Written evidence by Universities UK (UUK) HEF0093

Education Select Committee: 'Higher Education and Funding: Threat of Insolvency and International Students' – UUK submission

About Universities UK

Universities UK (UUK) is the collective voice of 141 universities across the UK. Our mission is to help UK universities be the best in the world, through their research and teaching, knowledge exchange and commercialisation activities, and through the positive impact they have locally, nationally and globally.

Where possible our response refers to universities across the UK. Due to the devolved nature of higher education policy relative to the reserved nature of immigration and aspects of research policy this has not been possible in all sections. Universities Wales and Universities Scotland have inputted into this submission and where our responses deviate from a UK wide position, we have made this clear.

Executive summary

The financial outlook for UK universities is increasingly precarious due to funding for teaching domestic students and research no longer covering costs, a falling rate of recovery on research costs, and immigration policy decisions. Universities UK’s submission sets out the causes of the current financial situation facing universities, actions that should be taken by various government and non-government stakeholders to improve the situation, and the potential impact that provider insolvency would have on the wider economy and communities. The below points act as a summary of our submission.

• The financial situation facing universities is serious and requires urgent action by government to address the underlying causes of financial instability across the sector.

• Alongside diminishing real-terms funding for teaching in all nations of the UK, rising costs have included: substantial increases to the employer contribution for Teachers’ Pension Scheme members, rising utility bills and estates costs, changes to academic delivery and student support, and a national period of high inflation.

• Previous government actions and current government proposals relating to student and graduate visas and immigration requirements have a significant effect on the financial stability of universities across the UK and further consideration should be made of these consequences.

• The potential impact of a major institutional failure would extend far beyond the university community, affecting local economies, public services and ultimately the government’s missions. Even with strong measures in place, it would likely be impossible to mitigate against the adverse consequences of a major provider failure.

• Focus of the government, regulators, funders and the sector itself should therefore be on preventing institutional failure by addressing underlying causes of financial instability alongside putting in place mechanisms to assist an institution in financial distress or, failing this, minimise the impact of insolvency on students, staff and communities.

• A range of actions will be needed in order to find and implement solutions to the current challenges faced by the university sector. It is imperative that governments, universities, funders and regulators work together to prevent institutional failure and create a higher education sector equipped to meet national and local skills needs, be engines of opportunity, and undertake world leading research and innovation activities.

Recommendations

Transformation and Efficiency (including recommendations for universities)

• Universities have a responsibility to manage their finances appropriately. Executive and non-executive university leaders should consider how to apply opportunities for cost-saving, efficiency, and transformation, such as those identified by UUK’s Transformation and Efficiency taskforce. These include collaborating to explore new structures, sharing more services, better leveraging sector buying power, and adopting digital transformation..
• Other sector organisations should continue to take action to support universities to find ways to collaborate more deeply and operate more efficiently and effectively. This includes supporting leadership development, collective procurement, and developing approaches to support cross-sector cost benchmarking. Sector organisations must also collectively provide support, guidance materials, and convening opportunities on models for transformative change.
• Government should work with the sector to understand where barriers to deeper collaboration which have the potential to reduce costs exist, and to minimise them. Existing barriers include the restrictiveness of the VAT cost-sharing exemption, wariness around the implications of competition law, and a funding and regulatory environment that supports competition over collaboration.

Overall funding environment

• Governments in all four nations of the UK must take urgent action to arrest the decline of per-student funding, through a combination of public funding for teaching and tuition fees which rise in line with inflation annually. The balance between these elements is a political judgement, but we believe that the costs of higher education should be shared between the individual graduate and the state.
• Domestic tuition fees in England and Wales should be index linked with inflation on an ongoing basis and, in England the Strategic Priorities Grant should be protected in real terms.
• The Scottish system needs to move to sustainable and competitive levels of public investment in teaching and research.
• In Northern Ireland, the current review of university funding must find a way to increase per student funding to account for lost inflationary uplifts and be properly indexed-linked going forward. The student number cap should be modified to allow all those from across the island of Ireland who wish to, and are able to, study in Northern Ireland to do so - while ensuring the aspiration for better regional balance of higher education provision is not undermined.
• The value of the student maintenance package in England should increase in line with inflation on an ongoing basis, and thresholds used for calculating maintenance loans uprated.
• Action must be taken to return to 80% cost recovery levels on research grants. This will require action by universities, funders and by government.
• There should be sustained, real-terms increase to quality-related (QR) funding to ensure that universities are able to invest in future research capabilities and support a strong pipeline of research talent and infrastructure.
• Government should take measures to mitigate against the growing expectations on universities at a time of reduced resource. This should include reducing the burden of regulation and increasing flexibilities for universities bound by law to offer the Teachers’ Pension Scheme to offer new staff alternative pension schemes.

