The report was commissioned by Universities UK and is based on analysis of “the 2022/23 regulatory forecasts (Annual Financial Return 2022 for England and Northern Ireland, and Strategic Plan Forecast 2023 for Scotland) of participating UUK members and assessing how those forecasts would be impacted by certain sensitivities.” The research was conducted between July and September 2023 and January 2024.
The report coincides with news that student acceptances and deposits made to UK universities through the Enroly platform are down by more than a third compared with last year. About 1 in 3 students who come to the UK do so using Enroly. They have also noted that Confirmation of Acceptance for Studies issuance for the January 2024 intake of international students coming to the UK is down by 36% when compared to January 2023, and deposits are off by 37%.
The most concerning market is Nigeria, a major contributor of growth in recent years. Deposits from Nigerian students have fallen by 72% year-over-year, and Indian deposits are 37.5% lower. Last year, India and Nigeria were the #2 and #3 largest source markets for UK universities, and growing much faster than the #1 market, China.
Why is this happening?
International enrolment at UK universities is under pressure this year, due to:
• Recent changes in the immigration policy barring most foreign students from bringing dependants with them;
• The rising cost of living, which makes it more difficult for students to consider studying in the UK – especially students whose currency has been drastically devaluated (e.g., the Nigerian naira).
What is happening financially?
PwC summarises the growing problem as: “Universities are feeling significant pressure given constraints on their ability to generate income, increasing investment requirements and an escalating cost base. This is placing strain on margins and driving greater reliance on cross-subsidisation, particularly from international student fee income, which has led to increasing concerns about overreliance.”
Fuelling that overreliance is declining revenue from domestic student enrolments. Domestic students’ participation in higher education fell in 2022/23 and domestic tuition fees have been fixed at £9,250 per year since 2017. PwC notes that “undergraduates are often taught at a net cost to the provider.”
Institutions analysed by PwC assumed that increased international fee income in the future would help them to improve their financial position; in 2021/22, 25% of them were in deficit. Their optimism is based on “international fees [accounting] for between 33–66% of all course fee income by 2026/27 (compared to a range of 24–64% in 2021/22).”
But downward pressures on foreign student demand could very easily throw off those assumptions – and even a 5% drop in international enrolments could double the number of providers in deficit.
What does this mean?
In conclusion, PwC says “Despite its strong international brand and academic excellence, the UK Higher Education sector and its institutions are facing significant financial challenges that threaten to impact the quality of provision and student outcomes. In the longer term, this may impact the UK's international standing and its ability to attract and retain students, and therefore undermine the considerable economic benefits the sector brings to the UK.
Constraints on income generation, alongside cost pressures, have driven providers to increasingly cross-subsidise domestic student teaching and research activities with higher levels of non-fee-capped international students. Capitalising on strong international student growth in recent years, this strategy has led to an over-reliance in some cases and leaves some providers exposed to international demand or geopolitical shocks that they cannot control.”
Originally published in TUCO Magazine Feb 2024
