Record number of universities in deficit

Telegraph

07-05-2025

A record number of universities are in deficit as pressure grows on the Government to commit to bailouts for institutions that could go bust.
Telegraph analysis of the financial accounts for 143 higher education providers in 2023-24 found that 61 chalked up deficits last year – about 43 per cent of the sector.
It marks the highest figure on record and a significant jump since 2022-23, when 44 UK higher education institutions were in the red, according to Telegraph analysis.
Politicians and experts urged the Government to spell out its plans to ease pressure on the sector amid fears that one or more universities could buckle in the coming months without further support.
Nick Hillman, the director of the Higher Education Policy Institute (Hepi), said it was '100 per cent not sustainable' for ministers to continue to rule out rescue packages for any institutions that fail, as he warned that morale within the sector had reached its lowest point in decades.
The Telegraph analysed the deficit relative to income at UK higher education institutions last year after removing adjustments to expected liabilities to the pension scheme, which performed well in 2023-24. This provided a better picture of how universities' day-to-day spending related to overall income.
Five institutions were found to have recorded a deficit relative to income for the sixth year in a row, including Bishop Grosseteste University, Cranfield University, the Guildhall School of Music and Drama, Scotland's Rural College (SRUC) and the University of Reading.
Bishop Grosseteste University, which specialises in teacher training, recorded a 19 per cent deficit relative to income last year, with the Lincoln institution spending £3 million more than it earned.
Coventry University recorded the second-highest shortfall of UK higher education institutions in 2023-24, with a 16 per cent deficit relative to income.
Mr Hillman said: 'It's not massively surprising, because we all know the way the world's been going, but it is interesting to get the hard numbers because what we've been relying on is projections.
'Multiple years in a row in a deficit – that to me is the crucial point… And it's already got worse since the time period covered by [the] data, because inflation has continued to eat away at tuition fees, and the National Insurance rise has come in.
'[It's] 100 per cent not sustainable [for ministers to rule out a bailout]... Every government for decades has said that if a university goes bust, we don't bail them out, but it's nonsense.'
Dr Hollie Chandler, the director of policy at the Russell Group, said: 'These figures reflect the situation that universities have been warning about for some time – the financial challenges are significant, and many institutions are being forced to make very difficult decisions to safeguard their futures.
'Sustainable funding'
'Whilst universities are doing what they can to mitigate the situation, these measures alone will not be enough without government action to create a sustainable funding landscape.'
Universities have blamed current financial pressures on the eroding value of tuition fees over the past few years and a sudden drop in international students.
Bridget Phillipson, the Education Secretary, announced last November that the Government would raise university tuition fees in line with inflation next year for the first time since 2017, with further funding reforms to be unveiled by this summer.
But she has said universities should not expect taxpayer-funded rescue packages and instead told institutions to manage their budgets.
Leading university figures have warned, however, that the tuition fee rise alone does not go far enough, amid concerns that many universities are now teetering on the brink.
It comes after the Scottish Funding Council (SFC) was forced to step in with a £22 million funding package for the University of Dundee in March as the Scottish institution struggles with continuing financial pressures.
In a letter to Ms Phillipson sent on Tuesday, Helen Hayes, a Labour MP and chairman of the education select committee, warned that failure to address the worsening crisis across the sector would present a 'grave risk' to some universities.
Ms Hayes, who represents a cross-party group of MPs, urged Ms Phillipson to unveil contingency plans 'in the event that one or more universities cease to be able to operate'.
'Serious challenges'
'The committee is clear from our evidence session that there are currently a number of very serious challenges facing the higher education sector which, if left unchecked, present a grave risk to the financial viability of some institutions and courses,' she said.
Ms Hayes warned that university bankruptcies would also pose threats to 'the local economy in places where a university is an anchor institution and major employer, and ultimately to the international reputation and standing of the UK'.
Vivienne Stern, the chief executive of Universities UK, told The Telegraph that 'the reality for most universities is that they have had to make serious cuts' to weather the storm.
Telegraph analysis of the sector's latest financial accounts showed that universities laid off a record number of staff in 2023-24, with 10,223 redundancies across 108 of the country's largest institutions.
In total, universities were forced to pay out £210 million in severance payments across the country – almost double the previous year.
The University of Oxford laid off 656 staff last year, although many were part of Oxford University Press, costing the institution £5.3 million.
The University of Nottingham paid out £13.8 million to 408 staff, while the University of Central Lancashire paid out £10.5 million to 264 staff – their largest round of dismissals in at least a decade.
Mr Hillman warned that larger universities with healthy endowment funds would likely be shielded from the financial turmoil, while smaller, more niche institutions are expected to be the most vulnerable.
He likened it to the impact of Labour's introduction of VAT on private school fees, which is unlikely to wreak havoc on schools like Eton and Winchester Colleges, while more small-scale institutions have warned it could send them over the edge.
'Universities hate it when they're compared to independent schools… but I agree the analogy between them is very, very close,' Mr Hillman said.
The Hepi director also claimed there was growing discontent among university chiefs over Labour's approach to the sector, with recent policies echoing those of the previous Tory government.
Rishi Sunak, the former prime minister, was roundly criticised after announcing a ban in 2023 on most foreign students being allowed to bring family members with them to the UK, which many have blamed for a dramatic drop in international student numbers.
Sir Keir Starmer is now considering applying further restrictions on student visa applications from nationalities considered likely to overstay and claim asylum in the UK, The Times reported earlier this week.
Mr Hillman told The Telegraph that despite hopes that a change in government 'would mean a new understanding in Whitehall towards universities, that's not how people currently feel'.
'People think that this Government seems to regard universities very similarly to the previous government. There's an even greater sense of demoralisation, because it feels like the flames are getting closer,' he said.
'Firing on all cylinders'
Ms Stern told The Telegraph: 'Falling per-student funding, visa changes which have decreased international enrolments, and a longstanding failure of research grants to cover costs are creating huge pressures in all four nations of the UK.
'University leaders are gripping the problem… Our universities are something the UK can be genuinely proud of. They contribute over a quarter of a trillion pounds to the economy each year and are essential to the Government's growth ambitions and the UK's future economic success. We need them to be firing on all cylinders.'
The Department for Education was approached for comment.
Prof Andrew Gower, vice-chancellor of Bishop Grosseteste University, said: 'As seen across the sector, it is an increasingly challenging operating environment for universities.
'In response to these challenges, over the past three years, Bishop Grosseteste University implemented a programme of transformation to reduce operating costs whilst continuing to grow activity, maintain quality and deepen the impact of our teaching, research and knowledge exchange.'
A spokesman for Coventry University said: 'Our deficit for the financial year 2023-24 was consistent with our size, our previous success in recruiting international students, and our strategic decision to reform our structures and practices.
'We didn't create the financial crisis in the higher education sector, but we saw the storm coming and our deficit is partly due to our decision to spend some of our substantial cash reserves to buy time to reshape and resize the group over two years, with three years of planned change happening in year one of that programme.'
A spokesman for the University of Reading said: 'While we face many of the same financial challenges affecting many UK universities, we have in recent years made strategic decisions to draw on reserves rather than make short-term cuts, while also focusing on improving teaching. This has supported our key principle of environmental and financial sustainability.'
A spokesman for SRUC said: 'Like much of the higher education sector in Scotland, SRUC has faced significant financial challenges in recent years and we are continuing to make good progress in addressing these. We have also recently made a number of strategic investments, including obtaining taught degree awarding powers and launching Scotland's first new vet school in 150 years.'