Demand in Decline and Supply on the Up for the UK University Sector

Increased competition for students, falling numbers of 18-year-olds and tightened immigration rules impacting the number of international students applying, are all contributing to increased financial pressure on UK universities.

Read Upside - Autumn 2019

In addition, the removal of the cap on the number of students a university can recruit has opened a new, aggressive market whereby more institutions are lowering entry requirements, according to university admissions service UCAS.

These factors are having an immediate financial impact on some universities, who are directly losing income as a result of lower yearly student intakes.1
 
Revenue from international students is a critical source of additional income for many institutions and has funded several expansions within the sector. Enrolments have plateaued since 2012 when the visa rules were tightened, and again in recent years with the uncertainty caused by Brexit, which has added to the woe.2

Contributing to this financial shortfall are a number of internal financial pressures in the sector, not least rising staff costs, including pensions and the apprenticeship levy. International credit reporting agency, Moody’s, is reporting that many universities have been investing in new facilities to attract students, but doing so through borrowing, putting further strain on the balance sheet.3
 
Tertiary education is not safe from collapse. The Chairman of the Office of Students – the industry regulator – Sir Michael Barber, has publicly stated that any institution facing bankruptcy will not get a taxpayer-funded bailout.4
 
With reports claiming that there are at least three UK universities on the brink of bankruptcy, some serious questions need to be asked.5 Many universities are in close proximity to one another, leading to increased competition for students. Reputation and value propositions are key factors in the university selection process. Struggling universities need to act now or they may risk going under, as the taxpayer is not going to write a cheque to bail them out.

Now is the time to streamline course offerings or even shut them altogether and identify assets to dispose of by paying down borrowings to avoid bankruptcy or seeking professional help from restructuring specialists.


Sources:
https://www.theguardian.com/education/2018/aug/28/alevel-season-pushing-universities-towards-insolvency 
https://www.thetimes.co.uk/article/universities-that-are-failing-to-make-their-sums-add-up-pvnv2nq00 
https://www.thetimes.co.uk/article/universities-that-are-failing-to-make-their-sums-add-up-pvnv2nq00
https://www.thetimes.co.uk/article/universities-that-are-failing-to-make-their-sums-add-up-pvnv2nq00 
https://inews.co.uk/news/education/university-bankruptcy-reliant-on-loans/

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