

According to Professor Mapstone, Board member of Universities UK which represents the interests of 141 universities, international student enrollment has dropped by 30-40% for most institutions this past year, largely due to dependent visa restrictions.

Postgraduate taught courses have been hit hardest. Professor Roseneil explains this is because “mature students” pursuing postgraduate degrees often have families they want to bring. The University of Sussex, where international students comprise 30-32% of the student body (India is the largest source, followed by China and Nigeria), saw a 40% drop in international enrollment in autumn 2024 following visa restriction announcements.

“I think it has particularly affected women (international students wanting to study in the UK). It’s often very difficult — almost impossible — for a woman to think, ‘I’m going to leave my kids behind and study abroad for a year.’ Some women do it, and in some cases, it can be a really positive experience for them, but it is still very challenging,” Professor Roseneil told this newspaper.

The University of Surrey experienced a 30% drop in the number of applications. “The drop is actually across South Asian countries like India, Pakistan, Bangladesh, and also in West Africa,” Professor GQ Max Lu told The Indian Express. Sheffield University lost over 2,000 international students — roughly 20% of its international student body — last year.

But, impacts vary by international profile. St. Andrew’s University, with half its 10,000 foreign students coming primarily from the US and Europe rather than South Asia, has seen minimal effects from dependent visa restrictions.

What measures are universities taking to address the financial shortfall?

UK universities are implementing both immediate cost-cutting measures and longer-term strategic changes.

Staff reductions: Many institutions like Cardiff University have introduced voluntary severance schemes.

“We have a scheme at the moment, a voluntary scheme, where we’re inviting applications from everyone who wants to leave. And we’ll give them a generous package,” Professor Roseneil from Sussex said.

Professor Koen Lamberts, Vice-chancellor of the University of Sheffield, notes the’’ve completed a similar program: “We offered them very generous terms to do that… We’re going to have to respond probably by becoming a slightly smaller university.” Edinburgh University is implementing a similar approach as well.

Income diversification: Universities are actively exploring alternative revenue streams.

“We are now looking at all sorts of new ways of increasing income from non-standard activities,” says Professor Roseneil. “Distance learning, online distance learning, CPD (Continuing Professional Development), Executive Education.”

Sheffield is focusing on commercialising intellectual property, while Exeter University created “Green Future Solutions”, a business-facing arm leveraging their climate expertise. Surrey and Cardiff have accelerated philanthropic fundraising efforts.

Transnational education: Delivering UK degrees in other countries through partnerships or international branch campuses is also emerging as a significant strategy for many institutions. An international branch campus allows universities to plough back some of the revenue to the parent campus.

Surrey University plans a branch in India. “It’s part of the diversification strategy of every university,” notes Professor Lu, viewing these ventures as building long-term financial resilience.

Exeter recently launched a Cairo campus. “We’ll be partnering with Ainshams University to deliver not only Exeter degrees but also joint degrees,” says Professor Lisa Roberts, President and Vice-Chancellor of University of Exeter. Cardiff is exploring opportunities in Kazakhstan, China, Southeast Asia, Saudi Arabia, and India.

What is the way forward for UK universities?

UK universities are advocating for several policy changes to stabilise their finances.

“We are encouraging the government to consider the equality impact of the change in relation to dependents,” says Professor Mapstone referring to how visa restrictions might disproportionately affect certain groups of students. She also argues, “students shouldn’t be included within the net migration figures (and hence not face the effects of policies aimed at containing migration). The student population is generally not looking to arrive in the UK and stay indefinitely.”

Professor Mapstone further advocates for government funding increases: “We think there should be a rebalancing which enables the UK government to say yes the student should contribute to the cost of their education but it benefits the country as well as the individual.”

Many anticipate sector restructuring. “I think we will go through a period of consolidation, some tough decisions will be taken,” notes Professor Rudolf Allemann, Pro Vice-Chancellor, International at Cardiff University. “There may not be quite so many universities, there may be merged institutions.”

Universities are also developing efficiency-focused teaching models. “Universities also start to think much more how to be efficient and effective,” says Professor Allemann, citing strategic online teaching as “clearly a lot less labour-intensive.”