Written evidence submission by Dr Jack Willoughby (University of Leicester Institute for Policy) (HEF0064)

Education Committee

Higher Education and Funding: Threat of Insolvency and International Students

Dr Jack Willoughby is the Institute for Policy Manager at the University of Leicester and has worked for many years in the policy and research space. In his previous roles he has worked for multiple MPs, including the Minister for Science, Research and Innovation during the coronavirus pandemic. He has also worked for the Policy Research Unit in Westminster, in which role he provided briefings and policy responses to several hundred MPs in Parliament. In his current role, he manages the University of Leicester’s Institute for Policy, providing a policy focus to the University’s leading research, and whose outputs help inform policymakers on a variety of subjects in related fields.

Key points in summary

• Recent declines in international student numbers have proven a catalyst for tipping University finances over the edge.

• The proposed international student levy will place additional financial burden on the sector and/or reduce international student demand, exacerbating pressures on the sector.

• HEIs have significantly developed their role in their local and civic communities; potential insolvency would have significant and far-reaching impacts beyond institutional footprints.

• A range of mitigating actions continue to be undertaken by universities to alleviate the financial pressures they are under, but more and more drastic actions have become a necessity to address financial shortfalls.

• More needs to be done by the sector and supportive policymakers alike to highlight the positive impact of international students in the UK and shape the public discourse

HEI financial landscape

The UK Higher Education sector finds itself in a precarious state; just last year, the Office for Students published its report on the financial sustainability of providers in England which found that 40% of them were expected to run budget deficits.[1] Rising operating costs, the impact of the pandemic, and shifting student/consumer demand is not dissimilar to the pressures that other sectors have faced, but the impact of a series of government interventions on tuition fees and international student numbers have contributed to putting HEIs on the brink.

Our institution, the University of Leicester, whilst not facing the immediate dangers of some of our peers, is not without its challenges. The University reported an operating deficit of £8.3 million in the 2023-24 financial year after several years of surplus, and cash reserves have been reported at a ‘historically low’ £22.4 million.[2] The shift from surplus to deficit has been stark and the depleted cash reserves in place to deal with states of emergency, ensure that a further major policy intervention could have significant consequences.

The charts below, taken from the 2023-24 annual financial report, show the University’s financial situation across key metrics:

Figure 1 – University of Leicester (UoL) operating cash flow as a percentage of income (annual) for the seven most recently reported academic years[3]

Figure 2 – University of Leicester (UoL) staff cost as a percentage of income (annual) for the seven most recently reported academic years[4]

Figures 1 and 2 show that post-pandemic (2021-22 onwards), the amount of operating cash flow as a percentage of income has decreased significantly, whilst the staff costs as a percentage of income over the course of the same period have increased substantially. The report has also noted that the ‘challenging international student recruitment market will impact working capital and liquidity levels.’[5]

In spite of the difficult financial times, the University of Leicester has been attracting significant research income, and set an institutional record in 2022-23, receiving £103 million in research awards.[6] In spite of its research intensity, the University still needs to subsidise its research through income from international students; a situation felt by research-intensive universities across the country. What makes the University of Leicester unique however in this regard is that it remains the only UK university with a Medical School that is not a member of the Russell Group; its Medical School indeed ranked 2nd in the UK in REF2021. Without the international pull of Russell Group membership, the impact of international student income on the University’s finances provides a unique snapshot amongst UK research-intensives. In an increasingly competitive global marketplace, universities need all the help they can get in attracting international students.

Mapping HEI finances against international student numbers

Figure 3 – UoL student numbers by headcount:

2021/22 Academic Year[7]

2023/24 Academic Year[8]

Figure 3 provides data for the University of Leicester for its student number headcounts for the academic years 2021-22 and 2023/24 respectively. The University student body has seen a marked increase in its composition of undergraduate and postgraduate enrolment, with a greater proportion of the student body being undergraduates today. Likewise, there has been a composition shift towards a greater proportion of Home students rather than international. Many of the University’s postgraduate students are from international backgrounds and the impact of the postgraduate student visa changes has been acutely felt. The drop in international student income correlates with the financial pressures outlined in the previous charts, and has come amidst a series of political interventions to reduce the number of international students. The proposed international student levy would hamper demand even further and place significant additional pressures.

