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Britain’s universities are on an unsustainable path


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The UK has been a world leader in academia for centuries. Its philosophers, inventors and scientists have had a significant global impact. That legacy continues today: 17 of its universities rank in the global top 100, its graduation rate is well above the OECD average, and the brightest students from across the globe aspire to be UK-educated.

All that is now at stake. According to Financial Times analysis, one-third of the country’s universities saw a decline in applications from overseas non-EU students last year. A drop-off in higher fee-paying foreign pupils, particularly from Nigeria, India and Bangladesh, is set to deepen a funding shortfall that has put the country’s higher education institutions on an unsustainable trajectory. Without a turnaround, Britain’s scholastic prestige and higher education’s estimated £130bn contribution to the economy will fade.

Domestic undergraduate tuition fees — which are the main source of funding — have in effect been frozen for the past decade. Inflation has meanwhile driven up operating costs, including energy bills and salaries. With rising demand for places, the estimated loss made by English universities on each domestic student annually is expected to double to £5,000 by the end of the decade. To make ends meet, universities have become reliant on attracting more lucrative international students. Non-EU students now account for nearly 20 per cent of income.

Recent government efforts to curb immigration have put this funding stream at risk too. Most international students are now barred from bringing their family members with them. There are also plans to review post-study work visas. Meanwhile, negative rhetoric around immigration and competition from the US, Canada and Australia means many have already voted with their feet. A sharp drop in international students could put four-fifths of universities in England and Northern Ireland in deficit, according to PwC.

Other funding sources are also thin. Government spending on tertiary education per student is below the OECD average. For research, UK funding bodies cover 80 per cent of costs, with universities liable to find the remainder. Elsewhere, the private sector plays a bigger role. Close to a quarter of research in Germany, Switzerland and the Netherlands comes from industry collaboration, compared with 10 per cent in the UK. Brexit also cut off access to EU funding streams. And although the UK has now rejoined the EU’s research and innovation funding programme Horizon Europe, uncertainty over its membership has disrupted research.

It is not impossible that at least one university could face bankruptcy this year. Either way, necessary cutbacks to research, lecturer salaries and dorm facilities will lower their education standards, innovative potential and competitiveness for international talent. York university last week announced plans to ease academic entry requirements for foreign students. 

Student fees and immigration are sensitive political issues, so any immediate improvement seems unlikely with an election this year. But the next government will have its work cut out. Constraints on international students must first be eased. Fees can then no longer continue to fall behind inflation. The broader funding system needs review. Flexibility in fee caps, so that they are actually linked to costs, demand and skills shortages, and a more progressive system of student loan repayments — which currently acts as a flat 9 per cent levy above the salary threshold — could be explored. Improvement in research collaboration between business and universities is also key.

The sector is not only essential for education; it is the bedrock of the country’s science and research output, making it central to raising its lacklustre productivity performance. British universities must not become a case study in how to fritter away a comparative advantage.



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