Written evidence Submitted by National Centre for Universities and Business (NCUB) (HEF0067)

Education Committee

Higher Education and Funding: Threat of Insolvency and International Students

The National Centre for Universities and Business (NCUB) represents a collective voice of leaders across higher education and business and aims to tackle issues of shared interest. The NCUB is an independent and not-for-profit membership organisation that promotes, develops and supports university-business collaboration across the UK.

Questions and response

Impact of government policy on international students

1. How will current Government policies affect the financial stability of higher education institutions?

UK universities are one of the UK’s greatest strategic assets. They educate the future workforce, conduct world leading research, and act as anchor institutions in their regions — supporting businesses, driving innovation, and powering local growth. At a time when the UK faces major economic and societal transitions, their role is more important than ever. Yet their financial stability is under growing strain, underlining the need for a funding and policy framework that allows them to remain flexible and responsive to national and local needs.

This strain is rooted in longstanding structural challenges within the funding system. Domestic tuition fees were frozen for over a decade, eroding significantly in real value: in England, fees worth £9,250 today equate to just £5,924 in 2012/13 prices, with similar declines across the devolved nations.[1] Public research funding also routinely fails to meet the full cost of delivery — in 2022/23, universities received only around 69% of their expenditure on public R&D.[2] These deficits leave universities increasingly reliant on more volatile income streams, most notably international student fees, which have been central to balancing budgets and cross-subsidising research, teaching, and knowledge exchange (KE).

The UK’s International Education Strategy[3] previously encouraged the growth of international student numbers, recognising both the direct financial benefits — over £30 billion annually to the UK economy — and the wider gains of education exports, from strengthening global influence to expanding research and business partnerships. However, recent policy changes are making the UK a less attractive destination. These include:

• Restrictions on dependents for taught undergraduates and master’s students, which led to an 85% fall in dependent applications and a 15% fall in tuition paying international student numbers in the following year.[4]
• Shortening of the Graduate Visa route from 24 to 18 months, which the government itself predicts will reduce student numbers by a further 12,000.
• A proposed 6% levy on tuition income from international students, which would directly reduce institutional revenues at a time of significant financial strain.

It is also important to recognise the growing stratification within the university sector. Some institutions are better placed to withstand policy instability than others. For example, medium‑sized research‑intensive universities appear particularly exposed: they face sizeable research deficits, as public R&D funding does not cover the full costs of delivery, but lack the scale of the very largest universities to offset these losses through growing international student recruitment or significant endowment income. This creates a heightened risk that financial pressures will reduce their research capacity and curtail their ability to support regional innovation ecosystems and business partnerships. Critically, many of the universities most exposed are focused on areas central to the UK’s Industrial Strategy and located in regions most in need of economic growth.

Regional variation is further deepening this stratification. While some universities benefit from stronger local funding streams, devolved government support, or alternative income sources, others do not enjoy these advantages and are therefore far more vulnerable. This uneven geography of resilience risks widening inequalities in the UK’s skills pipelines, research capacity, and local economic growth.

Because universities’ finances are highly interdependent, reductions in international student income have far-reaching consequences. NCUB’s State of the Relationship evidence shows that businesses consistently cite the strength of UK universities as a key reason to invest here.[5] Less international income means fewer resources for research and innovation partnerships, fewer industry-sponsored PhDs, reduced knowledge exchange with small- and medium-sized enterprises (SMEs), and the closure of high-cost courses — particularly in science, technology, engineering and mathematics (STEM) disciplines — that underpin local skills pipelines. This risks weakening local economies where universities are major employers and civic anchors, while also making the UK a less attractive place for inward investment.[6]

Finally, declining international student numbers also diminish diversity and cultural exchange on campuses and in communities, eroding an important element of the UK’s global soft power.

