Written evidence by University of Hull (HEF0047)

Education Committee

Higher Education and Funding: Threat of Insolvency and International Students

Introduction

1. This evidence is submitted by the University of Hull, a research-intensive, TEF Gold university that will celebrate 100 years of service to its city and beyond in 2027. Throughout our history, we have welcomed international students. We attract students from more than 100 countries and value highly the benefits they bring to our campus community. The opportunity to engage with the diverse perspectives and cultures of our international students enriches the learning experience for all our students, equipping them with the knowledge and skills to be successful in a competitive global economy. International students also have a hugely positive cultural and economic impact on our city and region. For example, in Hull, every four international students support an extra full-time job in the city.[1]

2. As the sole university within the Humber, we are proud to generate a regional economic impact of £0.6 billion GVA and support 6,900 local jobs, as part of our annual £1 billion GVA contribution to the UK economy.[2] We are employer to around 2,000 highly skilled staff who live in the local area. Through our education and research, we are supporting regional growth industries, including clean energy, advanced manufacturing, AI and logistics, we are addressing skills shortages in our local public services, and we are tackling regionally, nationally and internationally important challenges in topics such as flood resilience, addiction and wound care. In an area of significant economic and social disadvantage, we have a strong record on widening access to higher education and in supporting our students to succeed. Our graduates are the skilled doctors and health professionals, teachers and researchers, innovators and entrepreneurs that will support the future wellbeing and prosperity of our region.

Financial sustainability of UK higher education

3. Our contribution to Hull and our region mirrors the essential contribution that all UK universities make to their place. We also, however, face the same challenges that are undermining the financial sustainability of institutions across the sector. Many of these challenges arise primarily from three features of the current higher education system.

• Cost recovery on publicly funded research remains low. According to TRAC data, in academic year 2022/23, higher education institutions in England and Northern Ireland recovered 67% of the full economic costs of Research Council-funded projects and 75% of the costs of research funded by other government departments.[3] Cost recovery across all research funders was 68%.
• The value of the home undergraduate tuition fee – the largest source of income for many institutions – has been eroded significantly as the cap, unlike costs, has failed to keep pace with inflation. While the increase to £9,535 from 2025/26 is welcome, even if the cap were now to rise in line with inflation in future years, the real-terms value would remain around two-thirds of its value in 2012.
• The competitive, market-based system limits the ability of institutions to cooperate in ways that would support greater sector efficiency and innovation. Together with the limited financial headroom arising from the eroded value of home undergraduate fees, the market-based system can also limit the sector’s capacity to prioritise strategically important subjects during periods of lower student demand. For example, this was a primary factor in the extremely difficult decision that Hull made recently to close its Chemistry provision. While the chemicals industry is one of the most significant in the Humber, and one that the University would wish to support, declining applications meant the subject area was no longer viable, with student demand and fee income insufficient for the University to be able to invest in the renewal of its Chemistry programmes.

4. Taken together, these features encourage institutions to adopt a business model that relies on other uncapped sources of income to cross-subsidise the underfunded core business of educating UK students and conducting research. International tuition fees are the most significant, but also an increasingly volatile and unpredictable, source of such income. The sector’s reliance on the recruitment of international students leaves it vulnerable to shifts in policy, financial challenges (such as the devaluation of the Nigerian currency in summer 2023, which saw the cost of UK programmes rise dramatically and had an immediate and major impact on the student intake at Hull) and other international trends.

International students

5. Universities are committed to responsible international recruitment practices, such as those articulated in the UK Agent Quality Framework, and robust compliance with our duties as sponsors of study visas. With the sector having already met the recruitment targets set out in the previous international education strategy, international students form an increasingly large proportion of the UK’s net migration figures, which successive governments have sought to reduce. Measures, such as the restrictions on dependent visas implemented at the start of 2024, have already had an impact on reducing numbers and are a prominent cause of the financial challenges being felt across the sector.[4] The policies announced in the recent immigration white paper are expected to suppress demand further.

6. The sector recognises that, despite the recent fall, numbers of international students coming to the UK remain higher than pre-COVID (though dependent visas have returned to historic norms). Nevertheless, further reductions will both exacerbate the sector’s financial challenges and limit the positive economic impact and soft power benefit that the UK receives from international students at a time when the government is seeking growth and when threats to our national security and global stability are rising.

7. UK policy is not the sole factor likely to influence future international recruitment. The UK, USA, Australia and Canada are currently the four largest providers of international education. While present policy direction in the other three countries may increase the attractiveness of the UK, at the same time competition is broadening as other countries increase their market share or develop their own higher education systems (meaning that more students may choose to study at home). There is, therefore, a risk that domestic policy creates an overcorrection and reduces international student numbers beyond the level intended by government – and beyond the limits of institutions’ financial tolerances.

