Written evidence by techUK (HEF0065)
Education Committee
Higher Education and Funding: Threat of Insolvency and International Students
About techUK
techUK is the trade association which brings together people, companies and organisations to realise the positive outcomes of what digital technology can achieve. Around 1100 companies are members of techUK. These companies across the UK range from leading FTSE 100 companies to new innovative start-ups. The majority of our members (around 60%) are small and medium-sized digital businesses. By providing expertise and insight, we support our members, partners and stakeholders as they prepare the UK for what comes next in a constantly changing world.
This is a response submitted by Jake Wall, Policy Manager, Skills and Future of Work on behalf of techUK, an organisation which is an employer representative body.
Executive summary
Universities are core infrastructure for the UK’s technology-led economy. They power the research breakthroughs that underpin entire sectors, from AI and life sciences to clean tech and quantum, while training the skilled workforce that tech businesses rely on to grow and compete globally. In a world where economic advantage is increasingly built on innovation, talent and ideas, the UK’s universities are strategic national assets.
There is a clear link between the government’s core missions, particularly those centred on growing the economy and creating opportunity for all, and the higher education sector. Government analysis found that 88% of new jobs are expected to require graduate-level skills by 2035, with a majority of these jobs sitting in its priority sectors, including a need for over 1.9 million STEM professionals.
The contributions of universities and higher education institutions extend across every level of the economy. Nationally, they drive frontier R&D, attract global investment, train talent, and fuel high-growth sectors. Regionally, they anchor innovation ecosystems, help spin out new ventures, and act as partners for local businesses. Locally, they provide not just jobs and infrastructure, but also access to skills, research, and enterprise, and often serve as the single most important economic institution in their area. Through partnerships with local employers and communities, they help level up opportunity across the UK by widening access to education and creating pathways into good jobs.
However, these roles are under threat. University finances are under increasing strain due to inflation, real-terms declines in domestic tuition funding, and a reliance on international student income. These issues are exacerbated by cuts to public funding – such as Quality-Related Research (QR) funding and the Strategic Priorities Grant – and challenges with cost recovery for research, leading to significant research and teaching deficits.
Institutions are already scaling back their activity in response to financial pressures, from course provision to research. Cuts to the Strategic Priorities Grant, that helps fund the teaching of high-cost subjects including those in science and technology, in this context has worrying implications for the tech sector’s graduate talent pipeline. The grant was already proving insufficient to cover institutions’ costs, and its value has fallen considerably in real-terms over recent years.
Government policies that impact international student enrolment, such as visa changes, dependants bans, and the proposed international student levy, are therefore fraught with risk.
The proposed levy on international student fee income is particularly concerning. It would act as a tax on one of the UK's most successful export sectors, undermining the financial sustainability of institutions and reducing the appeal of the UK as a study destination. Alongside other restrictive measures, the levy threatens to destabilise a sector already under significant pressure.
The damaging effect on higher education would extend to the tech sector, too, because universities are a critical pipeline for high-level digital and STEM skills, as well as a source of cutting-edge research and innovation. A decline in international student numbers and reductions in income, when universities already face considerable public funding pressures, would reduce funding for these programmes, limit collaboration opportunities, and weaken the talent pool that tech employers across the UK rely on to grow and compete globally.
This policy environment risks compromising the UK’s ambitions on growth and R&D, reducing course provision and access for students, and pushing some institutions into insolvency.
The consequences of institutional failure would be severe: academic disruption, job losses, weakened local economies, and reputational damage to the UK’s global standing.
To ensure the sustainability of the sector, techUK has emphasised:
The UK’s global competitiveness, regional growth, and tech sector talent pipeline depend on a thriving, resilient higher education system. Government must act now to protect this critical national asset.
Impact of Government Policy on International Students
How will current Government policies affect the financial stability of higher education institutions?
International students are integral to the financial stability and global reputation of UK higher education institutions. For many universities, tuition fees from international students subsidise research, teaching, and services for all students. As a revenue stream, income from international students has become increasingly important in the context of flat domestic tuition fees, which have lost considerable value in real terms, inflationary and cost pressures, and reductions in public funding.
Broad public funding challenges
The financial challenges facing the sector are already compromising the ability of universities to deliver high quality teaching, with high quality resources and infrastructure, and conduct world-leading research. It is important to note that higher education funding is devolved, therefore this submission focuses primarily on England, however institutions across all nations are tackling similar difficulties from reductions in funding.
Research by the Office for Students has highlighted weakening financial performance by universities and falling net cash flow for three consecutive years.
Core components of university research funding in the UK like Quality Research (QR) have dropped in value by 16% since 2010, and equivalent block research funding has fallen even more so in devolved administrations, whilst schemes such as the Higher Education Innovation Fund (HEIF), which fund university innovation and knowledge exchange, are effective but limited by funding and allocation caps.
The Strategic Priorities Grant, designed to support higher education institutions to deliver high-cost subjects and provide strategically important investment was also cut by £100 million this year, though followed in the Industrial Strategy by a commitment to revise the grant to better support future skills needs. This is a clear tension, and funding through the grant is already insufficient and preventing universities from meeting demand in key growth sectors – falling in real terms by 18.4% since 2018/19. These courses include lab-based subjects and subjects that require costly equipment, including engineering, computing and science.
Project-specific research funding is intended to cover up to 80% of the full cost of research, but the data shows that cost recovery rates are considerably lower and worsening. As a result, universities are subsidising research despite their already overstretched income streams. Universities UK highlight that some of the lowest cost recovery rates are for the training and supervision of postgraduate research students, with a clear impact on the UK’s ability to “attract, support, develop, retain and use research talent” and drive innovative R&D in industry.
Capital expenditure has also been decreasing annually, by between 4% and 20% every year since 2022/23. Buildings, infrastructure and IT are all key areas requiring investment, but financial pressures are meaning providers are delaying investment projects and costs are increasing where they have begun. Pots such as the UK Research Partnership Investment Fund (UKRPIF) are available to support co-investment in research infrastructure alongside businesses. On the other hand, government recently cut the allocation for capital spending in higher education by more than half.
Funding challenges are laid bare by the £6.2 billion shortfall in funding for research, and £2 billion shortfall for teaching. Worryingly, nearly half of institutions are forecast to be in deficit next year. The impact of these challenges is already being seen as 1 in every 2 universities cut courses and staff, and cut back spending on building and maintenance spending too. Nearly 20% have reduced investment in research, whilst 79% are considering further reductions.
Existing policies affecting international students
The impacts of public funding challenges on research, course provision and investment will surely intensify, and some universities may seek mergers or close altogether, if financial pressures continue to worsen. In this context, government policy on international students is a key consideration.
There were 732,285 overseas students studying at UK higher education providers in 2023/24, a drop of 4% from the record high in 2022/23, marking the first fall in numbers since 2012/13. Whether this is a reversal in trend, which saw the number of international students in the UK grow considerably between 2017/18 and 2022/23, is unclear.
The number of student visas reached a record high of 484,000 in 2022, before falling the following two years, and applications for study visas in August were 17% lower in 2024 than 2023. Though applications for each month between December 2024 and April 2025 were higher than the same months a year prior.
In 2021/22, international students made up 24% of all students in UK higher education, compared to 17% in 2011/12 and 12% in 2001/02. Much of this increase can be explained by a growth in postgraduate numbers, as well as a rise in non-EU students post-Brexit.
The contribution of these international students to the higher education sector is considerable. In 2021/22, international student fee income represented 23% of total university income, around £11.8 billion. On average, the cross-subsidy from international students to educating domestic student is £2,588 per year.
The reliance of universities on tuition fee income, especially that from international students, is reflected in the fact that while tuition fees accounted for just 24% of university income in 2005/06, it has exceeded 50% since 2019/20, coinciding with a drop in public funding and government grants.
