The Rising Costs Faced By Universities

A report published by The Office for Students (OfS) predicts more than a third of Universities are likely to have serious cash flow problems in 2025, which brings with it a potential for radical changes to the higher education landscape.

By 2025-26, it is estimated that 72% of universities may face deficits, with a total shortfall projected at £1.6 billion, and that 40% of institutions may only have enough reserves to cover one month's bills, including salaries.

Tuition fees will rise to £9,535 annually by autumn 2025, but the increase may not suffice to address deficits due to inflation and higher operational costs,

Sir David Behan suggests universities need to consolidate courses, increase degree apprenticeships, and explore mergers to cut costs, with collaborations between neighbouring institutions to avoid duplicating similar courses to improve efficiency.

Universities may also begin to focus on fewer, more sustainable courses. This could, however, risk creating “cold spots” in rural areas with fewer educational options.

Institutions are also being urged to provide clearer information on how tuition fees are used, particularly in terms of contact hours and student support services with greater oversight for courses like business degrees to ensure they provide tangible benefits to students.

As a result, the student experience may decline due to larger class sizes, fewer courses, and reduced support services, with concerns over value for money remain, with only 36% of undergraduates in England rating their courses as good or very good value.

Universities are at a crossroads, needing to balance financial sustainability with maintaining academic standards and student satisfaction.