UK universities are set to lose more than £17bn in real income over the next four years as persistent inflation erodes the value of tuition fees, according to newly released research. Higher education software provider TechnologyOne modelled the total amount universities will lose to inflation each year up until 2026-27, by calculating the real-terms decline in tuition fee value and forward projections on student applicants.
Despite UCAS predicting a rise in student numbers in its ‘Journey to a Million’ report, universities are expected to lose £5bn each year due to persistent inflation. Tuition fees for domestic students have been capped at £9,250 since 2017, giving universities limited options to offset the impact of rising prices.
With financial constraints set to only increase over the next four years, universities have no room for error when it comes to spending decisions. With the pace of losses only accelerating, something has got to give, and universities cannot afford for that to be the quality of education, support services or the university experience overall.
Universities already make a loss on every home undergraduate, and that loss is only set to grow with inflation. This is evidently financially unsustainable in the long term and will ultimately impact on student and staff through deteriorating facilities or a reduction in staff:student ratios or student support services.
So how do we go about fixing these rather dire statistics?
- To plug this funding gap, universities are increasingly turning to international students – UCAS projects a 60% increase in international students, with a 75.6% increase in higher education applicants from outside the EU. However, even a marked rise in the influx of international students is unlikely to offset the deficit.
- To preserve the high quality of our sector and our ability to attract investment, talent and world-class research, it is vital that the higher education provider unit of resource be restored to 2012 levels as soon as practically possible. This can be achieved in the short term through a combination of effective policies, regulatory reform and top-up funding.
- At the same time, the need to find new ways of working and to modernise our systems has never been more evident. If tuition fees remain fixed, the higher education sector must prioritise long-term forecasting, especially given the expected uptick in student demand – it is crucial for universities to have mechanisms in place to retain enrolments and spot at-risk students.
And it’s not just universities feeling the pressure. Academics are being forced out of the industry as pay and pensions fail to keep up with the cost of living. ONS earnings and inflation data indicate real wages have fallen by almost 30% since 2014.
TechnologyOne has also found that students saw the cost of living rise by 13.6% over the previous year, around a fifth more than the price rises felt by the public. As students feel the pinch, many are opting for online education to leverage flexible classes or minimise the cost of accommodation and travel, but these sacrifices to the university experience only heighten the risk of students walking away from their academic studies.
There are no two ways about it: technology is the answer to many of the ills the sector faces. It can help with staff retention, removing the menial manual burden of administrative tasks and allowing staff to focus on what matters.
Modern technology systems such as Software as a Service offerings are also key to attracting students, who have grown up on Netflix and Apple Pay, but also retain them, by offering a great digital experience and, for example, helping spot struggling students at risk of dropping out.
Digital transformation projects require significant investment and resources, so it is understandable that universities already tightening their belts during the cost of living crisis are hesitant to engage with new technology. But smart investments made today will be crucial in helping universities find savings and serve students better tomorrow. More effective flows of data, which an integrated SaaS enterprise resource planning solution enables, will help institutions drive intelligent digital services and improved decisions on investment.
Universities are more than just institutions of teaching and research. They play a crucial role in attracting and anchoring talent to their communities. They support innovative businesses to scale and grow and to deliver the technologies and skills required for new industries to flourish. An unsustainable university system makes for a less stable economy in all areas. There is no doubt in my mind that technology is part of the answer to bridging the £17bn gap in university income.