International students also contribute to local economies more broadly, and a study estimated that students starting in 2021/22 would deliver a net economic benefit to the UK of £37.4 billion. Regionally, this is significant, resulting in a £58 million net economic contribution per parliamentary constituency. According to the HEPI, it translates to £450 million in Manchester alone, equivalent to £3,500 per resident.
Although the UK government has said that they welcome international students and their contributions, they have, at the same time, committed to reducing net migration into the country.
The International Education Strategy, published in 2019 and updated in 2021, sought to increase the value of education exports and increase the total number of international students studying in UK higher education to 600,000 a year by 2030. However, the new government has launched a review of the Strategy to ensure it remains effective and reflects the priorities of the government.
Policies pertaining to immigration, visas, dependents and student work rights are therefore central, and pose risks to striking an effective balance, with downstream effects across institutional finances, regional economies and the UK’s global competitiveness in higher education.
There are a number of policy decisions that have already taken place, or are being discussed that have or will heavily impact the enrolment of international students and subsequently university finances. In the round, government policy decisions taking effect in 2025/26 are estimated to amount to a reduction in £1.4 billion of funding for universities and higher education institutions. Policies affecting international students are one part of that puzzle looking ahead, but the wider policy environment around international students, including decisions taken by previous governments that are set to be maintained, underpin considerable challenges.
Royal Society analysis reveals that the cost of UK visas is significantly more expensive than other top research nations and rising. This is true across visa routes, particularly due to the high cost associated with the Immigration Health Surcharge (IHS). The student visa, for example, costs £524, while the HIS costs £776 per year. This cost is separate from further outlays on course fees and living expenses, and undermines the comparative attractiveness of UK universities.
From 2024, the UK removed the right for international students on the Student visa to bring dependants into the country. This has restricted the ability of students who are able to bring dependants to the UK to government sponsored students studying a course that lasts more than 6 months, or full-time students on a post-graduate courses that last 9 months or longer that are a PhD, doctorate or research-based. The restrictions for dependants for those on a Student visa has had permutations for the Graduate route, as the Graduate visa only allows those who were previously on the Student visa as dependants. Its impact is reflected in a government review that found a 63% reduction in the number of deposits paid for the September 2024 intake by international postgraduate applicants compared to the same time in the previous year. Cranfield University reported a 47% decline in postgraduate taught students in just 2 years, and warned of the financial implications for the research and teaching ecosystem.
Proposed policies affecting international students
Proposed changes to the Graduate route outlined in the Immigration White Paper, that would shorten its duration from 24 months to 18 months for undergraduate and master’s graduates, are likely only to accelerate and worsen a decline in international student numbers. Previously, the length of the Graduate visa has aligned with the length of graduate programmes and other trainee schemes, enabling a smooth transition. The impact of new restrictions that undermine this alignment will mean graduates on such courses will have to find a way to extend their stay. A potential avenue is for employers to sponsor them as a skilled worker, though this comes with costs and compliance duties that could compromise business appetite.
Further relevant to this are changes made in 2023 around the ability of students to switch from a Student visa to a work visa. These changes mean students are only able to apply for a work visa, provided they meet the necessary requirements, once their course has been completed – and have been coupled with more stringent criteria and increased costs for routes such as the Skilled Worker visa.
The effect of these changes is reduced post-study work options that diminish UK attractiveness, compared to countries offering more generous post-study work rights. A survey conducted by Keystone Education Group of prospective international master’s students found that 58% said it would make them less likely to choose the UK for their studies, 37% somewhat less likely, and 21% much less likely. For universities, a decline in enrolments stemming from less appealing visa conditions exacerbates financial pressures.
The Immigration White Paper also proposes a 6% levy on income from international student fees, to be invested in domestic skills and education provision. The impact on the higher education sector and universities will be devastating and fails to recognise the contributions that international students make to the UK economy, and the strength and reputation of its higher education sector. Higher education, after all, is one of the UK’s strongest exports and implementing this effective tax on the industry would run counter to government’s ambitions on trade and growth. A levy would leave universities with two choices: absorb the costs, which a majority are not in a financial position to do and, in any case, would likely entail scaling back teaching and research even further; or pass them on to students, further reducing the appeal of the UK internationally. Considering domestic fees are controlled by the government, international student fees are a key mechanism through which higher education institutions can offset or manage rising costs.
Government policies intending to, or having the effect of, reducing international student numbers in the UK poses specific challenges for the UK tech sector. The sector relies on international STEM graduates to meet talent demand in key areas like software development, data science, and AI. When considered in the context of wider immigration policy, including proposals in the White Paper that will increase costs and frictions more broadly, the effects on UK tech will be wholly negative.
The impact of changes to dependant visas, visa costs, and work visas have already impacted the perception of the UK amongst international students and affected their ability to study here. And the financial sustainability of the higher education sector is already on the brink. Proposed changes to the Graduate visa and the proposed levy on international student income could push many institutions over the edge. At a time when government is keen to drive national and regional growth, and is looking to higher education to deliver world-leading research, foster innovation, and produce the highly-skilled graduates for its priority sectors, including digital and technology, policies that will worsen many of the structural issues facing the sector are misguided.
What is particularly worrying is that the impact of reduced international student numbers will not be felt equally across higher education. TBI analysis shows that post-1992 institutions have weaker finances and that those with lower entry requirements rely more heavily on international student fees for financial viability, with more exposure and less capacity to adapt to fluctuating student numbers. Data shows that post-1992 institutions accepted 3% fewer international applicants in 2023 than in 2022, the lowest number since 2016. These institutions provide a disproportionate share of higher education opportunities for British students from low-income backgrounds, underscoring implications for social mobility.
That is not to say there won’t be a significant impact on other universities. According to data from 2025, 51% of international students attended Russell Group universities. These are universities with a strong research-intensive focus and they also rely on the cross-subsidy from international student fees to fund their activities including domestic student teaching and research. The significant cohort of international students at these universities and their comparatively higher fees mean policies such as the proposed levy would reduce the income of these institutions more than others, and impact the activity they are able to undertake. According to modelling by Wonkhe, for the majority of large universities the cost is around 2% of income, and around 3% for Russell Group institutions.
It is clear that government policies intending to reduce immigration numbers and international students cannot be considered in isolation, and must recognise the impact on a higher education sector that has become dependent on international student fees. Current government policy has already contributed to falling international student numbers, and proposed policies expect to see these numbers drop even further.
If government is serious about leveraging the strength of UK higher education, the focus should be on supporting the sector to overcome the significant challenges it faces – protecting the financial viability of institutions and supporting reforms – and it must think again about policies that serve only to actively exacerbate them.
What implications will these policies have on future tuition fee increases?
Current and proposed government policies targeting international students, such as increased visa costs, restrictions on dependants, an international student levy, and potential changes to the Graduate Route, are likely to reduce international student demand, particularly for postgraduate taught courses where growth has been strongest in recent years. As institutions face declining income from this group, and grapple with issues stemming from insufficient public funding, many will be forced to explore alternative revenue sources and cost reductions to maintain financial stability.
With the domestic undergraduate tuition fee frozen at £9,250 since 2017 in England, though set to rise to £9,535 for the 2025/26 academic year, and inflation rapidly eroding its real-terms value while increasing costs, universities are left with limited options. The same cap on domestic fees exists in Wales. In Scotland, tuition is free for Scottish students, but Scottish universities only receive £7,610 per head to teach Scottish students and also rely greatly on the cross-subsidy for teaching costs from foreign students.
While universities could simply increase their fees for international students further, many have done this already to offset other pre-existing financial pressures, and the result would be pricing out middle-income applicants and reducing UK competitiveness globally. Many institutions may not have the flexibility to do so in any case, creating disparities whereby only wealthier students can afford high-cost courses or attend well-funded institutions. Moreover, an increase in fees could result in a focus on attracting students from specific countries that could absorb the cost.