It is important to note here that the University of Leicester has one of the UK’s most diverse student populations in the UK, especially amongst research-intensive universities. In fact, the University of Leicester welcomes students from 150 countries,[9] and still maintains a considerably higher international student population than the UK average (33% compared to the 23% UK average.[10] Its ability to attract international students builds in no small part on its international reputation for teaching and research and the rich diversity of its locale, which is reflected in its student and staff bodies.

The need for a sustainable solution

Significant steps have been taken by the University to address the shortfall, as would be expected by any business facing such a predicament. Portions of the University estate have been sold off and many Departments and Schools are currently undergoing a ‘Strategic Review’, which will look to see how subjects and courses can be offered in a more financially viable way. A number of my colleagues have also taken voluntary severance; the possibility of compulsory severance orders, whilst the University has expressed is not desirable, remains a stark future possibility. The subject areas currently undergoing the ‘Strategic Review’ have been determined in part by their poor student in-take, particularly from international cohorts.

Many UK universities have taken similar steps to address their financial deficits, but more fundamental steps are now being taken to address the scale of them. A number of Departments, Schools and Colleges across the nation face closure. Public perception often associates these closures with supposed ‘lesser-value’ degree areas, but this does not always correlate with what is actually happening. Schools across the country that are closing include English, Chemistry, History, Geography, Modern Languages; degree subjects that have produced many business and society leaders, CEOs, MPs and even Prime Ministers. More subjects will undoubtedly follow unless a sustainable future for universities can be found.

The Financial Times estimated last year that English universities were losing approximately £2,500 per Home student a year.[11] In this light, the Government intervention to raise tuition fees in line with inflation from £9,250 to £9,535 from the 1st August 2025 will prove an insufficient and unsustainable measure. A number of suggested solutions have been provided by UUK in particular, in their 2024 report ‘Opportunity, growth and partnership: A blueprint for change from the UK’s universities’,[12] although there has been insubstantive policymaker engagement with the sector to find a solution.

Higher Education (HE) as a leading UK export, with potential to deliver significant economic growth

The economic contribution of international students to local and national economies is well attested. International students bring:

• A £41 billion annual contribution to the UK; meaning each UK parliamentary constituency is on average £58 million better off
• In our East Midlands region, the off-campus expenditure of international students is around £353 million, funding 3,093 jobs[13]

Whilst the direct economic contribution of universities is acutely felt, their wider economic contribution often goes under the radar. George Blake, the Policy and Networks officer for London Higher, indeed noted last year that ‘universities support at least as many jobs in the local economy as they do directly, meaning that if one of the larger institutions were to fail, local economies could be decimated’. He also noted that in terms of direct job losses, a large UK university going insolvent, would exceed those of the Port Talbot steel mill, where a local regeneration and job support programme had to be initiated at a significant and sizeable cost to the UK taxpayer.

Charlie Jeffrey, the President and Vice-Chancellor of the University of York, has meanwhile stressed that HE is the ‘single largest export industry’ in 26 parliamentary constituencies, and is in the top three in a total of 102, spread all around the country.[14] The insolvency of HEIs in this context threatens to considerably undermine attempts made by politicians across the UK’s broad political spectrum to regenerate regions across the UK.

Local and civic impact of HEIs

HEIs have been playing an increasing role in their local communities, with the impact of HEI contributions being more acutely felt than ever. Over the past few years, 26 Civic University Agreements (CUAs) have been signed across the country, and serve as ‘civic strategies, rooted in a robust and shared analysis of local needs and opportunities, and co-created with local partners’.[15] In 2022, the University of Leicester, alongside De Montfort University and Loughborough University signed a Civic University Agreement with five local authorities in the city and county. This ‘University Partnership’ was the first of its kind in the UK to be agreed with the three most represented political parties in Westminster; Labour, Conservatives and Liberal Democrats.

The University of Leicester’s economic impact both locally and nationally has been recorded as follows:

• £360 million annual contribution to the local area
• £600 million annual contribution to the UK as a whole
• 1 in every 23 jobs in Leicester is supported by the university
• The university supports around 10,000 jobs nationally
• Space Park Leicester, which opened in 2022, added £89 million to the economy in its first year of operation.[16]

Key Questions for consideration

• Should a HEI go insolvent, how will the shortfall in local and national economic contribution be addressed?
• As a leading UK export, how can the sector be harnessed most effectively to deliver local and national economic growth?
• How can the positive impact of international students be better communicated by the sector and supportive policymakers against the current political narrative of denigration?
• Can a sustainable future be found to protect the ground-breaking and innovative work of the UK’s research-intensive universities?

September 2025