In short, current government policies risk destabilising an already fragile funding model. Unless alternative, sustainable funding mechanisms are introduced, and stronger stability in international student policy is secured, the UK risks undermining one of its most valuable national assets and weakening its future growth prospects. Crucially, the impacts of this instability will not be felt evenly across the sector, with some universities and regions far more vulnerable than others — particularly those most vital to delivering the UK’s economic and industrial ambitions.

2. What implications will these policies have on future tuition fee increases?

If recent policy changes further reduce international student numbers, universities’ financial pressures will intensify. As they cannot directly raise regulated domestic tuition fees, institutions are likely to increase pressure on devolved governments to review fee caps and address research deficit issues.

Universities may look to recover lost income in other ways, alongside introducing cuts or reducing activities. This could include:

• Further increases in international student tuition fees - although feedback from NCUB members indicates that many universities consider additional rises could be counterproductive, as higher costs may deter applicants and ultimately reduce overall income.
• Raising fees for self-funded short courses and professional training.
• Increasing prices for partnership activities and private contract research.

These measures carry risks. Higher costs for collaboration could put a brake on university-business partnerships. NCUB’s Business-Led R&D Taskforce, chaired by Sir John Manzoni, has already highlighted rising costs for industry-sponsored PhDs — a trend that threatens to price SMEs in particular out of working with universities in this way.

At the same time, we are already seeing universities cut higher-cost provision. Some institutions have begun closing expensive-to-run courses, often in STEM subjects that are critical to the Industrial Strategy. This reduces pathways for domestic students and undermines local economies that depend on universities’ skills pipelines and knowledge exchange.

If international student income continues to decline, universities may be forced to raise costs for those who remain, and cut domestic provision, making UK study less affordable, attainable and attractive. This risks driving further declines in applications, reducing campus diversity, and limiting the resources available for research, KE, and collaboration with businesses — creating a downward cycle of reduced income, opportunity, and impact. To avoid this outcome, NCUB recommends that the Government scraps the proposed 6% levy on international student tuition income and conducts a full impact analysis of how recent and potential policy changes will affect tuition fees, course provision, and local economies.

3. How will the interaction between international student enrolment and tuition fees shape the sector’s financial outlook?

Universities’ reliance on international student tuition fees has become a structural feature of the sector’s funding model. These fees do not only support teaching and students. but cross-subsidise vital activities including research, KE, and partnership with businesses. A reduction in this income, or continued uncertainty over future flows of international students and the fees they bring, will have significant consequences for the sector’s financial outlook and by extension the critical activities that universities engage in.

The scale of the immediate financial challenge is well documented: Office for Students (OfS) data shows that 43% of institutions are forecasting a deficit in 2024/25, rising to 72% by 2025/26.[7] However, the practical impacts are only now becoming clearer. NCUB is undertaking research, to be published by January 2026, on how these pressures are reducing universities’ capacity to work with businesses and employers — a critical dimension that traditional financial reporting fails to capture. This matters because reduced collaboration risks weakening local skills pipelines, slowing business-led R&D, and undermining the innovation and KE activities that drive regional and national growth.

NCUB’s annual State of the Relationship report and Collaboration Progress Monitor show a concerning reversal after decades of steady growth in university–business collaboration. In the critical Covid‑19 recovery period, total income from wider KE activities with business (excluding licensing) fell by 0.6% between 2021/22 and 2022/23.[8] The number of collaborations with both SMEs and large companies also declined, with 5% fewer interactions in 2022/23 compared with the previous year.[9] Strikingly, business funding for university R&D is down 12% from pre‑pandemic levels, while income from licensing and consultancy is also falling.

Our analysis suggests that these are not marginal fluctuations: they signal a sustained downward trend that threatens the UK’s innovation ecosystem. The consequence is a weaker flow of new knowledge, technologies, and skills into UK firms, eroding competitiveness, stalling productivity growth, and diminishing the UK’s attractiveness for inward investment at precisely the moment global competition for R&D is intensifying.