If international fee income continues to decline or comes under further pressure from policy, universities may become even further dependent on recruiting from smaller pools of international students that are willing to pay a premium, deepening financial precarity.
In any scenario, government will likely need to raise domestic fees further to offset the impact of inflation. But even if this were to happen, it would not solve the financial challenges facing the sector already; government will need to address shortfalls in public funding too.
Other potential fallout includes a restructuring of course offerings, including the cutting of less profitable courses or reduced course sizes, which is already happening in some institutions and limits access and choice for students. Indeed, the impact on high-cost courses – including many technology and science-related courses – in the context of cuts to the Strategic Priorities Grant, is a worrying prospect.
The viability of courses is increasingly determined by a minimum enrolment threshold, which varies by course but is higher for lab-based and higher cost courses. Inflationary pressures, cuts and real-terms decreases in funding, and financial pressures stemming from declining international students are raising those thresholds. As a result, courses in strategically important areas for the UK – such as health informatics provision needed for the NHS – are being cut due to difficulties in making them profitable. And the viability of courses for smaller or more regional institutions with smaller application pools are impacted first.
Government policy could therefore create a vicious cycle, where policy-induced declines in international enrolments reduce income and exacerbate wider public funding challenges, forcing institutions to raise fees and cut courses, which in turn further depresses demand and restricts access to critical skills pathways.
Ramifications of Institutional Insolvency & Regional Impact
What would be the consequences of a higher education provider becoming insolvent?
The insolvency of a higher education provider would have profound and far-reaching consequences, not only for students and staff but also for local communities, the national economy, and the UK’s international standing. Universities are deeply embedded in the social and economic fabric of their regions. Their collapse would trigger a cascade of disruptions, from halted degrees and job losses to weakened local economies, reduced training options for the public sector, and a diminished global reputation. The stakes are high and the ripple effects could be more severe than even industrial closures.
According to Professor Shitji Kapur, Vice Chancellor of King’s College London, even a small number of insolvencies or institutional restructuring and course closures could impact student numbers and therefore the ability of the sector to conduct research, as these activities are interdependent.
Overall, there is a lack of political and legal clarity over what institutional insolvency would look like, with no legal framework governing university insolvency processes and student protections. The Office for Students does not have powers of intervention to prevent closures, though it can issue a Student Protection Direction to direct institutions’ actions and has published guidance for institutions to avoid, plan for and navigate potential market exit. The Office of the Independent Adjudicator for Higher Education (OIAHE) is placed to handle student complaints and advise on compensation, but there is a real risk of a domino effect that impacts lender confidence and demand across the sector.
Academic disruption
The most immediate and personal consequence of institutional insolvency is disruption to students’ lives and education. University is not just a place of study, for many it’s a home, a community and the foundation of their future careers. Insolvency puts the brakes on their academic progress, and leaves students uncertain about whether they will be able to complete their degrees, transfer credits, or even remain in the country.
Mills and Reeve have argued that existing insolvency legislation does not cover universities, meaning there is a lack of formal protection for students. If students are considered creditors in such a context, there are no established protections or duties with regard to completion of their studies. Academic uncertainty would leave students in limbo.
In response to this disruption, institutions and policymakers may look to teach-out arrangements or facilitate transfers to other institutions, though this is far from straightforward. Teaching out, in the context of institutional insolvency, raises questions around how quality will be maintained and to what extent support for students will continue so they are able to engage amid changing circumstances.
It is not clear that teaching out would even be possible, if the only insolvency regime available – as is likely right now – is liquidation. The legal standing of regulator instruction, such as student protection direction from the OfS, would be equally questionable in such a scenario.
It is also logistically complex to coordinate the transfer of hundreds or thousands of students, who will require multi-year support, each with different courses, credits and academic requirements. Receiving institutions may not have the capacity, expertise, or infrastructure to absorb students at short notice. The transfer of data and student records would be essential and pose difficulties at short notice, and challenges would be particularly acute in regions where there are fewer, or perhaps even only one, universities in the area.
These solutions are also financially difficulty, especially as the insolvent institution may not be able to contribute financially. This would then require government intervention to pick up the pieces, or put pressure on other universities who are facing their own challenges – compromising their own teaching and research.
There are financial consequences for students too, with uncertainty surrounding money spent on accommodation, tuition and other fees, whilst international students may face visa issues and additional costs.
A report by the OIAHE has assessed past closures in the English higher education sector, which have been concentrated among smaller, private institutions, and set out a framework to manage the impact of higher education provider closure. In the report, they highlight key consequences and lessons including:
Reputational damage
Beyond individual outcomes, the insolvency of a university can cause significant reputational damage to the UK higher education sector as a whole. The UK has long been regarded as a global leader in higher education. A high-profile institutional failure could undermine confidence in the system’s stability and governance, making prospective students and international partners more cautious. This would degrade the appeal of UK universities as a destination for talent and investment, eliciting further damage to sector finances and contributing to negative consequences for research and teaching.
This risk is particularly acute in a competitive global market, where the UK’s reputation for stability and academic excellence is a key driver of international enrolment, and undermine not just the competitiveness of UK higher education but also the talent pipelines which key growth industries such as technology depend on.
Job losses and local economic impact
The insolvency of a university would have devastating consequences for local economies, particularly in towns and cities where the institution is a major employer and economic driver. Outside of insolvency, even mergers leading to campus closures would have a significant impact. Universities are often among the largest and most stable sources of employment in their regions, supporting not only academic and administrative staff but also a wide range of indirect jobs in the local economy. Institutional closure would result in significant job losses, affecting not only academic staff but also administrative, technical, and support personnel, with a knock-on effect for jobs and businesses in local areas.
The scale of potential redundancies is substantial. Analysis from the HEPI makes this clear: a university that teaches up to 40,000 students and employs 4,000 staff could face job losses exceeding those seen in major industrial closures, such as the Port Talbot steelworks, where around 2,500 jobs were lost. University insolvency could lead to a sudden and total end of employment for thousands of individuals.
The loss of experienced academic and professional staff can have long-term consequences for the sector. Expertise built over decades may be lost, and the disruption to research, innovation, and teaching capacity may never recover.
University insolvency creates a risk of brain drain and weakening graduate retention in affected areas. As higher education institutions play a critical role in attracting, developing, and retaining skilled talent, their collapse means this pipeline of talent may be permanently disrupted. Not only would there be no pipeline of new graduates, but the second order effects of institutional insolvency on local economies may compromise the jobs and opportunities that do exist in these areas. A study by HESA found that 46.5% of graduates stayed in the same region where they studied, meaning the loss of university can lead to a substantial outflow of young, educated people.
In the UK, this could be especially damaging for post-industrial towns or smaller cities, where universities may be the primary source of graduate-level employment and innovation. Without universities, local employers may struggle to recruit, and young people forced to relocate to larger urban centres – concentrating opportunity and investment in already prosperous areas.
Affected regions could suffer from negative student and graduate perceptions, which deters them from seeking to study in other institutions and work in these places due to fears of instability or limited career prospects. This could therefore create a self-reinforcing cycle of decline, characterised by fewer students, graduates, jobs and less investment.
Further ripple effects will negatively impact everything from innovation to housing and hospitality:
Loss of course, subject and HE provision
The closure of a university or higher education institution is not just about that single institution, but about the academic provision available in the areas in which they reside. Institutional losses can therefore lead to the permanent loss of entire areas of academic provision, and particularly so in regions where alternative options are limited.
There is a danger is that, especially in the case of specialist subjects or high-cost disciplines, student access and choice in parts of the country with regard to higher education will be compromised. This would mean skills gaps and shortages in key sectors, like tech, that depend on university talent pipelines could worsen both regionally and nationally.
