Written Evidence from BUFDG (HEF0068)

Education Committee

Higher Education and Funding: Threat of Insolvency and International Students

1.              Executive Summary

2.              Introduction / About BUFDG

3.              The H E sector

4.              Impact of Government Policy on International Students

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

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

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

5.              Higher Education Insolvency Protections

6.              Ramifications of Institutional Insolvency & Regional Impact

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

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

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

Appendix A: Acronyms and Abbreviations

1.              Executive Summary

1.       BUFDG is the representative body for UK higher education (H E) finance leaders and their teams. We represent 186 universities and higher education providers.

2.       The H E sector contributes £265bn[1] to the economy and international students are vital to UK higher education finances, contributing £37.4bn[2] to the economy (both figures for 2021/22), or £20.1bn if “associated flow-on benefits” of international students are excluded[3]. These figures are significant in the context of the overall size of the UK economy (£2,851bn in 2024[4]) and should not be jeopardised by damaging government policies.

3.       In 26 parliamentary constituencies higher education is the single largest export sector, and in 102 constituencies it is in the top three export sectors3, so international students are powerhouses for local economies as well as national GDP.

4.       Government policies threaten this income stream, particularly the proposed international student levy and visa restrictions. The levy is likely to reduce income, not increase it, due to price sensitivity in the global student market as UK fees are already high. The reduction in H E sector income is likely to be c.£600m a year, with individual universities expecting significant financial impacts from the levy, ranging from 1%-3% of total turnover.

5.       The sector is already under financial strain, with average surpluses down to 0.5% and many institutions facing deficits.

6.       Visa changes and reduced post-study work rights will make UK institutions less attractive to international students. International student recruitment is already declining, with a 15.5% drop reported in 2023/24.

7.       The financial model relying on international students is fragile, due to market volatility, concentration risk, and price sensitivity.

8.       Institutional insolvency would have severe consequences, including disruption to students, job losses, and reputational damage, as well as probable increases in financing costs for surviving institutions, with potential contagion risk. Local economies would suffer, as universities are major employers and economic anchors. As well as students and staff, loss of a university would impact public services, research, and community engagement.

9.       There is no coordinated strategy for regional course provision, risking gaps in subject coverage and access.

10.   Creative disciplines are particularly vulnerable, despite their significant economic contribution.

11.   Universities support government priorities, including the NHS workforce, regional development, and industrial strategy.

12.   BUFDG recommends revisiting the levy and visa policy proposals, to avoid undermining a key income stream.

2.              Introduction / About BUFDG

2.1 The Education Select Committee (‘the committee’) has announced a mini-inquiry into Higher Education and Funding, including the threat of insolvency and international students, and this response on behalf of Chief Financial Officers and Finance Directors in universities and higher education providers[5] (HEPs) concentrates largely on the financial concerns around international students and the impact of insolvencies, rather than the legal concerns around insolvency.

2.2 Given the devolved nature of higher education funding, and the remit of the committee, this submission focuses on the English funding model where relevant, but many of the points are equally applicable to the devolved nations as universities in all nations rely on international student income to operate profitably. 

2.3 BUFDG[6] is the representative body for UK higher education finance leaders and their teams. We aim to be the recognised channel for the provision, analysis, and dissemination of information, guidance and support around finance across the H E sector, supporting our member universities since 1993. We represent 186 universities and HEPs across all four UK nations and are making this submission on behalf of our members.

3.              The H E sector

3.1The H E sector contributed £265bn to the UK economy in 2021-22[7], and for every £1 of public money invested into H E, £14 is returned to the economy. The sector employs almost 400,000 people[8], and is ranked only behind the US in global university rankings[9], such is its current international reputation and export success, but global competition is increasing.

3.2 It is important to understand how difficult it is for a university/HEP to operate in a quasi-market. Regulated HEPs have no control over the fee income for their main activity/service and yet do not receive additional government funding to cover inflationary shortfalls. HEPs attempt to bridge this income gap with uncapped fees from overseas students, but this income is irregular and at the mercy of government immigration and visa policy (and rhetoric), which can severely disrupt planning cycles. Many universities are also legally obliged to offer particular pension schemes, but with little say in how schemes are structured, or the level of contributions. It is widely recognised that universities must cross-subsidise their main activities with income from other sources[10], mainly international student fees, as UK student tuition and research are loss making activities.

