Funding ‘catastrophe’ facing British universities — can Warwick ride out the storm?

Academics have warned of a ‘catastrophe’ facing Britain’s universities this year, as rising costs and falling enrolment numbers place huge pressure on institutions’ finances. 

It has led to suggestions that universities could be forced to abandon courses, cut staff, or even merge to avoid bankruptcy and closure. Such an event is unprecedented in British history, but now looks increasingly likely. 

40% of universities will be running budget deficits by the end of the year

In July, The Sunday Times suggested that there are three ‘leading’ universities in “serious peril”, whilst the Office for Students (OfS) has forecast that 40% of universities will be running budget deficits by the end of the year. 

 The dire situation prompted Sir David Behan, the organisation’s interim chair, to warn in August that the “golden age of higher education” is ‘over’. Since his appointment in July, the OfS has restructured itself to prioritise monitoring the university sector’s financial stability. 

The regulator has gone as far as to order vice-chancellors that they must create contingencies to prepare for the possibility of closures in the middle of the academic year, to protect students from the fallout of a university’s collapse. 

Measures could include transferring affected students to other universities, though these would not necessarily be nearby ones. There are also concerns that the mechanisms needed to differentiate students from other creditors are not in place, potentially placing students behind corporations in priority for compensation. 

For university staff, meanwhile, a collapse would be predictably brutal in a sector that is permanently shrinking. Universities employ thousands of full-time staff, and the sudden collapse of one of these institutions would lead to job losses on an unprecedented scale. 

Universities are autonomous and there are expectations around how they manage their budgets

Bridget Phillipson, Education Secretary

One potential response to prevent this eventuality has now been ruled out, however — that being the idea of the government stepping in to ‘bail out’ universities in financial distress. 

Bridget Phillipson, the Education Secretary, rejected the notion of taxpayer money being used to save universities from closure in comments reported by The Guardian. She argued that: “Universities are autonomous and there are expectations around how they manage their budgets, and I would expect them to do that without seeking any calls on the taxpayer.” 

Notably, both she and the Junior Education Minister Jacqui Smith have refused to rule out the possibility of raising tuition fees as a means of increasing university incomes. 

Despite government rhetoric, many in the sector have continued to warn that state intervention to save British universities is a matter of necessity. 

Jo Grady, General Secretary of the University and College Union, urged in a letter to ministers that: “Anything short of an emergency rescue package for the sector will be insufficient to stave off catastrophe.” 

The potential scale of this ‘catastrophe’ has only been compounded by the latest Home Office immigration figures, which show the number of international applications to study in the UK from January to July slumped compared to last year, falling by 16%. 

[International student loans] represented over a quarter (29.7%) of the University’s annual income

British universities rely heavily on international students to shore up their incomes, as the state cap on student loans means they lose about £3,000 for every domestic student they take on.  

Notably, this includes the University of Warwick. Though international students comprise only 37% of the student population, their tuition fees made up over half (55%) of the University’s income from tuition fees and educational contracts in 2022–23, at £249.3 million. 

This total represented over a quarter (29.7%) of the University’s annual income for the year, making it Warwick’s single largest source of revenue, well ahead of home tuition fees (comprising £183.7 million) or research contracts (at £144.1 million). 

The total was more than triple the size of the year’s underlying surplus of £73.5 million.  

The University’s 2023 Financial Statement observed that: “The primary mitigation against flat tuition fees continues to be the recruitment of sufficient numbers of international students.” 

In attempting to secure this source of income, the University has sought to diversify the geographic scope of its international intake. The appointment of prominent international academic, Professor Michael Scott, as Pro-Vice-Chancellor (International) in 2023 demonstrated this focus on Warwick’s international outreach. Yet inevitably the projected fall in international applicants to the UK will now be felt by

Warwick will continue to advocate to all concerned the importance of welcoming people from around the world into staff and student communities

Michael Scott, Pro-Vice-Chancellor (International)

Pressure from the drop in international student fees will come at a uniquely critical point for the University of Warwick, as it invests millions in a much vaunted Science and Engineering Precinct. 

The University’s 2023 statement noted that: “The scale of investment will inevitably be financially stretching, with both increased borrowing and lower cash levels being planned.”  

Speaking to The Boar, Professor Scott remained upbeat about the role of international students at Warwick. He said: “International students are a vital part of life at the University of Warwick, and we are proud to welcome them onto campus. The benefits of our international student body are huge, and our campus experience is much richer for it.” 

He added: “Warwick will continue to advocate to all concerned the importance of welcoming people from around the world into staff and student communities.”