In parts of the country where universities may be one of few or the only accessible or appropriate higher education provider, their closure could leave communities without adequate access to degree-level study and create cold spots of provision. The impact would be most severely felt by mature students, part-time learners, people with disabilities, and those with caring responsibilities, as these groups are less likely to relocate for study.
How do higher education institutions contribute to growth in their local economies, the provision of public services, and their wider communities?
Higher education institutions are powerful engines of regional innovation and long-term prosperity. By anchoring public-private partnerships, driving innovation, supporting graduate retention, and acting as civic institutions, universities help shape the economic and social futures of their localities.
Many universities have established Civic University Agreements that coalesce around four key principles: place, with an emphasis on the economic, social, environmental, and cultural life of communities; public, informed by evidence-based analysis of place needs and developed with local partners and community; partnerships, collaborating with other universities and anchor institutions; and measurement, with clear objectives and impact.
Local growth
It is important to note that many of the post-1992 universities that are most vulnerable to government policies and potential insolvency are key to local prosperity across less wealthy areas.
In local economies, higher education institutions are major employers and consumers, supporting thousands of jobs within and beyond them. Students and staff contribute significantly to local economies through housing, retail, transport, and leisure spending.
Aberystwyth University, for example, employs over 2,000 staff in a town of approximately 13,000 people, while an Oxford Economics report commissioned by the University of Exeter, the university contributed £816.3 million in economic output to the city of Exeter in 2020/21, supporting 9,750 jobs, which is equivalent to 9% of the city’s total employment.
University procurement supports local supply chains, in areas like construction, IT services and beyond. The University of Plymouth have, in their procurement strategy, set out a clear commitment to supporting local suppliers. They are signatories of the Plymouth City Council Local Procurement Charter, and report that many local suppliers have won and grown their business with the university as a result of this approach.
Universities are central to driving local economic growth, not only through direct employment and spending, but also by acting as strategic hubs for innovation, enterprise, and investment. Their role is increasingly recognised in national policy frameworks such as the UK’s Modern Industrial Strategy and the development of regional clusters, enterprise and investment zones, as well as local and regional investment plans.
In different parts of the country, universities support local growth plans and coordinate with local authorities and businesses to support development and meet the needs of their local communities. The North East Combined Authority’s interim local growth plan, for example, includes investment to support university spinouts, work with universities on clusters in areas including technology and data, and a focus on meeting skills needs. They also play a key role in graduate retention, something at the heart of the Lancashire Growth Plan.
Institutions host innovation labs, incubators, and enterprise centres that support local startups and SMEs, anchoring local tech ecosystems. Through knowledge exchange partnerships, they help businesses adopt new technologies, improve productivity, and access research expertise.
To take one case study, Future Space, the on-campus innovation centre at UWE Bristol, has supported over 100 innovative businesses, creating over 400 jobs, developing 240 new products and services, and contributing nearly £17 million to the Bristol economy. These businesses include university spinouts, student start-ups, and high-tech firms attracted from across the UK and internationally. Moreover, these businesses and the centre have facilitated over 40 student internships, and led to permanent employment for more than 20 UWE graduates, strengthening the local talent pipeline.
The Future Space innovation centre is complemented by the Launch Space incubator which provides funded support for entrepreneurs and early-stage tech startups. Altered Carbon, a deep-tech spinout founded by UWE alumni which develops AI-powered scent detection technology is an example of a company that has grown through university incubation and innovation support initiatives. It has secured over £3 million of investment, including £1.3 million in private funding.
These collaborations are vital to the UK’s industrial strategy, which identifies sectors like digital, clean energy, and life sciences as key growth areas, and will depend on leveraging the regional and respective strengths of UK higher education institutions.
Indeed, the government’s new industrial strategy goes some way towards recognising universities role as place makers – institutions that strengthen regional industrial clusters, generate spinouts, and embed innovation into local growth plans – that will play a critical role in delivery, though it does not equate to an effective strategy for the higher education sector. In designated Investment and Industrial Strategy Zones, universities are central in attracting inward investment, aligning skills provision with employer needs, and supporting high-growth sectors.
Universities can act as powerful magnets for international business investment by offering world-class research capabilities and a steady pipeline of skilled graduates. For example, the University of Warwick has played a key role in attracting global firms like Tata Motors and Bosch to the West Midlands, leveraging its research strengths in engineering and manufacturing. Similarly, the University of Cambridge’s innovation ecosystem, including the Cambridge Science Park, has drawn numerous multinational companies seeking to collaborate on cutting-edge R&D.
The University of Lincoln has attracted investment from Siemens into its agri-food research, helping to establish the Lincoln Science and Innovation Park and supporting the development of a regional industrial cluster. This is particularly notable given that Lincoln University has reported significant financial pressures and launched a voluntary exit scheme alongside a consultation with staff on departmental restructures in spring 2025. Universities under financial strain can and do attract FDI, especially when they align their research strengths with regional industrial needs. However, sustaining these partnerships becomes more difficult without stable funding and the spectre of insolvency puts these benefits at risk.
Public services
Higher education institutions are foundational to the UK’s public services, not only as training grounds for essential workers but also as engines of innovation that modernise how services are delivered. For the NHS, schools, and local authorities, universities provide both the human capital, research, technological expertise needed to meet rising demand and evolving challenges. Through placements, consultancy, and collaborative R&D, universities support the adoption of new technologies and help improve service delivery.
Universities educate the majority of the NHS workforce, from doctors and nurses to radiographers and biomedical scientists, and are increasingly integrating digital health, AI, and data science into their curricula and course offerings.
Aston University offer a dedicated MSc AI in Health to give students the opportunity to explore and understand the application of AI and data science to healthcare. The curriculum is co-designed with AI experts and healthcare professionals, and offers real-world experience through partnerships with Aston Medical School, West Birmingham Hospitals NHS Trust, and others. The University of Derby offers a similar course as a BSc.
The University of Sunderland has expanded its medical and nursing programmes to address regional workforce shortages in the North East, while also embedding digital health competencies to prepare graduates for a tech-enabled NHS. It is a key partner in the £4.17 million NortHFutures Digital Health Hub, a regional initiative involving six universities and seven NHS Trusts, alongside innovation accelerators, industry partners and others. The project aims to build a world-leading healthcare technology ecosystem in the North East and North Cumbria, with a focus on digital skills training, AI, virtual reality, and health-tech innovation.
Another case study is the Digital Health Enterprise Zone (DHEZ) operating on the campus of the University of Bradford as part of the University Enterprise Zones pilot. DHEZ provides both a physical space and a virtual service to support the development of digital health solutions that improve patient outcomes and community wellbeing. It brings together academics, businesses, healthcare professionals, students, and local communities to co-create innovations and deliver projects aligned with the needs of the local NHS and care systems.
Similarly, in the West Midlands, Aston University, the University of Birmingham and other partners including industry and the local NHS Foundation Trust joined forces to create the West Midlands Health Tech Innovation Accelerator to support in bringing new medical and healthcare technologies to market.
In education, universities are central to training the next generation of teachers and school leaders. Many also lead research into edtech, inclusive learning technologies, and AI-driven assessment tools, innovations that are reshaping classrooms and improving outcomes. Nottingham Trent University has established an Interactive Systems Research Group which has developed a range of accessible and AI-enabled learning platforms aimed at improving outcomes for students with disabilities and those at risk of exclusion. Their work includes the MaTHiSiS and Pathway+ platforms that support inclusive teaching and improve engagement for students with learning disabilities and autism in schools, and collaborations with schools as well as tech firms like Fujitsu.