At the same time, universities are cutting activities to manage costs. Universities UK reported in Spring 2024 that almost half of institutions had closed courses, with significant rises in course consolidation and departmental closures.[10] From an NCUB perspective, the contraction is especially concerning because they fall in areas with known strategic importance and skills shortages. These closures will further limit the supply of talent pipelines, constrain employer access to cutting-edge training and facilities, and erode universities’ role as anchor institutions in local economies.

The uncertainty over international student enrolment also undermines universities’ ability to plan strategically. Universities operate on long time horizons, often five years or more, yet volatile policy signals on immigration rules and tuition income make it impossible to plan with confidence. This reduces the sector’s ability to commit to the bold, long-term initiatives needed to support UK economic growth, regional development, and industrial strategy priorities.

NCUB’s position is that international student policy is not only an immigration issue but a core part of the UK’s economic and industrial strategy. The financial stability it provides underpins the research, skills, and innovation partnerships that businesses rely on. Without a sustainable model and greater certainty around international student flows, universities’ ability to deliver for students, businesses, and the wider economy will continue to erode.

We recommend the Government works with universities, in consultation with their stakeholders, to develop a sustainable funding framework that secures the long-term role of international student income while reducing systemic overreliance on a single revenue source. Crucially, this must include scrapping the proposed 6% levy, which would further destabilise finances, and ensuring policy supports universities’ ability to sustain research, KE, and collaboration with businesses that underpin local and national growth.

Ramifications of institutional insolvency and regional impact

1. What would be the consequences of a higher education provider becoming insolvent?

The insolvency of a higher education provider would not only disrupt education for students, but would also have profound consequences for the UK’s economy. Universities are embedded in local and national business ecosystems: they are employers, R&D partners, innovation hubs, and anchors of regional skills pipelines. The collapse of even a single institution would damage confidence in the sector, weaken collaboration with businesses, and undermine the UK’s ability to compete globally.

The Government, and the OfS, have rightly focused on the student experience in the event of insolvency, but it must also recognise the risk to universities’ other customers: businesses, partners and employers. University–business partnerships take years to build. Their loss would erode trust, reduce the number of collaborations, and diminish the UK’s reputation as a reliable place for innovation and investment.

As NCUB’s evidence shows, university–business collaboration is already under strain. Our State of the Relationship report[11] reveals that after decades of growth, key metrics of collaboration are now in decline: business funding for university R&D is down 12% compared with pre-pandemic levels; total income from KE with business fell in the critical Covid19 recovery years; and collaborations with SMEs and large companies dropped by 5% between 2021/22 and 2022/23. Insolvency would accelerate this negative trend, cutting off access to facilities, expertise, and partnerships that businesses rely on for innovation and productivity growth. For SMEs in particular, the loss of a trusted university partner could end their ability to engage in R&D altogether.

The effects would extend far beyond research. Universities train almost 3 million students annually, ensuring a steady pipeline of graduates and upskilled workers into sectors critical to the UK’s growth ambitions. Partnerships with employers — through advisory boards, industrial placements, CPD, micro-credentials, and co-designed programmes — are essential to aligning education with labour market needs.[12] Insolvency would not only disrupt students’ pathways but also reduce the flow of talent to local and national employers, at a time of acute skills shortages.

The loss of a university would also reverberate through local economies. In many places, universities are among the largest employers and are central to business incubation, KE, and inward investment. They attract foreign direct investment (FDI)[13] and provide the facilities, networks, and credibility that underpin regional economic development. Insolvency in this context risks hollowing out entire local ecosystems, particularly in areas without alternative higher education provision.

In short, the insolvency of a higher education institution would weaken the UK’s skills base, slow the flow of innovation into businesses, damage local and national economies, and undermine the Government’s own industrial strategy and growth ambitions. NCUB is currently undertaking a project to assess in detail how financial instability in the higher education sector affects university–business collaboration – Stronger Foundations - and would be pleased to share early findings with the Committee in the autumn.

2. How do higher education institutions contribute to growth in their local economies, the provision of public services, and their wider communities?

