Vice chancellors nationwide have long warned of a growing financial crisis in universities.The dire warnings have now become reality.
Coventry University will reduce funding by £95m over the next two years due to an £85m budget shortfall.
The University of Sheffield Hallam has invited 1,700 members of its academic staff to apply for voluntary dismissal.
The University of Aberdeen has announced that it will continue to offer joint honours degrees, but is currently consulting about the possibility of eliminating single honours in modern languages.
The University of Staffordshire announced in November that more than 20 percent of its staff would lose their jobs.
As institutions of higher education are hit by high inflation, frozen tuition fees and staff pensions, as well as a drop in international students, universities have started to implement cost-cutting and mass layoff programmes.
Nick Hillman is the director of the Higher Education Policy Institute, and former adviser to the government. He warns that thousands of jobs could be lost in the universities of the United States.
He warns that the outlook is worse than it was in the 1980s when Margaret Thatcher intervened to prevent University College Cardiff going bankrupt. Hillman says that for the first time ever, an institution may go bankrupt.
Vivienne stern, chief executive officer of Universities UK, which represents 142 UK universities, said: “I talk to universities every day and I’m not sure I’ve come across any that aren’t cutting back in some way.
Not all are job losses but many are. This is happening across the board.”
Brighton University, which earlier this year cut over 100 academic staff members, including 23 forced redundancies.
The spokespersons for Coventry University, Brighton University, Staffordshire University, and Sheffield Hallam university said that they must take action to ensure their financial sustainability.
Universities are delaying investments as well as cutting staff and canceling courses. According to UUK, class sizes are on the rise across the board. The average ratio of students to staff is increasing from 15.5 to 16,9 over the next seven years, until 2021-22. Some institutions are trying to sell everything, including land and artwork.
David Maguire is vice chancellor of the University of East Anglia. He says that everyone has a scenario in which expenditures will exceed incomes within the next three to four years.
Maguire became the new UEA president in May 2023, after the university found a £30m budget hole that they feared would grow to £45m in three years. The fall in student numbers and increased staffing costs are to blame.
He reduced the number of employees through a series of voluntary redundancies and severance packages. The investment was also cut, and this included a reduction in the recruitment of PhD students.
The UEA is now expecting to be back on track in two years.
Maguire warns the entire sector will need to undergo a radical overhaul in order to survive.
He says, “I am convinced that the current business model of universities is not sustainable. It has to be changed.” He believes that some universities may soon adopt online-only models of teaching for certain courses.
First, there are the tuition fees. Since 2017, these fees have been frozen at £9 250. Inflation has increased since then, pushing up wages. In many cases, the cost to deliver some courses is a loss.
The universities must now cover a funding gap of £2,500 per English undergraduate. This will double to £5,000 by 2030.
The demands placed on universities have increased as real cash has declined. Jenny Higham is vice chancellor of St George’s University, and the policy lead for funding in UUK. She says that students need more support with mental health, more support with their careers, and more financial assistance to cope financially.
In order to balance their budgets, universities are increasingly dependent on the higher tuition fees of overseas students. Overseas tuition fees are not capped, so institutions can earn more.
In 2016, foreign tuition fees accounted for 13pc (or a third) of university income. Since then, this figure has risen to 19pc.
Hillman: “The business model of universities is to lose money on everything except for foreign students.”
But now, this source of income is at risk. Due to changes in immigration laws, international students won’t be able bring their dependents with them on their visas after January unless they are enrolled in a postgraduate programme.
It is a deterrent to many people. According to an analysis by QS Quacquarelli Symonds (a higher education network), the January 2024 intake for Nigerian students – who are most likely to have dependents – has dropped by 40% year-on-year.
This government will also review the graduate route. Currently, overseas students are allowed to work in the UK after completing their studies for two years, or for three years if they have a PhD. Stern says that this is “toxic” to international applicants.
She says: “I’m worried that January and February will bring a lot of chickens home.”
Adding insult to injury, universities are unable to pay their pensions because of the ballooning costs. Teachers’ Pension Scheme is required for universities that were under local authority control prior to the removal of polytechnics.
The Teachers’ Pension Scheme, a public pension plan that is not funded, promises its members a certain level of retirement income. The scheme has 722,000 members in the education sector, and the contribution rates are determined by the government.
In April, the employer contribution rate for this scheme will rise by 5 percentage points to almost 29pc.
The Department of Education announced that it would provide extra funding to schools in order to cover the additional contributions following the April increase, but higher education institutions will not receive extra money as they are autonomous.
Both Tories and Labour are largely silent about the university finance issue. Former Universities Minister Jo Johnson proposed that universities could raise their fees to keep up with inflation, based on the performance ratings of their universities. However, this proposal has not gained much traction among policymakers.
Hillman states: “Neither Keir Sunak nor Rishi Starmer are willing to propose higher fees in the immediate aftermath of a general elections.”
Maguire continues: “Nobody outside of this sector will be able to solve this problem, we must do it ourselves. We must think the impossible.”
A Government spokesperson said that tuition fees have been frozen “to provide better value to students and taxpayers”. Labour has not responded to a comment request.