Universities also work closely with local government to bring their research expertise and data to bear on local initiatives. The University of Exeter, for instance, has partnered with Devon County Council to co-develop climate modelling tools and sustainability strategies that inform local public service planning. The university contributed to the council’s Carbon Reduction Plan 2024–2027, providing data-driven insights to guide emissions reduction. This university-county collaboration is formalised through a Civic University Agreement, that seeks to align the university’s research and innovation capacity with the council’s wider public service priorities and deliver local impact.
Some universities have also struck partnerships to support local economic transformation through smart infrastructure. The University of Bristol has partnered with the City Council on such endeavours and is a member of the MetroLab network focused on driving digital innovation across cities and localities. Examples of these innovations in Bristol range from the 5GUK Test network and smart tourism to careers and recruitment platforms. Similar examples of university collaborations exist in Scotland, where the University of Glasgow has partnered with the city on projects including 5G roll out, establishment of the Glasgow Riverside Innovation District, and the use of data captured through CCTV for smart decision-making around things like pedestrian footfall and traffic analysis.
Community
Higher education institutions are civic anchors that help shape the social, cultural, and educational fabric of their communities. Last year, the Education Secretary Bridget Phillipson emphasised that universities must strengthen their contributions to local communities and expand opportunities for disadvantaged learners.
Civic Agreements evidence clearly how universities can collaborate and work together for the benefit of their local communities. In Leicester, Leicestershire and Rutland, De Montfort University, Loughborough University, University of Leicester, and the city and counties of Leicester, Leicestershire and Rutland have established an agreement to bring together skills, expertise and capital to support local communities. Their work spans 5 themes: arts, culture and heritage; the economy; education; the environment; and health, wellbeing and sport.
Civic University Agreements exist in many other parts of the country, including in Greater Manchester, where the agreement with 5 universities focuses on areas including meeting local skills needs and boosting participation in education, deploying R&D and supporting innovation for key regional sectors like technology to create investment and jobs, and reducing inequality.
Across the UK, universities are also taking action to spread opportunity for learners through targeted outreach, foundation years, and partnerships with schools and colleges in areas of low participation.
A national example is the Uni Connect programme, coordinated by the Office for Students. Uni Connect brings together 29 regional partnerships of universities, colleges, and local organisations to deliver outreach activities, advice, and information to young people from underrepresented backgrounds. So while it is a national programme, it delivers locally and regionally.
Since its launch, the programme has engaged over 1.5 million learners and worked with more than 2,000 schools and colleges across England. It aims to reduce gaps in participation, support informed decision-making, and address outreach ‘cold spots’ where access to higher education is most limited.
One project of the Universities Partnership in Leicester, as part of the Civic Agreement, worked with Uni Connect: Pathways to establish the skills-based programme Evolve to raise attainment for KS3 learners. Evolve aims to support learners to develop metacognitive skills, study and learning strategies, build confidence, and learn self-reflection and self-regulation skills. The programme was designed and piloted by the University partners and Uni Connect, and brings together partners, local schools and students.
Other local examples include those from University of Liverpool. Through its Liverpool Advocates programme, current students from diverse and underrepresented backgrounds serve as mentors, role models, and guides for prospective students in local schools. The university also runs Liverpool Plus, a transition and support scheme that helps underrepresented students build community, access resources, and thrive academically once enrolled.
Outside of their typical cohorts, universities and higher education institutions are increasingly serving their community with lifelong learning courses and training too.
The University of Sunderland, for instance, delivers a UKSPF funded Skills and Inclusion Programme. This programme entails over £2.5 million of investment for residents, employees and businesses to undertake fully funded training, with 100 fully funded courses available from the University and 11 delivery partners covering a range of levels and disciplines – including digital skills and engineering.
What strategies should be implemented to prevent insolvency and ensure sustainable regional provision of courses?
In order to safeguard UK higher education and ensure that universities and other institutions can play a central role in delivering on government priorities, it will be paramount to establish a long-term plan for the sector, bolster its role in delivering regional and local impact, and drive reform.
With universities and higher education institutions critical to realising the country’s ambitions for growth, but facing pressing challenges which risk undermining their ability to support these efforts, government must set out a clear vision for what a healthy, thriving and productive sector looks like and a plan to make it a reality.
The Minister for Skills and the Minister for Science have discussed the core principles they see underpinning the higher education sector over the coming years. These principles include contributing to economic growth, conducting high quality curiosity-driven research, building national capabilities in key sectors, contributing to the economic and social prosperity across regions and localities, and being a force for UK soft power.
However, it is hard to see how these principles can be fully realised without adequate support for the sector. Government must be clear on what it expects the sector to do and not do, and, critically, create the conditions for institutions to deliver. This will mean ensuring that policy thinking is joined-up, grasping the nettle on the range of issues affecting higher education, and working with stakeholders and the wider sector to craft a sustainable and effective future.
The publication of a long-term Industrial Strategy, that will rely on universities driving high-level skills, research and innovation, would do well to be matched by an equally long-term plan for higher education.
techUK therefore recommends government publish a long-term strategy for higher education to support ambitions for the sector. The strategy will need to address funding challenges and set out a sufficient long-term settlement for universities; include a coherent international education strategy and policy on international students; support collaboration between institutions and with industry; put higher education institutions at the heart of regional growth, skills and innovation; and support reform and transformation in the sector.
Funding
The financial model underpinning higher education is not sustainable. Institutions face growing deficits in both teaching and research, driven by rising costs, real-terms declines in domestic tuition fees, and declining public funding. Yet money spent to fund universities, according to one report, garners a 14x return on investment. While the evidence for these pressures is set out elsewhere in this submission, the strategic response must be clear: a long-term funding settlement is essential to safeguard institutional viability, research, and course provision, particularly in high-cost and strategically important areas such as STEM and digital technologies.
Government must work with the sector and address declines in QR funding and low-cost recovery rates for publicly funded research. It must also think again about cuts to the Strategic Priorities Grant and review domestic student fees, to ensure that funding reflects the cost of teaching and does not compromise course provision for key sectors.
Without reform, universities will be forced to scale back their activity and course provision or may fail entirely, undermining the UK’s ambitions for innovation, skills development, and regional growth.
International students and strategy
Given the tension between government aims to reduce net migration and the reliance of higher education institutions on the cross-subsidy from international student fees, establishing a coherent international strategy for higher education is paramount.
As we have made clear, international students are a vital source of income for many institutions. However, over-reliance on this revenue stream has introduced systemic risk. At the same time, the higher education sector is one of the country’s most successful export industries and international students provide significant direct and indirect economic benefits across the country.
International collaboration and recruitment is also important for delivering high-quality research and education provision. 60% of research produced in the UK has an international co-author, and internationally collaborative research is demonstrated to deliver greater impact. According to UUK data from 2021, the proportion of international academic staff was 47.7% in engineering and technology, and 40.2% in mathematical and physical sciences, with engineering and technology attracting the highest proportion of non-EU staff (24%). Although the government has created a Global Talent Fund taskforce and an associated fund to attract world-class researchers to the UK, and this is a welcome initiative, friction remains in the wider funding and policy environment.
Changes to visas pertaining to students and graduates, the proposed levy on international students, and the implications of tighter work visas for the recruitment of early-stage researchers and technical and support staff, all invoke significant challenges for a sector which will be critical in delivering on government’s growth and industrial strategy priorities.
The government must overcome confusion in policy objectives by refreshing the International Education Strategy as part of a wider strategy for higher education. This must entail a clear and consistent approach which protects and leverages the global competitiveness of the sector, supports sustainable growth, and avoids abrupt policy shifts that destabilise institutional planning. And it must ensure a friendly environment for international collaborations and attracting international researchers and academics.
Due consideration must be given to the challenges already facing institutions, underpinning a collaborative approach that brings together government and higher education to plot out a route forward on international student numbers that does not compromise institutional viability. This means, in the first instance, shelving plans for a levy on institutions’ income from international students.