3.3 The sector is often spoken of as though it is homogenous, with 165 universities, plus other HEPs and research institutes, all operating in the same way and providing largely the same kind of courses to the same kinds of students. But this is a gross over-simplification – some universities/HEPs offer a broad range of undergraduate and postgraduate courses and undertake significant research; others specialise in the arts, performing arts, agriculture, engineering, or veterinary medicine, among other specialisms; or offer postgraduate courses only; some have little to no research income/activity; and yet others are specialist research institutes; some specialise in widening participation and helping students with potential who come from backgrounds that don’t traditionally engage with universities; whereas others are considered more ‘elite’ and whose widening participation activities differ significantly from those who specialise in it; some have large endowments; others have to fundraise from a relatively new alumni base; some operate self-contained campuses; others are based in buildings throughout a city; and some have overseas campuses. And there are many more differences besides.

3.4 This variety makes it difficult to represent the position of every university, but this submission sets out several common issues and concerns around funding and international students. In addition, as mentioned in the Introduction, higher education is a devolved matter in Scotland, Wales, and Northern Ireland, which all have different funding systems to England but all of which also rely on international student income.

4.              Impact of Government Policy on International Students

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

Overall impact: Harming UK exports

4.1.1.1 International students in UK universities are an export success, contributing £37.4bn to the UK economy in 2021/22[11]. This breaks down to £58m per parliamentary constituency, or £560 per person in the UK. We urge the committee to consider the potential harm to the economy that some government policy decisions regarding international students could have.

4.1.1.2 Whilst the UK is currently second only to the US in world university rankings[12], government policies and proposals are likely to harm that reputation. The THE World University Rankings for 2025[13] even note that “Australia’s top five universities all slip down the rankings, due to declining reputation and international outlook” - something the UK H E sector does not wish to replicate. Therefore government policy is key to maintaining a strong international reputation and student numbers.

4.1.2 Proposed international student levy

4.1.2.1 The Government proposal of most concern is the international student levy. While Government may intend for this levy to be charged to international students in addition to existing fees, and therefore produce additional government funding that can be used to help fund higher education and skills provision, in reality this is unlikely to be additional income. The international student market is highly competitive not only between UK providers but also universities across the globe, and international student fees are already at the limits of price sensitivity (higher fees would lead to reduced intake), as well as the UK having the highest visa and health surcharges among global competitors nations. As a result, the addition of the levy will in fact reduce income for universities and the higher education sector, as there is no headroom to for an extra charge to international students in such a price sensitive global market.

4.1.2.2 The proposed international student levy is likely to cost the UK H E sector £600m annually[14], on top of other policy announcements which will cost the sector £1.4bn a year (after taking account of the £37m increase in tuition fee income). This loss of income across the sector will impact the financial stability of H E institutions that have had to increase international student numbers (and been encouraged by government to do so) to grow a source of income not reliant on UK tuition fees and more direct government funding.

4.1.2.3 Increased global competition for limited numbers of international students is allowing overseas recruitment agents to drive up prices, from around 10% of fees a decade ago to between 13% and 30% now. Therefore the amount of each international student fee actually received by universities is already falling.

4.1.2.4 Whilst UUK has modelled the potential impact/cost across the sector as a whole, we have received examples from member universities of the specific impact the levy would have on different types of universities. For example:

• A very large university (turnover >£1bn) has estimated the cost of the levy at £32m a year.
• Another large university (turnover c.£850m) told us that the levy is likely to cost them £20m a year.
• A mid-sized university (turnover just under £400m) estimates it will cost them £12m a year.
• A smaller university (turnover <£70m) estimates a cost of £600,000 a year.

4.1.2.5 These costs (ranging from around 1%-3% of total turnover a year) are huge sums for these universities to fund with no associated increase in the related income. This would wipe out many remaining sector surpluses (already down to, on average, just 0.5%[15]) pushing more universities into deficit, and will inevitably mean reduced funding for aspects of core operations such as support and teaching of UK students, research, or widening participation work.

4.1.2.6 In addition, it is not clear whether a levy could be introduced across all nations of the UK, as higher education, and some tax, policy is devolved. And if the levy were introduced across the whole of the UK, would the revenue from the levy go to the devolved Governments or the UK Government? Introducing a levy in England only would further distort the position across the UK and disadvantage English universities in relation to those in Scotland, Wales, and Northern Ireland.

4.1.3 Graduate visa post-study work period proposals

4.1.3.1 Any levy on fees will reduce competitiveness of UK universities in an international market, particularly when the value of the graduate visa will also be eroded by other proposals such as reducing the post-study work period to 18 months. The graduate visa remains more attractive in other competitor countries such as Australia and Canada where two or three years’ post-study is commonplace.

4.1.4 Changes to dependent visas for international students and international student recruitment numbers

4.1.4.1 The Office for Students (OfS) reports[16] that “reported non-UK student recruitment in 2023-24 was 15.5% lower than last year’s forecast, largely because of a reduction in recruitment from January 2024 onwards” so there is a significant downward trend in international student numbers, even before the reduction in post-study work periods and the proposed international student levy. Some of this downturn is attributed to the changes to dependent visas for international students implemented in January 2024.

