A 20-percentage point drop in international student enrolments next academic year could plunge 80?per cent of?English and Northern Irish universities into deficit, PwC has warned.
In modelling commissioned by Universities?UK, the accountancy firm analyses the possible impact of?various scenarios on?institutions’ finances in?the context of a?rapidly deteriorating economic climate for higher education.
It looked at 70 financial returns and found that 40?per cent of providers were projecting to be in deficit in 2023-24 but most were expecting increased income in the years ahead because of continued expansion into international education and more enrolments from the?UK’s growing young population.
This was forecast to be accompanied by falling expenditure, with the cost of borrowing and capital outlays assumed to be going down in the next few years.
If these projections come to fruition, the proportion of institutions in deficit will fall to 19?per cent in 2025-26 and to 13?per cent by 2026-27, says the , which warned, however, that the forecasts may turn out to be overly optimistic.
It says the group’s “financial position is exposed to a number of risks, and any slight movements in their assumptions, could see the number of members falling into deficit rapidly increasing”.
If the growth rate of domestic undergraduate students fell by 5?percentage points a?year from 2024-25 onwards, more than half – 56?per cent – of the institutions would be in deficit by the end 2025-26, PwC projected.
In contrast, if undergraduate tuition fees – frozen for the past seven years were increased by 10?per cent in 2024-25, only 7?per cent would be in?deficit.
Various scenarios for what could happen to international student income were tested. Stagnation in growth would leave 27?per cent in deficit, and a?5?percentage point fall would put 51?per cent in the red. By far the most damaging would be a “sharp contraction” with the growth rate falling by 20?percentage points in 2024-25, which would leave four-fifths of the institutions in trouble.
Late last year, data from the web platform Enroly indicated that the number of international students paying a deposit to enrol at UK universities this year was down by 37?per cent compared with the previous year.
Sector leaders have blamed policy changes and government rhetoric as well as economic changes in key markets such as Nigeria for the steep falls.
The report further warns that if expenditure increases by 2?percentage points instead of the expected drop, 65?per cent of institutions would be in?deficit.
PwC looked at each scenario on a stand-alone basis but warned that they could materialise in conjunction with each other, leaving institutions facing an?“extremely challenging period from a financial sustainability perspective”.
It says providers are already taking steps to reduce costs and increase income, including “back-office transformation, adopting modern digital solutions, estates rationalisation and strategic partnerships”.
But, it warns, these measures are unlikely to be sufficient in the long term – particularly for smaller providers – and “more radical solutions, such as consolidation, may be required”.