Funding for universities – as well as the intake of international students – produces a significant return for the economy and policies with the effect of reducing institutions’ income would therefore be short-sighted, essentially skimming off the top and hampering investment that is shown to provide considerable economic benefits.
While it is proposed that funds from the levy are to be reinvested into higher education and/or skills, detail is lacking at this stage. The case for taxing institutions’ income, when their finances are already under pressure, to then reinvest the money back into them is not clear. Depending on how funds are used – and especially if the result is redirecting money from higher education towards other parts of the skills system – the plan may overlook the key role of universities in the UK’s domestic skills provision, critical to providing opportunity for learners to acquire skills and knowledge in sectors with the highest growth potential, and in need of support and investment.
Government should work alongside the sector to reduce dependencies on international student fees, instead of instituting damaging levies, and be clear on where an effective balance between reducing international recruitment and protecting UK higher education as a key export sector lies.
Collaboration, innovation and local growth
To support institutional resilience and regional provision, universities must be empowered to lead through collaborative partnerships and place-based innovation. This includes:
Strengthening collaboration between universities, industry, and the wider education ecosystem is a key strategy for preventing institutional insolvency and supporting sustainable regional provision. Creative partnership models between institutions can help them pool resources, reduce duplication, and maintain provision for vulnerable disciplines and in financially vulnerable regions. Some universities are also exploring the possibilities of shared services. And while there are examples of universities establishing strong regional civic partnerships, a number of which we have cited, KPMG and Mills & Reeve and Universities UK highlight that complexity and a lack of clarity around regulatory and legal requirements, including competition law and VAT, hinder progress to more innovative forms of collaboration.
Expanding university-industry collaboration is an equally critical strategy for enhancing institutional resilience. These collaborations are important in a number of ways, boosting productivity, investment, upskilling and job creation. They can assist companies through knowledge exchanges to drive innovation in products, services, and working practices with access to leading expertise and cutting-edge facilities.
At the same time, they benefit universities by creating opportunities for applied research and bringing in additional investment to tackle real world problems. Collaboration can ensure research outcomes are likely to be adopted and have an impact, and may prompt interdisciplinary work to tackle complex challenges. Investment is a key benefit, reducing reliance on core grants and public funding, expanding institutions’ funding base and benefiting research capacity.
Tata Consultancy Services partnered with the Royal College of Art on a 3-year research project focused on vocal accessibility, seeking to better understand vocal interactions with technology – in light of the rapid adoption of innovations like smart assistants and the context of notable research gaps – and develop a set of accessibility guidelines for designers and technologists.
The key aims of the project were expand the means of interaction between users and vocally accessible technology and expand traditional accessibility into the realm of inclusivity, to develop guidelines to define a sustainable future for vocally accessible technology and create inclusive standards cross platforms, and to understand the user living experience of current systems and technologies through co-design with partially sighted people, technologists, and visually impaired programmers.
The initial guidelines were tested in collaboration with designers working for TCS and the Publicly Available Specification for the accessible design of Voice User interfaces was published by the BSI in March 2025.
In the UK, Knowledge Transfer Partnerships (KTPs) are funded by collaborative grants issued by Innovate UK as part of UKRI, and enable universities and businesses to reap these benefits. Shorter collaborations are facilitated by Accelerated KTPs. The scheme enables businesses to have up to 67% of project costs to be covered by the government. KTPs yield a return of investment of up to £5.50 for every £1 spent.
Through KTPs, the University of East London has worked closely with industry to drive innovation. An example of their collaboration through KTPs is their support for Intelligent Voice Ltd. They are providing expertise and research – in areas like augmented reality, video processing and motion detection, avatar animation and personalisation, and audio adaptation and reconstruction – to help innovate Intelligent Voice’s video conferencing solution that seeks to simulate more realistic and natural communication in virtual meetings.
Aston University is a sector leading KTP provider and its team won the Best Support Team and Best KTP Project at 2023 Innovate UK Awards. These types of projects have an average of 1000% ROI, demonstrating the significant return on investment.
An example of their KTP projects is their work with Advanced Smart Apprentices, developing a software platform to encourage apprentices to complete their training, using machine learning and predictive analytics to analyse learner records – reducing attrition and expected to grow revenues. Computer scientists from Aston’s College of Engineering and Physical Sciences created a learner engagement module called Smart Coach that deploys these technologies and offers learner support material to complement Advanced Smart Apprentices’ existing delivery software.
The HEIF is another highly effective mechanism to support universities with knowledge exchange, commercialisation and business engagement. It is focused on enabling universities to turn their cutting-edge research and student ideas into tangible societal and economic benefits, with a level of flexibility that enables institutions to invest where it would be most effective. The fund enables institutions to invest based on their strengths and opportunities, as well as respond to regional factors and their place in local ecosystems, covering everything from collaborations with businesses to empowering students and developing spinouts. Research England found that the fund returns around £14.80 for every £1 invested and, while techUK welcomes continued support for the fund in the industrial strategy, it could be further strengthened by uplifting the amount of money committed to the fund.
However, the National Centre for Universities and Business (NCUB) published a report which found a 5% dip in academia links with business. Collaboration income is down by 12% compared with pre-pandemic levels. Over recent years, the drop in SME interactions with universities – due to the pandemic and loss of European investment funds – has meant that university income from these interactions would have been 29% higher if it had continued to follow pre-pandemic trends. They face specific barriers, including time, costs, knowledge, and perceived risks, as well as a hard to navigate landscape. Universities can also struggle to engage smaller firms and face higher costs, lacking resource to engage the most appropriate small businesses. International models like Germany’s ZIM programme show how targeted support can strengthen these links with SMEs.
In their report, the Russell Group highlight how, in the UK, the Industrial Strategy Challenge Fund succeeded in driving collaboration between academia and industry in key areas, supported by its emphasis on key challenges and clear roadmaps. Replicating this success through funding in the new industrial strategy, such as the R&D Missions Accelerator Fund, should be a key objective.
Moreover, universities could be better incentivised to engage with industry through public funding mechanisms. The REF framework already looks at impact – weighted at 25% – when assessing institution’s research quality to allocate funding. This focus could be enhanced, and better or more standardised metrics deployed, making more effective use of hard data on long-term industry investment, collaboration and spinouts, such as the new UK Spinout Register.
Strengthening partnerships with businesses is also essential for ensuring course provision meets employer needs, particularly in high-demand sectors, thereby supporting both financial sustainability and graduate outcomes. There are examples of how businesses are already supporting with course design and supporting research initiatives, including Degree Apprenticeships, while improved data-sharing between businesses and universities can ensure that academic institutions are able to respond appropriately and effectively to changing demands. Moreover, universities can evolve their on-campus experience through the greater embedding of industry engagement, such as workshops, talks and practical experiences such as hackathons, that help join the dots between work and academia.
TechSkills delivers the Tech Industry Gold accreditation which is the result of a unique collaboration between universities and industry, successfully addressing the low employment rates of computer science graduates. Employers and higher education institutions work together to co-create curricula that develop the capabilities most sought after in the workplace, covering technical, business, project and professional skills. Employers also remain engaged with students through the delivery of the programmes.
The results from this collaboration have been exceptional: 86% of Tech Industry Gold degree students are in paid employment 15 months after graduating (compared to 76% for computing grads overall), 84% get a 1st or 2:1 (compared to 76% for computing overall) and 92% of Tech Industry Gold degree apprentices get a 1st or 2:1s.
Cisco’s Networking Academy programme was established in 1997 to prepare students for careers in networking and IT. The programme has partnerships with a number of universities, including the University of Portsmouth, to offer courses that provide Cisco certifications. Teaching is delivered by fully qualified Cisco Academy instructors, and students can practice, experiment, learn and share their work in a laboratory equipped with the latest Cisco networking devices.
