The financial health of the higher education (HE) sector has been described as ‘strong’ in the latest Higher Education Funding Council for England (HEFCE) report. However, fee caps, decreasing student levels and the impending impact of Brexit could tip some HE organisations over a financial cliff, warns leading audit, tax and consulting firm RSM.
The UK political landscape continues to put pressure on income. Since the production of the forecasts used in the HEFCE report, the government has confirmed tuition fees for 2018-19 will be fixed at £9,250. HEFCE has estimated that this impacts adversely on projected income in the sector by £113m in 2018-19 and £333m in 2019-20.
Projections to 2020 are lower than previous forecasts but still show 5.7 per cent growth of home and EU students. Whether this is realistic remains to be seen but UCAS has produced data that shows a 1.9 per cent fall in home and EU applicants for 2017-18, compared with forecast income growth of 2.1 per cent – suggesting that meeting the forecasts will be a challenge.
‘Couple the tuition fee cap with a UK demographic downturn to 2020, and the ability to maintain current income levels from home students will remain a real challenge for the higher education sector.
‘The reduction in domestic students could lead higher education institutions to look further afield to maintain income levels. However, as EU students currently pay UK home tuition fees they need confirmation that after 2018/19 this fee structure will remain or they may choose to apply closer to home instead. In addition, if restrictions are applied to immigration and visas post-Brexit then the revenue stream for the UK higher education sector will be further impeded.
‘The focus could then turn to international students to maximise the excellent reputation the UK has across the globe. However, whilst increasing international student recruitment may be a desirable alternative income source, achieving predicted growth levels may be difficult.
‘Without reassurances from the government, students may see the UK as a closed shop. Combine this with increasing competition from HE institutions in the emerging markets like Brazil, India and China, and uncertainty around Brexit, and we could see a slowdown on non-EU international recruitment – further restricting the ability to generate revenue for HE institutions.
‘Set against this backdrop, HE organisations also need clarity that Horizon 2020 research and innovation funding will be ring-fenced so it will remain accessible post 2019. Uncertainty is already impacting collaborative research projects between UK and European universities, so the government needs to act quickly to mitigate the risk.
‘Policy changes such as the apprenticeship reforms, including the introduction of degree apprenticeships, could provide an opportunity for UK universities to tap into a new revenue stream. If universities embrace more work-based courses in degree apprentices, they may also look at asset realisations to reduce unutilised properties which in turn could unlock extra revenue.
‘Ultimately, the HE sector needs reassurance from the government to plan for the future, and many will be looking to the forthcoming Budget announcement for some clarity to help navigate the ongoing turbulence.’