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

4.2.1 Universities cannot increase international student fees to charge the levy on top of existing fee levels and remain competitive, as many UK fees are already high compared to competitor international markets, and international student numbers in the UK are already falling.

4.2.2 This means that the £600m levy across the H E sector will be another cost for already struggling UK H E institutions to fund. It is well documented that the H E sector is struggling financially with the OfS stating16 that they are “seeing the third consecutive annual decline in the sector’s finances, based on data for 2022-23 and 2023-24 and forecast data for 2024-25”, and, based on OfS modelling, “providers would face significant financial challenges in all scenarios. Without mitigating action, the number of providers reporting deficits, low operating cash flow, and low liquidity could rise substantially, highlighting increasing financial pressures on the sector”3. Please note that this was published before the Immigration White Paper announcing the potential levy, so this dismal forecast doesn’t include the impact of the levy. Meanwhile, the Department for Education’s annual report[17] (published earlier this month) lists the risk of “Higher education financial failure” as “Critical – Very likely”.

4.2.3 UUK modelling concludes that policy decisions and proposals from 2025-26 alone will cost the H E sector £1.4bn[18] (even taking into account the increased UK tuition fee from 2025-26, and excluding the impact of previous policy changes that contributed to a previous reduction in international student fees of £1.1bn). This includes the increase in employer’s NI contributions that will cost the sector £0.43bn, which is not even covered by the uplift in tuition fees of £0.37bn.

4.2.4 Universities have already made or are in the process of making numerous changes to try to increase efficiency and respond to these financial concerns. Many have made significant staff cuts[19], removed courses or reduced module choice, or sold off capital assets. But whilst seen as necessary steps, the individual institution approach to these cuts raises a risk to future subject provision regionally and nationally, as well as to the UK’s research capability[20].

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

4.3.1 International students have become a critical source of income for UK universities and the UK economy. For universities this enables cross-subsidising of research, capital investment, and even domestic teaching, in which governments have been happy to allow significant growth, as it has filled the funding gap left by stagnant UK fees and reducing research funding.

4.3.2 However, this model is inherently fragile:

• Volatility: International student numbers are sensitive to visa policy, geopolitical events, pricing, and global competition.
• Concentration risk: Many institutions are reliant on a few key markets (e.g. China, India), making them vulnerable to sudden changes in demand.
• Price sensitivity: UK fees are already among the highest globally. Further increases to cover a levy or other costs risk pricing UK institutions out of the international market.

4.3.3 If international enrolments decline, the financial outlook for many institutions — particularly those without large endowments or diversified income — will deteriorate rapidly. This could lead to course closures, reduced research outputs and impact, regional activities supported by universities closing, job losses, and potentially even institutional failure.

5.              Higher Education Insolvency Protections

5.1 No comment on questions 6.1 to 6.3 – outside our remit and area of expertise.

6.              Ramifications of Institutional Insolvency & Regional Impact

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

6.1.1 The insolvency of a university would have severe consequences:

• Local economy: this would mean the loss of a major employer and economic anchor in almost all cities or towns with a university, but particularly in smaller towns and cities where universities are key to the regional economy.
• Government strategy: universities are contributing to the government’s agenda for skills; regional development; NHS workforce plans; life sciences plans; defence spending/development and more. A loss of any university will have an impact on some, if not all, of these.
• Students: significant disruption to studies, uncertainty over qualifications, and potential relocation of students. Transfers to other universities are complex and can result in students having to recommence studies. This would also impact other universities who may be required to take some of the students of the insolvent institution, which is not a simple matter at any time, but particularly when many institutions are reducing their courses and staffing to meet the current financial challenges they face.
• Prospective students: some prospective students would likely lose confidence in the sector and may decide not to apply, potentially further reducing income for the sector, but also reducing the prospects of those individuals.
• Job losses: huge job losses (thousands from the institution, but also local businesses relying on university business) would lead to increased unemployment.
• Alumni: if a provider became insolvent, the perceived value of its qualifications could diminish, potentially disadvantaging alumni in the job market and undermining their career prospects.
• Pension funds: the loss of a major contributing employer in a pension scheme/fund could have knock-on implications for the scheme overall. Beyond increased contribution costs for remaining members, there could be substantial balance sheet implications and heightened financial risk due to future pension valuations and potential changes in pension regulation.
• Financial Reputation: significant damage to the credit reputation of the UK and the H E sector in the eyes of financial markets and lenders, likely raising borrowing costs for other universities. While loan covenants and facilities such as revolving credit funds are agreed for set periods, there is a risk of a contagious crisis in the sector.
• Educational Reputation significant damage to the UK’s global standing as a stable and high-quality education destination, at a time when government policies and proposals are already negatively impacting international students’ decisions on coming to the UK.
• Research: the loss or dispersal of expert academic staff, disrupting research continuity, collaborative or grant funded projects, PhD students, and early-career researchers. Specialist facilities, equipment, and infrastructure critical to ongoing research could become inaccessible, and international research partnerships could collapse, affecting consortia, joint publications, and the UK's reputation as a reliable research partner. The risk of permanently losing entire areas of research expertise, particularly in niche or strategically important fields, would increase significantly should insolvency be more widespread.
• National and regional course provision: with no oversight of which courses are provided where, it is possible that a university becoming insolvent could impact the availability of certain subjects in the local region, or even nationally.
• Local community: Data examined by UUK[21] shows that 544 million people engaged with free university events in 2022-23. If an institution becomes insolvent, this engagement and interaction, often filling a gap in cultural provision that local authorities can no longer afford, would be lost to the local community.