The University of East London is one of the most ethnically diverse student populations in the UK. It partnered with Siemens on a Diversity of Thought programme that addresses key stages of recruitment cycles, and provides underrepresented students with work-based learning, mentoring and work experience. The two organisations were awarded the ‘Outstanding University Partnership with an Employer’ award by the Institute of Student Employers.
Government should simplify regulatory and legal frameworks, expand and target funding, and support co-designed provision to unlock the full potential of partnerships that support institutional viability, innovation and regional skills needs.
To ensure sustainable regional provision, strengthen higher education institutions, and prevent insolvency, they must be central to local economic development. Data shows that the gap in graduates between London and other regions is already marked and is rising. On current trends, by 2035, the skills base in London and the south would be aligned with that of world-leading countries like Japan and South Korea, but in other parts of the country it risks being overtaken by countries including Latvia and New Zealand. This underscores a need to boost local participation and maintain provision, while creating the graduate job opportunities needed for retention outside of the Greater South East.
Higher education institutions must therefore play a strong role in Local Skills Improvement Plans (LSIPs) and Local Growth Plans across every part of the UK, in partnership with employers, further education, and local and strategic authorities – and many already are. A place-based approach allows institutions to align provision with labour market needs and drive inclusive growth.
However, common funding mechanisms have not consistently incentivised this regional role. Commitments in the UK’s industrial strategy to “harness R&D investment to build strong regional innovation ecosystems” are welcome, particularly as aspects of funding – especially around research – have been geographically concentrated. In 2023/24, around 50% of UKRI investments went to the Greater South East, a trend that reflects institutional strength but also entrenches regional disparities.
The Research Excellence Framework which determines core funding allocations based on research performance does not account for regional disparities or take account of ambitions to level up different parts of the country. REF’s emphasis on ‘excellence’ rather than equity means regional investment is an emergent outcome, not a strategic one.
But we have seen how funding through schemes like the UKSPF and to mayoral and local authorities has already drawn on universities to support and deliver projects with local impact, and how dedicated investment in specific regional clusters has been anchored by these institutions. The new £500 million Local Innovation Partnerships Fund, intended to help parts of the UK grow their innovation ecosystems, is another positive step. Success will depend on fully leveraging university capabilities to support investment alongside local authorities and industry, building on the work that has already been done across regions like Greater Manchester, the North East, and Lancashire.
Universities could also benefit from greater support to commercialise research, create spinouts and support startups, and help them to scale, especially as the number of spinouts has begun to decline from its peak during the pandemic due to reduced early stage investment. This is particularly important outside of London, the South East and areas like Oxford and Cambridge, where access to resource and investment can be more limited, greater local action is needed to connect businesses with funding and support that is available, and students may have less exposure to enterprise. Research from the British Business Bank (BBB) found that spinouts outside of the Golden Triangle were less likely to access equity capital and raise notably less.
Though there are encouraging signs; despite support for startups through incubators and accelerators remaining most highly concentrated in London, this support is increasingly spread across the UK. Investment companies focused on supporting university spinouts, startups and other R&D intensive businesses have also been established by university partners – such as Northern Gritstone and Midlands Mindforge – in different regions of the UK to help them access the tools and finance needed grow. Northern Gritstone was a recipient of a £30 million investment from the BBB in 2023, and the BBB has also collaborated with local partners on the delivery of regional initiatives like the Midlands Engine Investment Fund. This illustrates the role it can play in supporting regional investment; the BBB has a number of regional funds, and steps to expand and bolster the regional impact of the BBB would be valuable.
SETsquared Exeter is a business incubator and accelerator that supports its members across Devon to build connections between skills and resources in the University of Exeter and identify sector-specific business support and facilities. Through the University of Exeter Enterprise Zone, SETsquared has links across the whole of Devon and facilitates business acceleration support across the county. The programme includes a range of support to help establish and grow STEM startups and SMEs, from workshops and mentoring to access to resources and technology. Its impact is clear: 6 out of 10 businesses engaged developed a new product, service or process, 41% collaborated on R&D, and 62% were successful in securing external funding.
According to analysis by Universities UK, around 27,000 new startups could be established at UK universities by 2028, with a predicted turnover of nearly £11 billion. They found that the number of active startups established in universities increased by 70% over the 8 years up to 2022/23 and 38,750 companies have emerged with the support of universities since 2014/15. These start-ups are critical for growth and create local jobs; in the academic year 2022/23, 64,384 people were employed by start-ups emerging from universities, up 177% in the last decade.
As previously mentioned, HEIF funding is especially important for university innovation activity – including developing spinouts, supporting startups and student entrepreneurship – and could be expanded to deliver greater impact, as is aligning funding through the Industrial Strategy. Case studies of the effective use of the HEIF include the University of Surrey’s Vidiia portable COVID-19 test-kit spinout and Keele University’s Smart Energy Network Demonstrator.
Schemes like UKRI’s Impact Acceleration Accounts also provide some support for spinouts through funding for impact activity, and Innovate UK provides grants and innovation loans for commercialisation. Gaps in funding for spinout and commercialisation support – identified in the Spinout Review – have begun to be addressed through government’s commitment of £40 million to a new 5 year Proof-of-Concept fund, and announcement of £30 million of funding to support a taskforce of universities and industry experts from Merseyside, East Anglia, the Midlands and Northeast England to assist efforts to “incubate and spinout new companies”. However, the scale and scope remains modest by international benchmarks; in comparison, KU Leuven – a single university in Belgium – receives around €20 million annually for proof of concept funding, while Australia has committed to a ten-year $1.6 billion Economic Accelerator programme. And though such proof of concept funding is required, there needs to be adequately joined-up and consistent funding for ideas and businesses throughout their growth journey, that is navigable and supportive, connecting funding from UKRI and Innovate UK, the BBB and private investment.
Despite a predicted growth in companies stemming from universities, Universities UK highlight a risk of the UK becoming an ‘incubator economy’ where firms are lost to overseas competitors if government and universities are unable to provide sufficient support for scaling relative to other countries. Similarly, if support for spinouts, startups and scaleups from universities is not well distributed across all parts of the UK, firms may be lost by regional and local economies to other areas of the country, such as London, where investment and support is more highly concentrated.
Academics from Brunel University have proposed setting up Public-University-Industry Partnerships (PUIPs) across the country to address fragmentation and limitations in support for scale-ups and spinouts. They would provide targeted funding, mentorship, and industry collaboration at every stage. Drawing lessons from the National Science Foundation (NSF) in the US, PUIPs would ensure structured growth paths for companies, similar to the SBIR and STTR programs that guide startups to scale-up seamlessly.
PUIPs would establish Cross-Sector Collaboration Hubs where different industries can co-develop technologies, share expertise, and synchronise growth efforts, thus accelerating commercialisation and market penetration, as well as Mid-Stage Growth Hubs in partnership with universities and local industries, ensuring that consistent support extends well beyond the initial development stage. In addition, they would establish Integrated Innovation Hubs that link universities, government bodies, and industry leaders across sectors.
They also recommend a National Scale-Up Strategy, modelled after the National Science Foundation's (NSF) I-Corps program, that would create structured pathways for high-potential companies to avoid stagnation and accelerate growth.
Devolution deals and Industrial Strategy Zones offer further opportunities to embed universities in regional growth strategies. The new Devolution Bill outlines government plans to institute devolution deals across England, but until now these have been negotiated by individual areas. In areas with Mayoral Combined Authorities, they are taking a strong role in place-based R&D; for example, the West Midlands and Greater Manchester “were part of a £100 million deal for Innovation Accelerators, aimed at boosting regional economies through translational R&D”.