Universities are central pillars of the UK’s knowledge-intensive economy and play a defining role in the prosperity of their regions. Each year they educate nearly 3 million students, equipping the future workforce with the skills demanded by growth sectors, while also providing lifelong learning and reskilling opportunities. At the same time, they act as hubs of research, innovation, and partnership, working with businesses, public services, and civic bodies to drive economic growth, strengthen communities, and sustain public value.

The benefits of these partnerships are seen every day in the businesses and communities that universities support. NCUB’s evidence[14] shows that companies often base investment decisions on the strength of local university collaboration. For a manufacturing SME, that might mean access to advanced testing facilities they could never afford alone. For a large tech firm, it could be working with academics on cutting-edge AI applications that unlock new markets. And for a startup, it may be the mentoring, networking, and incubation support provided through a university enterprise zone that turns an idea into ‑a viable‑ business. These relationships can take years to build — and when they thrive, they fuel local job creation, attract investment, and accelerate the speed at which knowledge and innovation flow into the wider economy. Where they falter, the impact is immediate: businesses lose trusted partners, local skills pipelines weaken, and regions risk being left behind in the UK’s drive for growth.

NCUB’s annual State of the Relationship reports and our library of more than 350 case studies exemplify the multiple ways in which universities are working to address societal and economic challenges. Examples include:

• Safer streets — Loughborough University's research is supporting policymakers and practitioners in using sport to mitigate the impact of crime on individuals and communities, in part through its Twinning Project to support prisoner rehabilitation.[15]
• An NHS for the future — West Midlands Health Tech Innovation Accelerator (WMHTIA), which is led by the University of Birmingham, is supporting the growth of a regional health tech ecosystem. So far, the WMHTIA has provided 105 health tech companies/academic teams with intensive bespoke development support, and created or safeguarded 110 jobs in the West Midlands over three years.[16]

The economic return from these activities is immense. NCUB analysis suggests that every £1 of public research funding, much of which is delivered by UK universities, leverages an additional £4 of private investment.[17] Nationally, UK universities contributed an estimated £265 billion to the economy in 2021/22, with research and KE alone generating £63 billion, and international students adding £37 billion.[18] These activities sustain hundreds of thousands of jobs and drive growth in local supply chains. Every £1 invested through the Higher Education Innovation Fund (HEIF) returns more than £8 in impact,[19] much of this delivered through direct collaboration with local firms.

Beyond direct partnerships, universities also sustain public services and lifelong learning. They co-deliver training that underpins the NHS and local schools, offer CPD and micro-credentials to keep the workforce adaptable, and provide incubation hubs that support social enterprises and startups. These roles are particularly vital in towns and cities where universities are among the largest employers and the backbone of local skills and business ecosystems.

In short, universities are woven into the fabric of the UK’s knowledge-intensive economy. They power local growth through innovation, attract FDI through worldclass research, and sustain thriving communities through education, skills, and civic engagement. NCUB’s evidence underscores that the health of university–business collaboration is directly tied to local and national competitiveness. Without strong, stable higher education institutions, the UK risks slowing its innovation pipeline, eroding its skills base, and undermining the growth of local economies.

3. What strategies should be implemented to prevent insolvency and ensure sustainable regional provision of courses?

The UK’s universities are one of our greatest national assets. They are globally respected for their teaching, research, and innovation, and they underpin the skills, discoveries, and collaborations that drive growth across every region.[20] With the right strategy, Government can build on this strength and reputation to ensure that universities not only remain stable but are empowered to lead the UK’s future growth, productivity, and progress. But to do so, the sector urgently needs a stable, long-term financial footing and clear policy direction. The current model is characterised by unpredictable and often contradictory interdependencies between public funding, domestic tuition regulation, and cross‑subsidisation through international fees. Without reform, we risk undermining both national growth ambitions and sustainable local provision.

