British universities are facing growing financial strain. The higher education sector’s funding model has weakened after more than a decade of frozen tuition fees for domestic students, rising operational costs, and heavy reliance on income from overseas students.
Domestic undergraduate fees in England have been frozen at £9,250 since 2017, losing more than 30% of their value in real terms, according to UK government and parliamentary data.
At the same time, universities have become increasingly dependent on international students for revenue. Overseas students now account for around 24% of total enrolments, with India emerging as the single largest source country, sending over 100,000 students to the UK in 2023.
Read | Before you study abroad, know this: Weather, money — harsh realities from an insider
The Office for Students warned that nearly three-quarters of British universities would be in deficit by 2025, with one in four leading institutions already cutting staff and budgets.
In a wide-ranging conversation, Eric Neumayer, Deputy President and Vice-Chancellor of the London School of Economics, spoke to The Indian Express on the sidelines of the QS Summit India, 2026 in Goa, about why international students, particularly from India have become central to university finances, what recent crackdowns on pro-Palestinian protests in the United States signal for academic freedom, and how LSE itself has handled campus activism during a period of intense global polarisation.
Excerpts:
Q: British universities are being warned of widespread financial deficits. Before we get into international politics, can you explain what structurally caused this crisis in the UK?
Story continues below this ad
This crisis has very little to do with sudden shocks and a great deal to do with long-term underfunding. At the most basic level, there is barely any meaningful state funding for UK universities anymore.
For many years, tuition fees for home undergraduate students were frozen. Even now, when increases are permitted, they are only in line with inflation. That might sound reasonable on paper, but in reality, universities’ costs — staff salaries, pension contributions, energy bills, maintenance, compliance — have risen far faster. Over time, this creates a widening structural gap.
Also read | India at centre of UK’s £40-billion international education strategy as student targets dropped
What is important to understand is that for many universities, home undergraduate students make up the largest share of enrolments. When that segment is underfunded year after year, institutions are forced to look elsewhere to remain viable. That is why international students have become so important.
Story continues below this ad
At LSE, we are somewhat insulated because we are more international and postgraduate-focused, and those programmes are not capped in the same way. But for many universities across the UK, particularly large teaching universities, this has become an existential challenge.
Q: The Office of Students had warned that by 2025, several UK universities were to face a deficit. Has the situation improved at all now in 2026, or is the sector still under pressure?
It remains very precarious. And, unfortunately, recent government decisions have added to the pressure rather than alleviating it.
The levy on international student fee income is a good example. International student fees are, in economic terms, export revenue. Taxing them is effectively an export tax. From a long-term competitiveness perspective, that makes very little sense.
Story continues below this ad
The motivation is largely political, reducing net migration figures and reallocating funds. Still, the outcome is that universities are left with fewer resources at precisely the moment they need to invest. That is why you are seeing redundancies, hiring freezes, and, in some cases, the closure of entire departments across the sector.
Q: How does this compare with what other countries are doing?
If you look at China, the contrast is striking. The Chinese government is investing heavily, billions, into its universities. That is a strategic choice about long-term economic growth, research capacity, and global influence.
In the UK, the state is doing the opposite. If you ask which of these approaches is more likely to produce globally competitive universities 10 or 20 years from now, the answer is fairly obvious.
Story continues below this ad
Q: Amidst this, do you see a fall in international student enrollment numbers?
Universities are not failing in a dramatic sense. No major institution has declared insolvency. Reputation, academic quality, and post-study opportunities still matter enormously to students.
What is happening instead is a slow erosion. Universities are cutting back rather than investing. They delay hiring, reduce course offerings, and scale down ambitions. Over time, that weakens research capacity and academic breadth.
I often describe this as death by a thousand cuts. The damage accumulates gradually, but it is real.
Story continues below this ad
Q: How central are international students to sustaining research in the UK?
They are absolutely central. Research funding in the UK rarely covers the full cost of conducting research. Funders typically pay for equipment and some salaries, but not the full overhead.
As a result, universities rely on income from international students to cross-subsidise both research and the education of domestic students. This model has become deeply embedded. Without it, much of the UK’s research output would be difficult to sustain.
