Almost three quarters of English universities to face financial problems next year

Almost 200 English universities are predicted to be in the red next year, following a £3.4 billion plunge in net income across the sector, a new report has found.

The paper, published on Friday by the Office for Students, the independent regulator of higher education in England, found that 194, or 72 per cent, of universities could be in deficit by 2025-26.

The figure takes account of the inflation-linked rise in undergraduate tuition fees recently announced by the government from April, which is forecast to bring in £371 million more in fees, as well as the increase to employer National Insurance contributions, which is expected to cost the sector more than that – an additional £430 million each year from 2025-26.

The report found that although acceptances of undergraduate students via Ucas increased slightly, by 1.3 per cent, the recruitment of international students has decreased “significantly”, with a 16 per cent decline in applications for visas between January and September 2024 compared to the same period in 2023.

“The number of international students from certain countries that send significant numbers to study in the UK has decreased significantly,” the report said. “The number of students from some of these countries has decreased by more than 40 per cent.

“Providers’ financial exposure to overreliance on recruitment of students from particular countries continues to be a concern,” it added.

Nigeria recorded the largest decline in applications with 25,897, representing a fall of 44.6 per cent, followed by Bangladesh with a 41.2 per cent drop. Other countries with significant reductions in applications include Sri Lanka (down 23.7 per cent), India (down 20.4 per cent), and Malaysia (down 12.7 per cent).

Visa restrictions introduced at the start of the year to prevent most international students from bringing dependants to the UK are seen as one cause of the declining application numbers.

The Migration Advisory Committee estimates the ban on dependants could lead to a fall of 120,000 in annual migration, and Home Office data shows 62,600 fewer students and dependants applied for study visas in the first six months of 2024 compared to the same period last year.

Figures released on Thursday showed the decline has escalated, with 405,000 applications for UK study visas in the year to October, which was down from 499,000 the year before, representing a fall of around 19 per cent.

Top 10 UK universities – in pictures

Office for Students estimated that about 100 institutions failed to achieve their UK undergraduate recruitment forecasts for 2024-25. “We estimate that around 150 providers may have failed to achieve forecast levels of international recruitment, with those providers that focus on postgraduate taught courses relying on international student growth being of particular concern,” said the report.

The regulator’s modelling suggests there will be a net reduction in annual income across the sector of £3.4 billion by 2025-26 – compared to a previously forecasted increase of £1.8 billion. The figures include the additional NI contributions costing the sector £133 million in 2024-25 and then £430 million each year from 2025-26.

“Our modelling suggests that the number of providers in deficit could be three times the number shown in providers’ 2025-26 forecasts, if they do not take mitigating action or such action is ineffective. This means that, if the modelling holds, the average provider could face more significant financial challenges than anticipated,” says the report.

British universities have repeatedly appealed to the government to lift visa restrictions on international students in a bid to save the struggling institutions.

The previous government raised the cap on university tuition fees in England to £9,000 ($11,650) a year in 2012 but it has been fixed at £9,250 since 2017. It will rise by £285 to £9,535 per year for courses starting after April 2025.

Key findings of Jenkins report

Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Almost three quarters of English universities to face financial problems next year

Fall in international students fuels £3.4 billion plunge in net income across the sector

Top 10 UK universities – in pictures

Key findings of Jenkins report