With up to 13 universities facing bankruptcy; is the student bubble about to burst?

The latest Institute for Fiscal Studies report outlines the perilous financial situation facing universities. UK higher education expanded as a result of ‘mass participation’ – as  young people, encouraged by government, but also facing declining employment options flooded to university despite the fees. As a result, the total income of the UK university sector is around £40 billion per year,  or 1.8% of GDP with  tuition fees making up around half.  But the sector now faces huge losses as enrolments by overseas students (who contribute 40% of fee income) collapse.

Exposure to these losses varies widely across institutions, but it hits higher-ranked institutions more; for example, international students make up nearly 70% of students at the London School of Economics, but less than 5% at the University of Wolverhampton. In addition it is estimated that universities will face a further fall in income as at least 10% UK students defer.

Yet with many elite universities  rolling in the money before the crisis, as a result, the report argues, it is not the institutions facing the greatest losses, but those that were  in the weakest financial positions before the crisis (a number of which were investing heavily in expansion projects and now  face losing even more potential students as  institutions further up the pecking order, seek to recruit them)  that are at the greatest risk of insolvency. The report cites 13 universities facing bankruptcy, though does not name them.

The period of market-led expansion is likely be followed by a period of severe retraction.  Government will expect university bosses to put their own house in order by closing and merging courses and institutions. But it will also want to pursue the longer-term objectives of the Augar Report,


with more and more universities engaged exclusively in the teaching of ‘vocational’ subjects and the expansion of sub degree courses. These processes have already begun – at the University of Sunderland, for instance, which has declared itself ‘a technical university’ providing for local industry.

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