Written evidence by UCU (HEF0078)

Education Committee

Higher Education and Funding: Threat of Insolvency and International Students

About us

The University and College Union (UCU) represents over 120,000 academics, lecturers, trainers, instructors, researchers, managers, administrators, computer staff, librarians, technicians, professional staff and postgraduates in universities, colleges, prisons, adult education and training organisations across the UK. We are grateful for the opportunity to submit evidence to this inquiry.

Overview

In this submission, UCU seeks to highlight that there are a number of critical challenges facing UK higher education: the current funding crisis alongside proposed reforms in relation to international student policy combine to threaten not only individual institutions but the regional economies and communities to which universities are so crucial.

Recent government policy shifts have created significant challenges for international student recruitment and retention. UCU has consistently raised concerns about restrictive immigration policies, including proposals that would force international students to leave the UK unless they secure graduate-level employment. These measures, combined with visa restrictions and policy uncertainty, have contributed to a 16% year-on-year decline in applications for sponsored study visas as of July 2024. This has been especially damaging given most institutions heavily rely on the higher fees charged to international students to cross-subsidise domestic students and research funding.

It is clear that the only way to a sustainable, fair and democratic future for the higher education sector is via a fundamental shift to a publicly funded model of higher education alongside fixing the broken governance model in the sector. It will also be essential to reverse the reputational and financial damage which will be caused by the immigration reforms set out in the ‘Restoring control over the immigration system’ white paper. Last but not least, UCU advocates for urgent government intervention to prevent institutional insolvency and emergency funding: the government must provide immediate financial support to universities facing acute financial distress, similar to interventions made during the COVID-19 pandemic.

This submission accompanies the oral evidence given by Dr Jo Grady, general secretary of UCU on 8 April 2025.

Impact of Government Policy on International Students

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

Financial crisis in UK higher education institutions

The Home Office immigration white paper, ‘Restoring control over the immigration system’ and its higher education-related proposals has been published in the context of a growing financial crisis in the higher education sector.

The higher education system is now at breaking point, and the signs of financial instability, indeed crisis, are clear. So far, this academic year alone, university employers have announced their intention to cut over 5,000 jobs (5,361), while at least five other universities have asked staff to quit but refused to specify how much they want to cut from their staffing budget. Alongside this the sector has announced over £238m of cuts and declared deficits of at least £30m. To address current financial shortfalls solely through funding cuts could see approximately 5000 additional jobs (4739) lost across the sector.

In May 2024, the Office for Students (OfS) published its annual report on the financial sustainability of higher education providers in England. The regulator found a decline in financial performance in 2022-23, with declining surplus levels, cash flow and net liquidity. A significantly higher number of providers expect to fall into deficit in the coming years. It found that, overall, providers were forecasting deterioration in the short- to medium-term financial outlook. 40 per cent of providers were expecting to be in deficit and an increasing number anticipated low net cashflow.

The report noted that sector institutions were predicting improvement from 2026/27 onwards, but the OfS considered this to be based on ‘an assessment of potential growth [in student recruitment] that is too optimistic’ (p. 3). The problem it identified was that the predictions of sector growth (35% in international students and 24% in home students between 2022/23 and 2026/27) combined individual institutions’ growth predictions. This almost certainly involved over-optimistic double-counting as individual institutions’ forecasts risk being based on recruiting the same students.

In November 2024, the OfS updated their analysis and concluded that, overall, UK and non-UK student recruitment is significantly below the sectors’ previous forecasts. Autumn 2024 recruitment outcomes have varied significantly for different types of higher education provider, and for providers within similar groups. Based on their latest modelling OfS estimate UK undergraduate entrants to be, in aggregate, 10 per cent lower than the sector’s forecasts for 2024-25, and non-UK entrants to be 23 per cent lower than those forecasts. Their analysis suggests that the outturn recruitment picture could result in an aggregate net reduction in annual income for the sector of £3.4 billion against the forecast position, and could, without mitigating action, result in up to 72 per cent of providers facing a deficit in 2025-26.

In March 2025, OfS estimated that approximately 100 providers have failed to meet UK undergraduate recruitment targets that they reported in January 2024; and estimate that approximately 150 providers could have failed to meet the international recruitment targets reported in January 2024. Coupled with the impact of the rise in employers’ NI payments, the regulator expected “an overall annual net income reduction of about £3.4 billion from 2025-26”.

Higher Education Statistics Agency data on student numbers published in March paint a similar picture, showing that 2,904,425 students were enrolled at UK higher education providers in the 2023-24 academic year, a fall of 1 per cent from the previous year and the first annual decrease since the year after fees were tripled in 2012.