A sustainable solution must come through a comprehensive Higher Education Strategy, co‑developed with the sector, its business partners, and local government. This should:

• Provide long-term certainty so institutions can plan beyond short political cycles.
• Address both teaching and research deficits, ensuring that essential activities like KE, business collaboration, and employer-led skills development are properly resourced.
• Explicitly consider regional needs, recognising that universities act as anchor institutions supporting local economies, skills systems, and civic infrastructure.

NCUB evidence shows that collaboration with business is central to regional growth. Our State of the Relationship report[21] finds that companies consistently locate investment where universities provide talent, R&D capacity, and facilities. Businesses tell NCUB that universities are a significant strategic asset and reason to invest here. For SMEs in particular, partnerships with local universities are often the only route to access advanced research, facilities, and innovation support.[22] If institutions in particular regions become financially unstable, the consequences are not only lost courses, but lost employer pipelines, diminished innovation ecosystems, fewer industry-sponsored research projects, and weaker local supply chains.

Sustainable regional provision therefore requires policy that actively protects and enhances the university sector’s ability to:

• Partner with SMEs and regional employers on applied R&D and innovation.
• Deliver industry-aligned skills pathways, from degree programmes to CPD and micro-credentials.
• Attract and retain inward investment by offering global standard research collaboration and infrastructure.

To achieve this, the Government should:

• Reform the approach to international students. While international tuition income is vital, it should not be the only lifeline. International students must be valued for their contribution to the UK’s knowledge economy and soft power, not framed narrowly through net migration statistics. NCUB recommends removing students from migration targets and reframing policy so international students are treated as short-term contributors akin to visitors or tourists, rather than as economic migrants.
• Scrap the proposed 6% levy on international student tuition income. At a time of acute financial strain, removing funds from universities would only exacerbate instability and reduce their ability to sustain teaching, research, and regional provision. Instead, the Government should focus on protecting the UK’s international competitiveness as a study destination, ensuring universities can continue to attract high-quality students, and reinvest directly in strengthening the sector’s financial sustainability.
• Ensure equitable regional provision by embedding HE into local economic strategies. This means coordinating with Mayors, combined authorities, and local employers to ensure subject provision reflects regional skills priorities, particularly in STEM and growth sectors.
• Protect and strengthen university–business collaboration. Government policy should ensure that universities have the capacity to partner with businesses of all sizes — particularly SMEs — through applied research, industry-aligned skills programmes, and KE. This includes safeguarding funding streams such as the Higher Education Innovation Fund (HEIF), addressing gaps caused by the loss of European Structural Funds, and considering targeted support for business-led R&D in areas most at risk. The Government, and bodies like UKRI, should also coordinate work to consider how the impact of insolvency on university partners can be mitigated.
• Reintroduce targeted public funding for critical high-cost provision. Since the £9,000 fee model was introduced, grants for high-cost subjects and small and specialist provision have largely been phased out. To protect skills pipelines in areas vital to the Industrial Strategy and Skills England priorities — such as advanced manufacturing, digital, and health — the Government should consider reinstating targeted grants that sustain courses and provision which cannot be delivered through fees alone.
• Ensure cross-departmental leadership in strategy development. The impact of university insolvency spans multiple departments: DfE, DSIT, DBT, and HMT. Any Higher Education Strategy must therefore be co-owned across government, ensuring that the interdependencies between teaching, research, KE, and international education are properly recognised and addressed.
• Support universities at risk of insolvency through targeted measures. A Government-led taskforce, informed by business and civic voices, should assess the economic risks of institutional failure and identify essential activities to preserve locally: workforce training, business incubation, and community knowledge exchange.

Finally, the sector itself is taking proactive steps. The UUK-led Taskforce on Transformation and Efficiency[23] is working to reduce costs and improve delivery. Its recommendations should be embedded into a national HE strategy and backed by Government, ensuring efficiency reforms are matched with sustainable resourcing.

In summary, preventing insolvency and ensuring sustainable regional provision requires more than reliance on international students. It demands a national strategy that treats universities as core economic and civic infrastructure — sustaining local ecosystems of skills, research, and business collaboration that underpin the UK’s competitiveness.

September 2025

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