However, as noted by the HEPI, a corollary of this is that investment may be increasingly directed to these areas and away from places where there is no devolution deal. Only 48% of England’s population is covered by a devolution deal and, though this is expected to rise to 64% this year, not all deals are created equal. In areas without devolution arrangements, strategies such as Local Growth Plans are not mandatory. Piecing together the devolution map in England is likely to take time, and there will need to be careful management in the meantime to ensure regional investment does not become overly concentrated in particular areas and universities have avenues to contribute to local growth in every region.
Government must ensure universities are fully embedded in regional growth strategies and funding initiatives, and have access to sufficient and equitable investment, across every part of the country.
Reform and transformation
To ensure the long-term sustainability and relevance of the UK’s higher education sector, reform must go beyond financial fixes and address the structural, regulatory, and technological foundations of the system. This includes:
Strengthened oversight mechanisms are required to manage strategic risk across higher education, prevent disorderly institutional exits, and provide adequate student protections. This could entail granting greater rights to the OfS or creating a new body within the DfE, or both. Public First set out a number of relevant recommendations including: evolving the role of the OfS from monitoring to greater support; creating a Higher Education Commissioner to liaise between the sector and the regulator, and investigate cases of financial vulnerability; and providing legal clarity by establishing an Special Administration Regime akin to those in areas like further education to protect students and assets under law.
Digitalisation, including the adoption of technologies like AI, can play an important role in driving efficiency within institutions. It can be a foundational shift that positions institutions to remain competitive and solvent, offering effective and relevant educational and student experiences. It’s clear that universities understand the potential of technology spans the breadth of institutions’ activities across operations, teaching and learning, and research. The opportunity lies in aligning digital investments with multiple priorities: diversifying income through modular and lifelong learning, re‑platforming research infrastructure for collaboration, and using automation to free staff for higher‑value academic work. Driving productivity through digital skills development, automation and more efficient institutional systems, innovating teaching methods and delivery, and facilitating more effective research are all key benefits.
Professional services within institutions are a key area where greater efficiencies could be identified and realised. The work of TCS with the British Council on professional services transformation shows the potential.
In finance, TCS deployed intelligent automation to reduce manual workload and improve accuracy while enabling greater data analytics, while in HR they instituted a digital adoption platform and an integrated service desk to streamline operations and automate aspects of work like onboarding and payroll. They also embedded digitalisation to facilitate more agile and resilient procurement.
As a result, British Council achieved significant operational cost savings, greater financial integrity and visibility, and improved their employee and candidate experience.
Conversations on digitalisation, datafication and automation in higher education are not new. Initiatives such as virtual learning environment rollouts and cloud transitions have promised transformative savings but often delivered unevenly. Where efforts have stalled in the past, issues have stemmed from cultural resistance, siloed governance and fragmented procurement. Recognising this, JISC has published a toolkit for digital transformation in higher education which emphasises that digital transformation must be culturally centred, with a need to focus on people and process as well as technology, and ensure technology initiatives align with organisational needs and strategic aims.
Further work by JISC and KPMG has outlined how institutions can work together and use technology collaboratively to drive efficiencies and reduce costs covering areas including: central coordination and standards; skills development in digital, data and technology; shared procurement and system management; shared services; and co-building sector specific technology.
But pressures to modernise and adopt digital technologies are not unique to the higher education sector; sectors such as finance and retail have already undergone radical digital shifts, and more comparable sectors such as health and local public services have also been wrestling with modernisation. An EY report noted that “universities are very unused to change, unlike in a commercial organisation, where change happens annually or even quarterly and people just have a ‘muscle memory’ for change”. Recognising that others have navigated similar challenges can help universities avoid reinventing the wheel and adopt proven strategies from outside the sector. Higher education, therefore, can and should draw on cross-sector lessons rather than approaching digitalisation as sector-specific phenomenon.
Nevertheless, digital transformation can provide numerous benefits for higher education, but the sector is lagging behind and greater support is needed from government to accelerate adoption. In many institutions, technologies and digital tools that have been adopted in the past may not be fit for the future. As suggested by Universities UK, part of the £3.25 billion Transformation Fund for public services could be deployed in higher education, though must be coupled with strong digital leadership and a holistic digital transformation approach within institutions.
The fast pace of developments and the adoption of technologies such as AI will mean that demands in the labour market will change rapidly, and learners will need to continuously upskill and gain new knowledge. Higher education must ensure it is able to adequately respond and adapt to support these learners and deliver the agile, flexible provision that matches the dynamism of the labour market.
AI adoption is asking questions of legacy models, processes and systems, and the financial fragility of higher education makes the need to address weaknesses in those systems more urgent. Policy frameworks such as the Lifelong Learning Entitlement (LLE) provide funding and direction, while at the same time setting expectations for how, and how fast, universities respond. These two interconnected drivers of change in AI adoption and establishment of the LLE – considered in the context of financial pressures on universities – should create a window for coordinated, systemic change, and a moment to rethink workflows, data architecture, and institutional models rather than layering new tools onto old structures.
We have already referenced how digitalisation will be an essential support for delivering on lifelong and modular learning, and the impact of technologies like AI will be broad, evolving curricula and changing learner expectations on the use of technology in teaching and learning. Conversations on AI, digitalisation, and lifelong learning provision will need to be considered in tandem.
In any case, the rollout of the LLE presents a major opportunity to reshape higher education around flexibility, accessibility, and lifelong participation. For universities, it offers a pathway to diversify income streams and reach new learner groups, including adult learners, career changers, and those seeking to upskill in response to labour market shifts. According to the Open University, more regular payments for modular study could also help institutions manage cash flow more effectively, an important consideration in the current financial climate.
However, to realise the full potential of the LLE, universities will need support to adapt. Delivering modular and short-course provision at scale requires investment in administrative systems, learner support services, and digital infrastructure. Institutions will also need to redesign curricula to ensure that shorter learning blocks are stackable, credit-bearing, and aligned with both regional and national skills priorities, while maintaining quality. Simply teaching existing component modules from larger qualifications, such as degrees, in isolation is not likely to be provide an effective or appropriate education experience.
The minimum credit requirement of 30 credits is in fact higher than many modules that comprise existing qualifications, and may pose some challenges, and evidence suggests smaller credit thresholds would operate better for modular learning while also reducing a need for bundling.
Furthermore, as these shorter courses are intended to support learners to upskill and acquire new knowledge in response to labour market needs and meet the skills demands of key sectors, including computing and engineering, ensuring that they are effective will require good levels of collaboration with industry – drawing lessons from existing examples of co-branded and co-designed provision between academia and industry.
Northeastern University has partnered with ServiceNow on an undergraduate degree programme initiative in the UK to help professionals upskill in emerging tech fields. The degrees and certificates are designed for help employers fill an immediate demand for skilled digital talent inside their own companies
The programmes are designed by the university faculty and ServiceNow, and those professionals enrolled on the Digital and Technology Solutions degree programme can earn certifications, including Certified System Administrator and Certified Implementation Specialist in IT Service Management, either as part of a three year programme or as standalone credentials.
Equally important is stimulating demand. Many prospective learners, particularly adults returning to education, may lack confidence, awareness, or financial certainty. Government and sector partners must work together to build trust in the system, promote the value of lifelong learning, and ensure that funding mechanisms are clear and accessible. Without action on the demand side, uptake may fall short of expectations, limiting the impact of the policy and the financial benefits for institutions.
Building on the existing Skills Toolkit, techUK has long-called for a Digital Skills Toolkit 2.0 to help people navigate digital skills and tech careers, and make digital opportunities and pathways more transparent and accessible to more people. In light of developments around the LLE, making plainly apparent how modular courses funded through the LLE align with avenues into tech and digital jobs will become only more critical.
That is all to say, if implemented effectively, the LLE could become a cornerstone of a more sustainable and inclusive higher education system, supporting institutional resilience while meeting the evolving needs of learners and the economy.
September 2025