SECTOR SERIES: Higher Education Sector Survival

SECTOR SERIES: Higher Education Sector Survival

April 3, 2020

International Uncertainty for the UK’s Universities

The UK’s higher education sector has long been a magnet for ambitious students from all over the world. A degree from a British university is career gold, reflecting our high educational standards. Our cherished freedom of expression is a significant factor for some overseas students.

So successful have we been at attracting foreign students, that they now represent one in five of all those attending higher education establishments here and a further 700,000 students are studying overseas for a British degree, making a total of over 1.15m people from abroad benefitting from UK education. Between them, they create a staggering net economic benefit for the UK’s higher education sector of £20bn a year. Furthermore, 20% of all staff come from overseas and 55% of all papers and books published by UK universities are written by international authors.

Right now, Coronavirus has shut down UK education and paralysed international travel. Many overseas students have gone home and distance learning courses have been badly disrupted. Nobody can say with any certainty whether it will just be this academic year that will be affected or whether the chaos will continue into the next one.

In parallel, there are the well-publicised difficulties over the truncation of A Level studies, which may affect undergraduate recruitment from UK schools for the 2020/21 year. At least some British school leavers will decide to delay their studies and take some form of gap year after being in lockdown potentially for months.

Returning to University September 2020

The conundrum facing universities here is how many foreign students will return in the autumn, either to complete their existing courses or to start new ones and how far will UK undergraduate and post graduate numbers drop? This will determine how many courses remain viable. The more courses are dropped, the less attractive a university becomes and so on in a downward reputational and student recruitment spiral. When the music stops, how far will revenues have fallen, how many academic and support staff will be needed and how many can be afforded within their slashed budgets?

This comes at a particularly difficult time for many universities, who have been embroiled for several years in a bloody and bitter dispute with staff over the huge deficit in the joint pension scheme (USS), in which some 400,000 past and present academics from a broad range of our older universities are enrolled. Not only are the financial implications of plugging the hole in the scheme life threatening for some of the less wealthy establishments, but relations between the management and staff are at absolute rock bottom. Widespread strikes were in progress when this crisis broke.

Reducing capacity, cost and potential restructuring

This is hardly an ideal position to start from, facing the major financial blow that Coronavirus will surely deliver. There will have to be some very painful decisions taken to reduce capacity and costs. It’s impossible to know how much of that £20bn foreign contribution to their coffers will be lost, but there will need to be some very significant restructuring.

Inevitably, the call will go out to alumni to dig deep to help save their dreaming spires. Some universities have priceless art collections; will they have to be sold? Others own substantial property investments, which may need to be trimmed to generate cash. Investment portfolios will be thinner in future, which may be no great loss given that they are highly unlikely to generate either a capital or an income return for quite a while.

For sure, the wines at High Table may be somewhat less fine in future and there may a little less Engastration on offer, no doubt to the delight of those poor birds threatened with multi-stuffing. University education and its finances, like many other aspects of our lives, may never be quite the same again.