‘Radical’ action required as half of higher education providers still face deficits

Nearly half of all higher education providers are facing a deficit this year, despite rising tuition fees and attempts to reduce costs.

124 institutions, representing 45% of those analysed by the Office for Students (OfS), are likely to post a deficit in 2025-26. This is an increase from universities’ individual projections in May, when 34% said they were at risk of running a deficit.

Their modelling suggests a total net reduction in annual tuition fee income of £437.8 million in 2025-26, significantly lower than the sector’s forecasts.

The report also found that, in over the next year, 45 institutions could have less than 30 days of liquidity. This represents one in six of the higher education providers in the UK.

The recent announcement of inflation-linked increases in tuition fees by Education Secretary, Bridget Phillipson, has positively impacted universities’ finances

There has been an increase in student recruitment in 2024-25 and 2025-26, which the OfS views as a “positive sign.” However, there is still “significant volatility”, and this year’s growth may not continue.

The recent announcement of inflation-linked increases in tuition fees by Education Secretary, Bridget Phillipson, has positively impacted universities’ finances. The OfS claims its implementation from the next academic year will reduce the number of providers reporting deficits from 45% this year to 41% in 2026-27.

The OfS’s projections do not account for the international student levy, which was proposed at the Labour Party Conference in September 2025. According to the OfS’s projections, the impact of the 6% levy will be approximately £760 to £780 million.

It continues to be our assessment that we do not expect multiple universities to close in the short term. But some institutions need to take radical action, which might include considering different structures or business models

Philippa Pickford, Director of Regulation at the OfS

Commenting on their analysis, Philippa Pickford, the Director of Regulation at the OfS said: “Universities now have welcome clarity over tuition fee levels in future years.”

Pickford maintained that despite significant financial challenges, “it continues to be our assessment that we do not expect multiple universities to close in the short term. But some institutions need to take radical action, which might include considering different structures or business models”.

The universities of Greenwich and Kent have both announced plans to merge in a bid to tackle rising costs while sustaining academic quality.