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

6.2.1 Universities are often the largest employers in their regions and play a vital role in:

• Economic development: Supporting local businesses, innovation, and inward investment.
• Public services: Training teachers, nurses, doctors, and social workers.
• Social mobility: Widening participation programmes in universities provide access to education for underrepresented groups/those not traditionally represented in higher education or professional careers etc.
• Civic engagement: Hosting cultural events, volunteering, and community partnerships with local businesses and charities etc.

6.2.2 The loss of a university would impact far beyond the campus.

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

6.3.1 A number of recommendations from various organisations have been made to government by BUFDG, UUK[22], the Russell Group[23] and many other organisations as part of the Comprehensive Spending Review, as well as previous Select Committee inquiries.

6.3.2 BUFDG’s Comprehensive Spending Review submission[24] provides more detail regarding strategies and proposals to support the health of the H E sector and to prevent insolvencies.

6.3.3 Some key points included in that document, as well as some additional points relating to government policy proposals announced since that document was submitted include:

• Revisiting the international student levy and visa changes to avoid undermining a key income stream, hopefully removing the levy suggestion entirely, and reconsidering post-study work periods in relation to international competitor countries.
• Committing to increasing domestic tuition fees annually in line with inflation.
• Supporting institutional collaboration and shared services to reduce costs, including amending VAT rules around cost-sharing to make it workable in practice.
• Reviewing research funding models and improving the funding for research to halt and reverse the decline in research funding.

6.3.4 In terms of ensuring sustainable regional provision of courses, this is currently very difficult because:

• there is no existing mapping of current or proposed courses on a geographical/regional basis;
• there is no government strategy for the needs of employers or the requirements of courses on a geographical/regional basis; and
• HEPs are autonomous businesses which will operate courses based on their own criteria (including what is/is not successful) and competition laws make it difficult to coordinate the provision or removal of courses on a regional or national basis.

6.3.5 When regional course provision is uncoordinated, there’s a real risk that non-STEM subjects, particularly the arts, humanities, and social sciences, become endangered, despite their significant economic and cultural value. The creative industries alone contribute over £125bn to the UK economy[25] and the Government’s announcement of the Creative Industries Sector Plan[26] in June 2025 was welcome recognition of their continued importance, yet these disciplines remain increasingly under threat due to financial pressures and cost of delivery. This is especially concerning given that the creative sector is one of the eight priority areas in the UK’s Industrial Strategy and raises the question of whether the role of HEPs in delivering that strategy is being fully recognised and incorporated. Universities play a critical role in delivering the research, innovation, and skills needed for growth, but this is undermined by the unstable financial position of the sector.

6.3.6 Another key point when considering regional provision is that not every student wants to be a doctor, vet, or engineer, nor is suited or able to attend a large university. There are increasing numbers of students who feel more comfortable in a smaller institution, especially the Covid-impacted demographic. The lack of a coordinated vision and approach to regional provision is of particular risk to smaller institutions.

6.3.7 So action needs to be taken to address the lack of coordination of regional course provision:

• the current availability of information on which courses exist in which locations must be addressed and some work undertaken/commissioned to map this;
• government policy on needs and requirements in specific areas, based on a national industrial and educational strategy then needs to be created;
• H E regulators should work with institutions considering cutting courses and others in the region to ensure an overview of provision and a balanced approach to removal (though this must also consider the ability for an institution to take decisions that will aid profitability where necessary); and
• the legal framework around competition etc. should also be reviewed and potentially amended.

Appendix A: Acronyms and Abbreviations

September 2025