In July 2025, OfS found that around one in six institutions (71) on the Office for Students’ register were subjected to “formal monitoring” by the regulator over their finances last year, while five had a “student protection direction” imposed because of a “material risk of closure”. 110 providers (41% of the sector) reported a deficit in 2023-24.

It is in this context of escalating crisis that the government’s immigration proposals pose such a grave threat to the stability of the higher education sector.

Implications of an international student fee levy

Perhaps of greatest concern, however, is the government’s proposal to explore introducing a levy on the income universities receive from international students. It is proposed that revenue raised by the levy would be reinvested in the higher education and skills system with further details due to be set out in the Autumn Budget. We can expect that a 6% levy (as suggested in the technical annex) on Higher Education tuition fees would be passed on to international students by providers, thereby representing an overall increase in the cost of coming to study in the UK. The government has estimated that an increase in international fees by 6% may lead to:

1.8% fall in international undergraduate demand, and 1.6% fall in international postgraduate demand in the short-run, and
2.4% fall in international undergraduate demand in the long run.

Provisional analysis in the white paper suggests a 6% levy could lead to an estimated annual reduction of approximately 7,000 international students in the long run. However, this impact is likely to be larger in the short-run and amount to around 14,000 fewer international students.[2] Initial analysis by Times Higher suggests that the proposed levy on international student fees could cost English universities £620 million per year, with some institutions facing bills of more than £20 million each.[i]

UK international fees are already high and the UK is effectively competing with other nations to attract international students. A further 6% increase in fees will make the UK less attractive to international students and would therefore have an impact on higher education revenue. At a time when UK universities are already struggling financially, slicing off a portion of this vital income stream will be another strain on already stretched resources.

Analysis based on 2023-24 Hesa data suggests that the universities that would have to pay the largest levies would be UCL (£41.5 million) and the University of Manchester (£27.3 million). Should it be applied in Scotland, the University of Edinburgh would face a £23.3 million bill. Large, research-intensive institutions typically generate the most income from international students. However, Gavan Conlon of London Economics has said smaller teaching-focused institutions may be most severely hit as they have fewer other income sources.[3]

Higher Education is a major export. London Economics found the net economic impact of just one overseas cohort in the UK was £34.7billion. In 26 parliamentary constituencies across the UK, HE is the biggest export.

Public First commissioned the University of York to explore the impact of international students on domestic living standards and wages. Their research found that international students raise living standards in every constituency in the country. On average:

every UK resident person – man, woman, child; working, non-working and retired – is £355 a year better off on average as a result of international students.
Every UK resident working adult – on a full-time equivalent basis – is £466 a year better off on average as a result of international students.
International students’ positive effects are spread across the country. In more than 100 constituencies, wage benefit from international students were found to be worth more than two and a half week’s wages for the average earner.

The Education International report, ‘In the Eye of the Storm: higher education in an age of crises’[ii], reinforces that international student policy has global implications for equity, sustainability, and academic freedom. It warns that restrictive migration and funding policies—like those adopted in the UK—create a market-driven dependency on international tuition, exposing HE systems to shocks, inequality, and erosion of public values.

The levy marks a double blow to institutions. Not only are universities receiving fewer international students due to previous visa restrictions, but they will now face a government tax on the income they do generate from remaining international students.

Restrictive policies not only reduce institutional revenue but also diminish the diversity and international perspective that enhance educational quality for all students. The multicultural learning environment that international students provide is integral to preparing UK graduates for an increasingly globalised workforce. International students, particularly at postgraduate level, contribute significantly to UK research output and innovation. Policy restrictions here risk undermining the UK's position as a global research leader.

There are also implications for recruitment to the profession. Higher fees would likely render the UK a less attractive destination for international students. This could directly result in fewer international PhD graduates progressing into an academic career. At some institutions, this could adversely impact subject availability, research capacity and collaboration opportunities.

International students and staff make vital contributions to UK higher education, enriching our campuses and communities. Instead of treating them as short-term economic assets or political bargaining chips, government policy should recognise and support their integral role. We call for a halt to the regressive proposals in the recent white paper and the introduction of a fair, stable immigration framework that allows scholars and students to thrive. The UK’s future as a global leader in education and research depends on openness, not exclusion.

The government urgently needs to remove restrictions on international students studying in the UK by:

Allowing those on student visas to bring family members to the UK (prohibited since January)
Removing students from immigration statistics

For international staff, we also call on the government to reverse the rise (from £26,200 to £38,700) to the minimum service threshold for a skilled worker visa. And to scrap the immigration health surcharge for staff.

