Minister Advises Universities to Adapt Business Models for Long-Term Success

May 22, 2024 TruthUSA

The minister indicated that the government may have a role to play in safeguarding students’ interests in the event of a university failing.

A significant number of universities in England need to revamp their business models to ensure financial sustainability and adapt to uncertainties and financial risks, according to a minister.

Baroness Barran made these comments in the House of Lords on Tuesday regarding the sustainability of higher education institutions, as more institutions are facing financial pressures.

“Indeed, all providers must continue to adapt to uncertainties and financial risks. Ultimately, providers are independent from the government, and it is up to them to decide how to manage their finances,” the parliamentary under secretary of state for education added.

Last week, the Office for Students (OfS) released a report urging universities to reassess their funding and business models to avoid closure. The independent regulator for higher education projected that by the academic year 2026-27, nearly two-thirds of institutions would be in deficit.

Government Bail Out

Cross-bench peer Lord Cromwell inquired whether a major university, such as a Russell Group institution, facing significant financial difficulties, would be “too big to fail” or if the government would bail it out.

Baroness Barran replied that larger universities were financially stable, but she added, “Of course, the government has a role to play in ensuring that student interests are safeguarded in the event of a university failing.”

Lord Cromwell referenced the “too big to fail” economic theory, suggesting that some institutions are so essential that their failure could jeopardize broader systems, and thus the government should intervene to support them.

Reliance on Overseas Students

Universities have reported a decline in overseas applications, according to a survey by the British Universities International Liaison Association (BUILA). Out of the 75 universities polled by BUILA, 88 percent noted a decrease in postgraduate applications from international students for the September 2024 intake compared to 2023.

The drop in applications from international students follows government restrictions on foreign postgraduate students bringing dependents to the UK, as part of wider measures to reduce net migration.

The restrictions seem to be impacting, with Home Office figures indicating that visa applications for dependents between January and March this year had fallen by 80 percent.

Home Secretary James Cleverly also ordered a review in March of the Graduate scheme, allowing foreign graduates to stay in the UK unsponsored for two to three years, to determine if it was being exploited for immigration rather than educational purposes. Last year, 144,000 visas were granted under the program along with an additional 30,000 for dependents.

The OfS report highlighted the concern of universities depending on overseas funding, noting a particular vulnerability when student recruitment is mainly from a single country.

Home Fees Cap

In 2017, then-Prime Minister Theresa May announced a freeze on the undergraduate fee cap for domestic students at £9,250.

There is no government-mandated cap on postgraduate or international student fees, with international students typically facing higher fees to study in the UK than domestic students.

Lord Grabiner asked Baroness Barran on Tuesday if the government would consider raising fees for domestic students, stating that “many universities can only make ends meet by charging exorbitant fees at the non-regulated graduate level.”

The minister indicated that raising fees for domestic students was not under consideration by the government, stating, “We have a responsibility to ensure that university education is affordable for students.”

PA Media contributed to this report.

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