Could a publicly funded university ‘go to the wall’?

The article “Ticking time bomb” I co-authored with Alan Preece explored the need for universities in the United Kingdom to provide more data on their international students and get ahead of politicians seeking to limit their number.

Now we ask whether the implementation of the Conservative’s UK Net Migration Briefing – capping of students on so-called ‘low value degrees’, banning dependant visas for postgraduate taught students, reducing the period of post-study work to six months and capping international student numbers – will lead to a UK publicly funded higher education institution going into administration?

When the House of Lords committee warned earlier this month that higher education providers in England have “an unhealthy dependency on international students, to compensate for frozen fees and increased costs”, the Office for Students (OfS) quite rightly came in for significant criticism.

Failure by the OfS to include non-EU students in graduate outcomes data, despite ministerial requests to do so, and a striking indifference to a group of students that in fact fund 20% of the sector’s operating costs, means its days may also be numbered as the government looks to cut the costs of public services.

Whilst government controls both the funding of higher education through the domestic student fee cap and the inflow of international students through its immigration policy, it is well within its powers to either ‘sink or save the sector’.

If we consider that the general election is just around the corner and universities in most cases are not big vote winners for the Conservative party, it is unlikely, even with the obvious failures of the OfS, that the present administration will come to the rescue. More likely the Tories will pull the immigration lever to win votes, particularly in the so-called ‘Red Wall’ constituencies in the North, and if higher education is a casualty, so be it.

Preventing economic disaster

‘Too big to fail’ describes a business or business sector so ingrained in a financial system or economy that its failure would be disastrous. The government will consider bailing out a corporate entity or a market sector, such as banks and major industries such as the automotive sector, to prevent economic disaster.

That idea is immortalised in Andrew Ross Sorkin’s 2009 non-fiction book Too Big to Fail, on which the film of the same name is based, which chronicles the collapse of the investment bank Lehman Brothers. What if the next sector under the spotlight is higher education? Would the government step in?

This could be largely dependent on the sitting MP in the constituency in which the university at risk is located and on the present government’s levelling-up agenda, but for vice chancellors residing in the bottom half of the UK, located in a safe opposition seat, whose finances look less than rosy and which are reliant on international students from Africa and South Asia to balance the books, there may be sleepless nights ahead.

Colleges and universities are major employers in the towns and cities in which they are situated. They bring much needed investment from overseas students into local and regional economies and are drivers of economic growth, through student spending, students taking up part-time jobs during their studies, and students and academics setting up incubators and start-ups.

With the significant headwinds against them in the run-up to the next UK general election, is it even conceivable that a UK publicly funded higher education institution could ‘go to the wall?’

If this was to be the case, we are confident that the institution in question would make every endeavour to do right by its students, either through continued operation to the end of their courses and/or transferring them to nearby institutions to complete their studies. That said, the implications for the university itself could be catastrophic in terms of job losses and reshaping access to higher education in their locality.

What is happening elsewhere?

Initially, it would mean widespread job losses and faculty/course consolidation. During the pandemic Australian universities cut up to 27,000 jobs in a single year (2020), seeking to save themselves from the financial carnage of plummeting revenue as international students chose to stay home, defer or move to another country with more open borders, in many cases the UK.

Australian federal government data reveal that the number of full-time equivalent jobs in higher education fell from 130,414 in March 2020 to 121,364 a year later. However, that data obscures the true total of job losses, as it does not count casuals and those on fixed-term contracts. The actual number is probably about 27,000, says Andrew Norton, a higher education policy expert from the Australian National University. Ministers are also said to be clamping/closing down around 200 so-called ‘dodgy’ colleges that are seen to be flouting immigration rules.

More than half of New Zealand’s universities are facing severe financial hardship in what is the sector’s worst crisis in recent memory. The crisis was exacerbated by COVID-19 and repeated funding cuts, presided over by an apparently indifferent government. By the end of 2023, as many as 1,000 jobs may have been lost from universities during the pandemic, a staggering loss in teaching and research capacity that will take years to rebuild.

“There has long been a quiet suggestion that New Zealand has too many universities. Locked in competition, they are fighting for a dwindling pool of students. The question of which university should shutter has long been verboten. Unless something changes, it may finally be answered,” says Charlie Mitchell writing in The Post.

Canada’s colleges are also on dodgy ground, with some of them totally dependent on international students, and if caps are put in place by the government to mitigate housing shortages, they too could go to the wall. Ontario’s Auditor-General Bonnie Lysyk raised concerns about the degree to which both colleges and universities in her province are relying on international students to fund operations.

She found that by 2021, international students accounted for 68% of all the tuition revenue that colleges collected. She warned that so much reliance on international students, largely from just a handful of countries, was a financial disaster in the making.

“Public colleges are increasingly reliant on tuition fees from international students to remain financially sustainable… Some colleges received 90% of their tuition revenue from international students and would not be viable without them,” she stated.

In the US at least 44 public or non-profit colleges have closed, merged or announced closures or mergers since March 2020. Campus closures peaked in the years leading up to the pandemic, driven by private for-profit college closures. Nearly 80% of the colleges closed between 2004 and 2020 were for-profit schools. With the US facing a demographic cliff and a possible Trump presidency on the cards, the future could see more of the same.

Sustainable internationalisation

In every instance the frailty of the system comes down to ensuring internationalisation is sustainable and as far as possible immigration neutral to appeal to governments of all colours.

There is, therefore, a solution: increase international student recruitment, which will ensure the financial viability of our institution of higher education in what could be challenging times ahead and, at the same time, ensure that students are effectively supported into jobs back home after gaining their overseas degree, enhancing soft power and reducing future economic inequality in major source markets and thus providing a pipeline of future international students.

Without a concerted effort to make the internationalisation of UK higher education immigration neutral the UK government could look to these examples from other countries and conclude that a UK publicly funded university is in fact not ‘too big to fail’, the result of which would fundamentally change the future size and shape of the UK higher education sector as we know it.

Louise Nicol is founder of alsocan and Asia Careers Group SDN BHD.