The proposal to reduce the graduate visa to 18 months is likely to have an adverse impact on recruitment as counties like Canada and Australia have longer visa lengths post-graduation.

Higher English requirements could prove as a barrier to considering the UK as a study destination. Many students for whom English is an additional language consider the opportunity to improve their language skills as an inherent part of studying rather than a pre-requisite.

The ‘asylum crackdown’ appears to link unrelated issues and we would argue that individuals should have access to the asylum process without prejudice.

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

Recent changes in tuition fees

A particular risk to the stability of the UK higher education system is the increasing reliance on international student fees to support worsening domestic shortfalls in funding. International students represent a crucial revenue stream for UK universities, often cross-subsidising domestic provision. Policy-driven reductions in international student numbers exacerbate existing funding pressures, with institutions like Cardiff University reporting £31.2 million deficits, partly attributed to declining international applications.

Costs have been rising, while a key source of university income (tuition fees), was held constant, resulting in a steady, year on year, erosion of the real value of tuition fee income. The current value of home student tuition fees is 64% of its 2012/13 value.

The problem sharpened when the war in Ukraine triggered an inflationary shock, with prices rising at 11.1% p.a. in the year up to October 2022. Until that time the impact of the relentless decline in real-terms funding had often been largely hidden. By 2022/23 the unsustainable, and often concealed, was developing into an acute crisis in plain sight.

Education secretary Bridget Phillipson announced on 4 November that fees will increase with the retail price index of inflation to £9,535, ending a long fee freeze that started in 2017. UCU believes that this fee hike is “economically and morally wrong”.

UCU believes that the balance between private and public investment must be redressed. According to the latest OECD data, the UK ranks lowest in terms of the share of public expenditure on educational institutions, for tertiary education (23%, rank 37/37, compared to an OECD average of 68%, 2021).

There is widespread recognition that the current funding system is not working and that we can no longer place greater financial burdens on students to fund the overall system. We would like to work with government to support the development of a strategic funding model for post-16 education which redresses the imbalance of public and private investment.

This should include

a commitment to phasing out tuition fees with their replacement with block grant funding;
revisiting employer investment in education and training – employers need to pay their fair share

There has been some better news in Wales, where the government has provided additional £19m financial support for the HE sector . The Scottish Funding Council has announced a £25 million support package for universities, although 88% of this funding will be allocated to to Dundee University. Though unlikely to be sufficient, these initiatives (plus the Scottish government’s additional funding for the Teachers’ Pensions Scheme - TPS ) are a useful start, but we need a more strategic, long-term solution to the funding problem.

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

The UCU report ‘The State of Britain’s Universities: a crisis unfolding in plain sight’[iii] highlights that underfunding since the 2007/8 financial crisis has left universities financially dependent on an increasingly inadequate funding model. The combination of austerity-driven cuts in public spending and the removal of the cap on home student recruitment, has led many UK universities to resort to aggressive domestic and international student recruitment using high international student fees to offset poor public investment.[1]

As a result of visa restrictions, implementation of the ‘hostile environment’ immigration policy and Brexit, international student recruitment has diminished at a rapid rate.

Since January, holders of student visas have been unable to bring family members with them to the UK unless they are studying for a postgraduate research degree. Many universities have developed business models which mean they now rely on the income from international students, including to subsidise research. Furthermore, international students have an equal right to family life.

The changes are making it much harder for higher education institutions to attract talent from overseas and risk compounding the decline of what is perhaps one of the UK's few world-leading sectors. The Education Secretary has taken a much more welcoming tone towards international students, but it's imperative we now see that reflected in Home Office policies lest we see a toxic combination of reduced international student enrolments and the declining value of tuition fees threatening the financial viability of the sector.

Underfunding of research

In 2022−23, UK universities incurred a £5.3 billion deficit on their research activities. While the university research system is designed so that project-specific grants awarded by the Research Councils cover up to 80% of the full economic cost of research, this rate of recovery is no longer being met and is worsening over time. This puts pressure on universities to cross-subsidise research from other income streams which may not be dependable, such as international tuition fees.

There are early signs that research activity is being squeezed; a recent UUK survey indicated that 14% of respondents had already cut back on academic research and 34% would consider it in the future.

We are also seeing examples of universities reducing academic research time by cutting ‘unfunded’ research as a response to crisis e.g. Newcastle, Hull and Bradford.

