UK universities face £2.5bn financial ‘blackhole’ due to 230,000 drop in student numbers

Universities could face a £2.5 billion funding ‘black hole’ amid predictions that 121,000 fewer students from abroad will enter higher education during the coronavirus pandemic, a report has warned. 

Tens of thousands of jobs risk being lost if the Government fails to take urgent action to mitigate the impact of the crisis, according to research carried out for the University and College Union.

The union is calling on the Government to underwrite any funding lost from a drop in student numbers to ensure universities are not ‘damaged’ when conducting research into Covid-19.

Nearly three in four universities across the UK – which amounts to around 91 institutions – could be left in a ‘critical financial position’ amid the pandemic, the report suggests. 

Already a number of prestigious universities, like Imperial College London, have announced cost-saving measures in a bid to protect finances

The total numbers expected not to take up university places is 230,000, according to the report, with 110,000 from the UK, and 121,000 from abroad. 

Chinese students make up 40% of that, so figures suggest 48,000 fewer travelling from China to attend university in the autumn.

Universities that cater for a large number of international students, who pay more in tuition fees, are set to be hit hardest by a drop in income in the next academic year.

The analysis, by London Economics for the University and College Union (UCU), warns that a fall in student numbers will lead to £2.5 billion of fee and teaching grant income being lost. 

Universities that cater for a large number of international students, who pay more in tuition fees, are set to be hit hardest by a drop in income in the next academic year. Pictured: The Bodleian Libraries, at the University of Oxford, is deserted during coronavirus lockdown

The report also warns that an estimated 30,000 university jobs are at risk, and a further 32,000 jobs are under threat throughout the wider economy, without Government intervention.

The total economic cost to the country from the reduced economic activity generated by universities amid a loss in income is estimated at more than £6 billion, the analysis suggests.

It comes after vice-chancellors warned this month that universities were likely to face ‘financial failure’ amid the Covid-19 crisis without emergency Government funding of at least £2 billion.

Universities UK (UUK) said the sector could face major financial risks in the next academic year amid a predicted sharp fall in international students and a rise in home student deferrals.

Already a number of prestigious universities, such as Oxford and Imperial College London, have announced cost-saving measures in a bid to protect finances.

Alistair Jarvis, chief executive of Universities UK, said the government must take ‘urgent action’ to provide support to universities

Jo Grady, UCU general secretary, said: ‘This alarming report shows that university staff and students are now staring over the edge of a cliff and desperately need the government to step in and protect the sector.’

She added: ‘Our world-renowned universities are doing crucial work now as we hunt for a vaccine and will be vital engines for our recovery both nationally and in towns and cities across the UK. It is vital that the government underwrites funding lost from the fall in student numbers.

‘These are unprecedented times and without urgent guarantees, our universities will be greatly damaged at just the time they are needed most.’

Alistair Jarvis, chief executive of Universities UK, said: ‘The union is absolutely right to warn of the knock-on impacts this would have for jobs, regional economics, local communities and students.

‘Government must take urgent action to provide the support which can ensure universities are able to weather these very serious challenges, and to protect students, maintain research, and retain our capacity to drive the recovery of the economy and communities.’

Rebecca Long-Bailey, shadow education secretary, is calling on the Government to underwrite all institutions to secure their future and their role in the country’s economic recovery.

She said: ‘The Government must step in to support universities and mitigate their funding shortfall to prevent the significant economic impact this report predicts.

‘UK universities must be valued as part of the frontline response to the coronavirus pandemic, supplying students to the NHS and conducting world-class research into the virus.’

But Nick Hillman, director at the Higher Education Policy Institute (HEPI), said the research should not be regarded ‘as the final word’ on how coronavirus may affect student numbers.

He said: ‘The report assumes higher education will be considerably less attractive in 2020-21 but, in a deep recession, there are good reasons why people opt to delay the end of their formal education.

‘The crisis may nudge people who have just left school (or indeed have just graduated) but were undecided about what to do next to stay on in education.’