According to the OfS, English Universities Are at Risk of Serious Deficits if Student Numbers Fall - Latest Global News

According to the OfS, English Universities Are at Risk of Serious Deficits if Student Numbers Fall

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Universities in England are facing an intense period of austerity with mergers, course closures and redundancies as the financial outlook for one of Britain’s most successful export sectors is expected to worsen.

The Office for Students said in its annual report on the sector’s finances that a decline in the market for international students, coupled with a decade-long freeze on domestic tuition fees, had made universities’ growth forecasts unrealistic.

Susan Lapworth, chief executive of the OfS, accused the institutions of “optimism bias” for using forecasts for growth of 35 per cent in international participants and 24 per cent in domestic participants between 2022 and 2026.

She said the report was “a signal to all institutions to re-examine their assumptions about the increase in UK and international students”, adding: “The figures reported to us for the sector as a whole are simply not credible.”

The higher education regulator’s report follows OfS warnings of a looming funding crisis for the sector due to falling student applications, the Financial Times reported.

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Data from universities and colleges show that the number of domestic admissions fell by one percent in 2023. Deposits paid by international students for 2024 suggest international student admissions have fallen by up to 60 percent so far this year.

In submissions to the regulator, universities predicted their revenue would rise by almost £10bn over the next three years, with £5bn coming from international students and £2bn from increased domestic tuition fees.

However, OfS modeling of scenarios in which universities failed to meet their forecasts suggested high levels of financial stress over the next three years.

Around 40 percent of universities expect a deficit this year. According to the modeling, this figure would rise to 90 percent if the total number of new students fell by 35 percent in 2026, resulting in a fall in net income of £9.7 billion compared to current forecasts.

University leaders are at loggerheads with the government over its migration policy, which has led to a sharp decline in the number of international students applying to English universities.

The OfS warned that “further and bolder efforts to save costs” were needed, which would lead to “significant rationalization” of courses as well as mergers and reduced research activity.

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It added that while some cuts would lead to “positive change and innovation”, there was a risk that cuts could have a “negative impact on the quality of students’ education and their overall experience”.

More than 50 universities are in the process of cutting jobs and closing courses as funding constraints after a decade of expansion are felt across the industry.

Following the publication of the OfS report, both university bosses and the University and College Union called on future governments to commit to a new funding arrangement for universities.

The sector’s demands include increasing tuition fees in line with inflation, increasing teaching and research grants and no further changes to immigration policies.

“The alternative is the hollowing out of institutions, cold geographical zones where courses are unavailable and fewer opportunities for future generations – damaging our society and economy,” UCU general secretary Jo Grady added.

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Tim Bradshaw, chief executive of the Russell Group of research universities, which are generally less exposed than those at the lower end of the sector, said further immigration restrictions would “significantly destabilize the sector”.

Universities UK, the sector’s main lobby group, said the cuts would have unintended consequences for students, regional growth and the economy while the sector takes steps to “steady the ship”.

“A university offering a language or humanities course doesn’t seem to matter. “If many universities do this together, there will be significant knowledge and skills gaps in the country,” said UUK chief executive Vivienne Stern.

The Department for Education said it is providing a total of £16.5 billion to the sector in the form of student fee loans and teaching grants.

“Universities are independent of government and it is up to them to decide how best to manage their finances. Together with the OfS, we will continue to closely monitor the financial sustainability of the sector,” a spokesperson added.

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