The Labour government is ostensibly prioritising economic growth. However, it is already clear that the financial problems facing universities are directly impacting a range of activities intended to build university and business partnerships – as a report for the National Centre for Universities and Business indicated:

“Some [universities] are also unable to sustain previous levels of research activity and industry collaboration. Engagement between SME’s and universities has declined in recent years, and financial constraints on both sides are often cited as contributing challenges”. (NCUB, 2025)

Higher Education Insolvency Protections

What is the current state of insolvency processes for higher education institutions?

It has been the subject of much discussion that there is very little in the way of protection for staff and students in relation to higher education and insolvency. Last year, at an expert panel convened by Kings College London, a legal expert explained ‘universities are not companies, so do not fall under existing insolvency legislation. Processes like administration, restructuring and company voluntary arrangements are therefore not currently available as a matter of law. There is an option of compulsory liquidation, but this is unsuitable for the higher education sector. Given the lack of insolvency options there is currently no formal protection for staff or students.

The Office for Students’ publication ‘Protecting the interests of students when universities and colleges close’ confirms this by setting out just how few protections there are for staff and students alike. All that exists is advice on contingency planning.

What measures exist to protect students, staff, and other stakeholders in case of institutional insolvency?

There are far too few safeguards for staff and students alike. The aforementioned document only sets out two considerations for staff and these are identified as part of contingency planning rather than any concrete requirements to protect staff.

‘Considering how changes in employment will be communicated to staff and how they will be supported through this process, including whether some will retain their roles during the closure.
Dealing with staff redundancies, which are likely to lead to limited staff resources being available while winding down operations.’(p7)

The government quite rightly recognised the importance of providing a bailout to British Steel when it faced insolvency and we believe the same principles would apply to the higher education sector should this scenario unfold.

Focusing on staff impacts, we are already seeing a number of damaging impacts on our members with no legal safeguards. There is a clear need for stronger governance. The absence of a framework for reform has seen a number of practices that have a detrimental impact on staff. The impact on the workforce is immense and under-documented in government publications. We have evidence to show impacts across the country.

Strike action has taken place and/or strike ballots have now been won at more than 12 higher education institutions in response to jobs cuts and attacks on terms and conditions.1 Collective disputes (e.g. Birmingham City) and votes of no confidence in the university’s leadership (e.g. Canterbury Christchurch) have been declared at several other universities.

Strikes have been a consistent feature of UK higher education since 2018 (e.g. pensions, pay, workload, precarity and inequalities). Many of these long-standing grievances will be further intensified by current funding problems as jobs are cut, the workloads of remaining staff grow, and morale deteriorates further. This will be experienced most acutely by those employed on precarious contracts, an employment status that has long been a scourge within the system.

Detrimental changes to terms and conditions

As well as job losses, employers are pushing through detrimental changes to terms and conditions of employment. This includes:

Delaying pay rises - over the past year we have seen an increasing number of UK universities withholding or delaying pay rises. According to a Times Higher article published in October, the number of institutions claiming financial exigency to delay pay rises is now into ‘double figures’.

 Increased workload, student: staff ratios & negative impact on student learning

According to internal documents, Cardiff University is planning to increase student: staff ratios and has admitted privately that this “will pose some immediate challenges and will require adaptions to workload, portfolio, and teaching and assessment practices”.
The highest ratio quoted in the document is 24 students to every academic, including in the newly created School of Global Humanities. Other proposed moves include moving from 13:1 to a “more sustainable” 18:1 in Cardiff’s business school, and from 16:1 to 20:1 in the School of Social Sciences.
Across the sector, job cuts are likely to lead to increased standardisation of assessment and reduced time for personalised learning.

Are additional safeguards needed to strengthen protections?

A governance review of higher education

There needs to be systematic scrutiny of university governance. We are calling for a commission to explore better university governance as part of a wider project to restore democratisation and increased staff participation in central decision making.

Such a governance review should be broad so as to address the broader deficits in governance arrangements and cultures within UK HE. For example, the report for the CDBU (published in early 2024) on governance in English higher education instutitions identified key problems like hierarchies within board membership, and lack of transparency about process; financialisation of governance activity; outsourcing of expertise and governor disempowerment, due to lack of preparation and/or clarity about the role.

We believe that more transparent and democratic decision-making within UK universities could have supported institutions to avoid some of the financial mistakes that have contributed to mass redundancies, a clear example here is the importance of staff and student voice in governance.