Q: How important are post-study work options, particularly for Indian students?
Story continues below this ad
They are hugely important. For many Indian students, the opportunity to gain work experience after graduation is not an add-on; it is central to the value proposition of studying abroad.
The reduction of the post-study work visa from two years to 18 months was therefore deeply disappointing for universities. That said, 18 months is still psychologically long enough for many students to feel it is worthwhile.
If that window were shortened further, I think we would see a much sharper decline in demand.
Q: Turning to the US, universities there have seen intense pressure under the Trump administration, particularly over pro-Palestinian campus protests and foreign students. How do you view this?
Story continues below this ad
I think this approach will harm the United States in the long run. It is extremely short-sighted.
Universities depend on free inquiry, debate, and academic freedom. When governments punish institutions or students for speech they dislike through funding threats or visa cancellations, they undermine the foundations of science and scholarship.
The US has long portrayed itself as a champion of free speech. What we are seeing now suggests that free speech is tolerated only when it aligns with those in power. That is deeply worrying.
Q: Does this set a dangerous precedent globally?
Yes. It creates a playbook. Others who wish to suppress dissent can point to this and say: This is how you bring universities into line.
Once that happens, institutional autonomy becomes fragile, and universities lose their ability to serve as spaces of critical inquiry.
Q: LSE itself has seen multiple protests, including pro-Palestinian demonstrations and encampments. How has the university handled this?
Protest is a normal part of life at LSE. We regularly see demonstrations on campus—pro-Palestinian, pro-Kurdish, and from Israeli student groups. That is entirely expected at a place like this.
We did have an encampment, similar to those at other US universities. It went beyond what would normally be allowed because it occupied an indoor building, but we treated it as an exceptional situation and allowed it for a limited period.
At the same time, protests cannot disrupt the core functioning of the university indefinitely. There has to be a balance.
There was one instance last year where students protested indoors, and staff felt intimidated. In that case, we investigated and issued written warnings. We made it clear that peaceful protest is welcome, but attempting to shut down university operations crosses a line. That distinction is crucial.
Q: Do UK universities retain more autonomy than their US counterparts?
Yes, I believe they do. Compared to the US, UK universities have been able to maintain greater institutional autonomy. To the UK government’s credit, it has not intervened in campus governance to the same extent. That difference matters.
Q: With growing hostility toward immigrants and campus activism in the US, is the UK becoming more attractive to international students?
In the short term, yes. We are seeing increased interest from students who are reconsidering the US. That said, student decisions are complex and influenced by many factors. It would be wrong to attribute changes solely to politics.
Q: Many UK universities are responding by opening campuses overseas, including in India. Is LSE planning on opening a campus in India?
That is simply not our strategy.
Q: There is persistent criticism that elite institutions like LSE remain accessible mainly to wealthy students. How do you respond to that?
It is a fair criticism, and one we take seriously. Expanding scholarships is one of our top fundraising priorities.
However, this is a long-term challenge. US universities are far ahead in this regard because of decades of philanthropy. To reach a point where cost is not a barrier, we need sustained donor support.
At present, many international students do come from privileged backgrounds, and the cost of living in central London exacerbates that. Acknowledging that reality is the first step toward addressing it.
Q. Given the influence global rankings have on student choices, has LSE made any changes specifically to improve its position in rankings, or are rankings still a secondary consideration?
We didn’t pay any attention to rankings for a long period of time. But of course, university rankings are important for students. So we have now taken this much more seriously.
One of the things we found is that, unfortunately, rankings such as QS are systematically biased against a specialised social science university like LSE. That’s because they work on the assumption that a university is a comprehensive university. Simply put, our ranking at the moment in the QS is, I believe, around 56 worldwide.
That is not a good ranking for us. And simply put, if we had a really bad faculty of engineering and a really poor medical school, we would be ranked more highly, which makes no sense.
All of our subject-level rankings are much higher than our university-wide ranking. That’s because, at the subject level, we are not disadvantaged by not being comprehensive. We don’t have engineering, we don’t have the sciences, and we don’t have a medical school. And this is our problem with rankings as a specialised social science institution.
