‘Not a V-shaped recovery’: UK universities, experts brace for possible financial instability

In an opinion piece published online by the University of York, Vice-Chancellor Charlie Jeffery talked about how “it is only because of the international student fee income that we can afford to teach home students”.

Several reports have also suggested the situation exists in the UK.

What numbers say

The UK’s Home Office received 28,200 applications for sponsored study visas in June, a nearly 28 per cent decrease from last June’s 38,900 applications.

Enroly, a service that assists international students with university enrolments, observed in March that the key metrics for the January 2024 intake were down by around a third year-on-year on its platform. The overall deposit payments are down by 34.95 per cent, CAS (confirmation of acceptance for studies) issuance is down by 32.12 per cent and visa issuance is down by 33.11 per cent. Back in November 2023, the overall deposit payments were down by 52 per cent, CAS issuance by 64 per cent and visa issuance by 71 per cent, when compared to January 2023.

Although only a minority of international students apply via the Universities and Colleges Admissions Service, the 2023 data showed that 71,575 of all ages were accepted on to UK courses in 2023–3 per cent less than the year before.

The percentage of CAS issuance for Indian candidates decreased by 32.55 per cent. Even in November 2023, Enroly predicted that there were indications there would be large falls in students from the UK’s largest market, India, with deposits down by 52 per cent and CAS/visa issued down by 66 per cent. Additionally, the number of Indian applicants of the UCAS has also decreased from 12,920 in 2023 to 12,750 in 2024.

Rise and fall of Indian applicants in UCAS applications

“Several factors are contributing to the decline in international applicants to UK universities. The increase in tuition fees, influenced by university policies and Government funding, plays a significant role. Rising living costs and restrictive visa policies have also made the UK less attractive. Efforts to reduce the number of international students have become a significant issue for the sector. Although dependent-visa restrictions are not a major deterrent for Indian research students, the overall change in perception due to political shifts is concerning. Since the Government initiated the MAC review of the graduate-route visa from October 2023 to May 2024, we have observed a notable decline in student applications,” said Arita Ghoshal, founder-director at One Step Global.

Experts had been predicting this fall for a while now, as the Sunak government’s policies hinted at a gloomy weather for the British education system. “This fall was inevitable and appeared to be a component of the UK Government’s former policy, which involved talking down the market starting in early 2023. Additionally, the policies they implemented strengthened the perception that the UK did not accept international students. Students found it more difficult to finance study in the UK as a result of the increased visa cost and IHS (immigration health surcharge) expenses,” said Suneet Singh Kochar, CEO of Fateh Education, a UK-Ireland educational consultancy.

Bankruptcy in the near future?

However, experts are predicting that this decline may bring the harshest autumn for the UK universities and do something that has never happened in the history of the British education system—bankruptcy of a university.

Two recent reports—one by PricewaterhouseCoopers and the other by the Office for Students (OfS), the higher education regulator for the UK—have recently predicted that 40 per cent of England’s universities face the danger of budget deficits this year. The claims made in such reports are being strengthened by the ground reality at several universities such as the University of York, which observed a small deficit (less than 3 per cent of the overall turnover) in the annual financial reporting.

“Major inflationary pressures, a UK tuition fee worth 50 per cent of what it was when introduced, and the previous government’s policy choices and negative rhetoric towards international students have led to most UK universities having to introduce cost-containment programmes. This combination of factors led to York seeing a small deficit,” Vice-Chancellor Charlie Jeffery told indianexpress.com.

While the decline in the number of international students is more recent, experts believe the stagnant tuition fee is one of the main reasons behind this looming danger of bankruptcy.

“The problem is that we have continually made damaging, retrograde steps to our universities, which has affected our universities’ ability to continue to be the best. And we see that in spite of our hands being tied behind our backs, one reason (is that) the fees of undergraduate students have been capped for the past seven years. How can you do that when you’ve had inflation, which has reached a peak of 11 per cent in that period. The real value of the income to the university is not £9,000; it’s about £6,000. On the other side, the costs of universities have gone up because of inflation. So they’re being squeezed by lower sales and higher costs,” said Lord Karan Bilimoria, a member of the House of Lords who has fought for graduate visas since the beginning.

Tuition fees for domestic students have been held at £9,250 ($11,925) since 2017 and increased by only £250 in the past 12 years. With such a minor increase, institutes have had to turn towards international students to keep themselves afloat. So, when such a shrinkage creeps in, the crumbling of the kingdom seems inevitable.

Statistically, there are more postgraduate international students, rather than at undergraduate level, and that is where there are no limits to the fees. So the universities charge a much higher fee for international students, up to three times higher than domestic students. “Higher fee is what enables the universities to subsidise the cost of the domestic undergraduate students because we make a loss on every undergraduate student. So if you then make it damaging for international students, and you have anti-international students rhetoric, or reduce the number of international students, you are also reducing the health of the universities,” Lord Bilimoria added.

While experts believe that the tuition fee needs to be revised to match the inflation, international students seem unhappy with the suggestion. “I am already taking a huge loan, and I am sure that other aspirants are also doing the same, or some parents might be investing their life savings. To think that there can be an increase in the tuition fee is just appalling. It will become completely unaffordable for second and third world countries’ students in such a case,” said a 21-year-old who will be applying for a MA International Business degree for the September 2025 intake.

However, experts feel that the gap in the tuition fee is not a secret, and students should plan accordingly. “While it is true that the cost of tuition for international students is nearly twice that of domestic students, the government has frozen the UG price and provides subsidies for a portion of it, but the true expense of offering a top-notch programme remains unpaid. As a result, overseas students wind up footing the entire cost plus a little extra to make up for the loss these universities incur when offering these courses to domestic students. The domestic and international fees are displayed simultaneously on the website, so students are aware of this difference even before they have applied. It is important to note that colleges do not try to conceal this discrepancy,”

Hope from Labour?

Learning from the damage caused by Rishi Sunak’s anti-immigration rhetoric, the new Labour government has been sending out friendly and reassuring messages for international students. That coupled with the reassuring conclusion of MAC Review in May is bringing hopes for the struggling UK universities.

“The outcome of the MAC review in May 2024 supporting the continuation of a graduate-route visa was reassuring. Post-study work in the UK remains a viable option for Manchester graduates, who are popular with employers in the UK and around the world,” said Dan Herman, India country manager at the University of Manchester.

However, there still are some universities and experts who reckon that the Keir Starmer-led government will not be able to provide a V-shaped growth chart immediately.

“The new Government has inherited a range of fiscal challenges. And at York we recognise that this means the new Government is unlikely to be able to find new funding for the sector, and we therefore have to find our own solutions. To that end, we have moved quickly to manage our finances with a series of measures to return to a surplus and ensure our continued stability and resilience. We expect to be back in surplus in the next couple of years.

“York is one of only four universities to have won the top UK Gold Teaching Excellence Framework award and be in the top 10 in the UK Research Excellence Framework, matched only by the Universities of Oxford and Cambridge and Imperial College London. In order to protect our position as one of the UK’s top-performing universities, we are reducing our costs and focusing time and effort on the teaching, research and student learning environment that brings the most benefit for students and delivers major research impact,” Prof Jeffery explained.