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 catastrophic consequences across multiple dimensions

We are clear that it is unacceptable for any university to be allowed to enter insolvency. Higher education institutions are not private businesses—they are public assets that serve students, staff, and communities. Allowing a university to fail would not only destroy livelihoods and educational futures but also undermine regional economies and public service pipelines. The government and regulator must treat the financial stability of institutions as a matter of public interest, intervening early and decisively to protect jobs, students, and the long-term integrity of the sector. Failure to act will result in profound negative outcomes: the dismantling of essential economic foundations, the destruction of specialist employment opportunities, the deterioration of local social and cultural systems, and the compromise of the UK's global reputation in academia and research. Immediate government intervention is essential to prevent lasting damage to educational institutions, regional communities, and their stakeholders.

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

UUK has shown that the total economic impact of the UK higher education sector on the UK economy is more than £265 billion, indeed for every £1 or public money invested in the sector, £14 is out back into the economy. Higher education institutions contribute to their local economics, public services and wider communities. The unacceptable impacts of financial instability in the sector include:

Student impact: Current students face immediate disruption to their education, with potential loss of course completion, qualification recognition issues, and significant financial losses. Transfer arrangements, while theoretically possible, rarely provide equivalent educational experiences or geographical accessibility.

Staff consequences: Thousands of highly skilled academic and professional staff would face unemployment. UCU analysis shows that universities are often among the largest local employers, with academic staff representing highly specialised professionals whose skills may not transfer easily to other local employment opportunities.

Loss of cultural and social capital: Universities serve as cultural hubs, providing public lectures, cultural events, libraries, and community facilities. Their loss would represent an irreplaceable reduction in regional social and cultural infrastructure.

Regional economic devastation: research demonstrates that universities have substantial economic multiplier effects in their regions. The closure of a major institution would remove not only direct employment but also the extensive supply chains, student spending, and induced economic activity that supports local businesses and services.

Direct employment: Universities are frequently among the largest employers in their localities, providing stable, skilled employment across a range of professional levels from academic staff to technical, administrative, and support roles.

Research and development: University research activity often addresses local challenges and provides expertise to local authorities and businesses, contributing to evidence-based policy making and economic development.

Supply chain effects: Institutions generate substantial demand for local goods and services, from construction and maintenance to professional services and hospitality. This creates a web of economic dependencies that extends far beyond the institution itself.

Student economy: The presence of students generates significant local economic activity through accommodation, retail spending, entertainment, and services. This is particularly crucial for smaller towns and cities where universities may be the primary economic driver.

Healthcare services: Many universities operate teaching hospitals or provide training for healthcare professionals, directly contributing to local healthcare provision and capacity.

Educational outreach: Universities provide continuing professional development, adult education, and community learning opportunities that enhance local skills and employability.

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

Prevention Strategies and Sustainable Regional Provision

Immediate financial stabilisation: UCU advocates for urgent government intervention to prevent institutional insolvency.

Emergency funding: the government must provide immediate financial support to universities facing acute financial distress, similar to interventions made during the COVID-19 pandemic.

Demarketisation: addressing student distribution

One of the most catastrophic effects of the fee-based funding model and its entrenchment has been the introduction of a quasi-market into the higher education sector.

In this structure, providers are forced to compete for students – especially aggressively recruiting international students, often – because this is the only way to secure and grow their revenue.

This has compounded existing inequities in the sector, while introducing new ones, and opening up sharply regionally stratified gaps in provision.

One way to begin addressing this problem short of tackling it at the source is to manage the symptoms by instituting a managed system of student distribution – not overall number caps but a mode of regulating the distribution of undergraduates between institutions.

As stated, we need to see an end to the broken fee-based funding model, addressing student distribution, a governance review of higher education and an emergency package of financial support for institutions that are at risk of closure.

Conclusion

Without urgent and serious intervention the proposals in the immigration white paper threaten to blight the lives not only of countless students and staff, but of universities’ local, regional, national and international communities. These proposals would, if implemented, prevent the higher education sector from fulfilling the radical and ambitious prospectus for social renewal that we believe should be its mission. More immediately they would seriously jeopardise the current government’s efforts to meet its objectives of economic growth and national renewal. Government must reverse restrictive immigration policies and develop a coherent international education strategy that recognises the strategic importance of international students to UK higher education and the broader economy.

UCU calls for immediate government intervention to prevent institutional insolvencies and longer-term structural reforms to ensure the sustainability of higher education provision across all regions of the UK.

The government's restrictive policies toward international students have exacerbated funding pressures while the broader funding model has proven unsustainable.

The potential consequences of inaction are stark: the loss of major economic anchors, the destruction of skilled employment, the degradation of regional social and cultural infrastructure, and the undermining of the UK's position as a global leader in higher education and research. The government must act decisively to address this crisis before irreversible damage is done to institutions, communities, and the individuals they serve.