8. Recent reductions and ongoing uncertainty in international recruitment also creates a destabilising effect on the home recruitment market. The option to protect revenue through accepting higher numbers of UK students is not available evenly across the sector. The OfS estimates that around 150 providers failed to achieve their forecasts for international recruitment in 2024. While larger research-intensive providers in aggregate increased their home UCAS acceptances by 10%, and larger teaching-intensives achieved a 1% increase, all other provider groups experienced a fall in home UCAS acceptances compared to 2023.[5]

Threat of insolvency

9. While many institutions are experiencing financial challenges of varying degrees of severity, most are taking action to assure their sustainability. Hull started to take steps to reduce its costs in 2023/24, through strict non-pay controls, voluntary severance and reduction in hours schemes and organisational restructurings (which included some redundancies). In parallel, we have invested in new digital systems to support an enhanced and more efficient level of service to our students, staff and stakeholders. This action has put the University in a secure financial position as we come to the end of the current academic year, and we have set a prudent budget for 2025/26 that reflects the significant degree of uncertainty that remains around both home and international recruitment for the coming year.

10. The sustainability of our medium-term financial forecasts is dependent on achieving modest growth in our student population (both domestic and international). Should the sector’s underlying systemic challenges remain unresolved, however, the alternative to such growth could see us facing difficult choices in the future with regard to consolidation of our portfolio, the support available to students (in relation, for example, to mental health) and institution-funded research.

11. Other institutions will be taking a similar approach and, while some may have further yet to go in tackling current financial challenges, institutional insolvency should be rare. Insolvency should only normally arise as a consequence of a sudden external shock or poor management of the transitions all institutions must make periodically (as at present) in response to shifts in their operating environment.

12. English higher education institutions registered with the Office for Students are required to have student protection plans, setting out how current students would be protected in the event of institutional closure. No such protection exists, however, against the impact insolvency would have on an institution’s place. Universities are often among the largest employers and a major civic partner in their area. They generate significant regional economic impact and deliver research, knowledge exchange and skills development attuned to local needs.

13. The loss – of jobs, expertise, facilities and more – arising from institutional closure would be even more pronounced in areas with a solitary or small number of universities. The new Hull and East Yorkshire Combined Authority area would be just one such example. Our region is home to more than 600,000 people and 20,500 businesses and has an annual GVA output of over £13 billion.[6] The insolvency of a university solely responsible for serving a regional economy of this scale would severely compromise the ability of that region to grow and prosper.

14. Moreover, the loss of opportunity in such an area would be profound. It should not be assumed that students who would have chosen to study at a particular institution will simply go elsewhere. Universities like Hull play a significant role in supporting students (particularly those from areas of traditionally low higher education participation) who wish to study locally or are unable to travel due to work or caring responsibilities, for example. Almost 60% of our home undergraduate students are local to the Humber region, where more than half of neighbourhoods are classified as areas of low higher education participation.[7]

15. While the risk of widespread insolvencies may be small, the greater risk perhaps is that the status quo generates the same impact over time, as systemic challenges lead to a gradual erosion of the sector, its contribution to growth and opportunity and its global reputation. Hull’s latest economic impact report illustrates just one element of this risk, where our contribution to the UK economy fell by £200 million between 2021/22 and 2023/24. This decrease was driven almost entirely by a reduction in our student population. In addition to reduced spending by students in our local region, for example, the fall in economic impact also reflects the reduced long-term exchequer benefit from a smaller number of graduates.

Recommendations

16. Supported by a UUK taskforce, the sector is already taking steps to pursue greater efficiency and explore opportunities for more significant transformation. We support the taskforce’s recommendations that, inter alia, the government should:

• provide funding to incentivise and derisk the actions required to achieve such transformation; and
• work with the sector to create a funding and regulatory framework that is more supportive of collaboration.

17. We would welcome government action to improve cost recovery on publicly funded research and a commitment to implement annual increases in the home undergraduate fee cap at or above the rate of inflation.

18. Policy stability and cross-government coordination to align policy, regulatory and funding levers are essential to create an environment in which universities can plan reliably. For example, we would welcome clarity in the forthcoming new international education strategy on the government’s vision for the future nature and scale of the UK’s international higher education provision.

19. We would further recommend that the benefits of international students to the UK, as highlighted in this submission, are reflected in the government’s strategy, and we would welcome a coordinated policy landscape that enhances rather than reduces the attractiveness of UK higher education in the competitive global education marketplace.

September 2025

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