International students and migration policy

• We strongly urge the Committee to recommend to government that it should not introduce a levy on international student fee income.
• The Government should ensure that there is stability in international student visa policy and commit to the preservation of the Graduate Route in the long term.
• Attention should be given to visa costs, which risk making the UK uncompetitive as a destination for talented students and researchers.
• The Home Office should work with universities on the implementation of changes to BCA thresholds – ensuring that their introduction is phased, accompanied by improved data sharing on visa application trends, and that the new RAG banding system for student sponsors is developed on a confidential basis to enhance compliance across the student immigration system.
• The new International Education Strategy (IES) should adopt a cross-departmental approach to providing a clear framework for sustained and managed growth in international student recruitment.
• Universities, and international students, should be central to the government’s forthcoming Soft Power Strategy.

Institutional failure and insolvency

• Government, regulators and higher education institutions should adopt a clear and shared principle that it should be a priority to avoid a disorderly institutional failure. We urge the committee to place its emphasis on how such an eventuality can be avoided, rather than on how to manage the consequences after the event.
• We do not believe that a bespoke insolvency regime for the sector is required at this time – indeed we believe that the creation of such a regime may increase the risk of institutional failure. However, government should provide guidance on how existing insolvency regimes apply to universities and work with the sector to identify gaps or areas where additional clarity is needed.
• In England, Student Protection Plans (SPPs) should be replaced by institutionally-owned contingency plans which are proportionate to the level of risk, and subject to proportionate scrutiny by the OfS. These plans should not be limited to student protection.
• Government should work with the higher education sector to establish a workable Transformation Fund which should support sector collaboration, promote financial sustainability and drive economic growth.

The current financial position and outlook: domestic challenges

The financial outlook for UK universities is increasingly precarious, given many years of declining levels of real-terms investment in teaching and research, increasing deficits in research, rising costs, and challenges with international recruitment. Some 41% of English institutions were in deficit in 2023/24, with greater proportions in Scotland (53%), Wales (66%) and Northern Ireland (50%). The latest report from the Office for Students (OfS) published on 8 May, before the Immigration White Paper was published, indicates that nearly half of English institutions were projected to be in deficit by 2026/27.

The real-terms value of domestic tuition fees in England has fallen by 36% since 2012/13, contributing to a £1.7 billion loss on domestic teaching in 2023/24 alone, with this deficit having doubled since 2021/22. In Scotland it is estimated that funding per Scottish student fell by 39% in real terms between 2014-15 and 2023-24. UUK analysis suggests that universities are now unable to meet student demand for the most expensive subjects, with implications for the UK’s talent pipeline and ability to deliver on the government’s Industrial Strategy.

According to the latest TRAC data from the Office for Students (OfS), the aggregate deficit across UK universities rose from 6.2% (£2.7 billion) in 2021/22 to 9.3% (£4.5 billion) of income in 2023/24. Without income from non-publicly funded teaching, including international students, this deficit would have reached 22.7% (£8.3 billion).

On research activity, there is currently an annual, UK-wide £6.2 billion loss associated with universities’ research. Universities recover only 66% of the full economic cost (FEC) of research through funding, as opposed to the 80% target, and the sector is also experiencing a decline in long-term QR research funding, which has seen a 16% fall across the UK since 2010. The fall in QR funding is especially worrying as it is a flexible and strategic source of funding which universities use to invest in early career researchers, facilities, and fundamental research – i.e. the very start of the talent and innovation pipelines. QR is also used to partially cover the costs incurred by low economic cost recovery.

Universities Wales recently submitted evidence to the Welsh Affairs Committee which provides more information on how these factors are affecting Welsh universities. This evidence is available here.

Universities Scotland recently submitted evidence to the Education, Children and Young People Committee of the Scottish Parliament as part of an inquiry into financial sustainability. The evidence can be found here, noting the Committee has not yet concluded the inquiry.

Institutions in all nations should do everything in their power to avoid insolvency. Many have already taken significant action to manage difficult financial circumstances by way of mandatory and voluntary redundancies, course consolidation and cuts to services. UUK is supporting members to find and implement further opportunities for transformation to adapt to the challenges of the current financial situation. The UUK Transformation and Efficiency Taskforce’s report ‘Towards a new era of collaboration’ identifies seven opportunities open to the university sector, and the action needed from central government to enable universities to drive such change, including recommending that government create a transformation fund.

The seven opportunities are:

• Pursuing innovative collaborative structures
• Sharing more services and infrastructure
• Levering sector buying power
• Supporting digital transformation
• Adopting a common approach to assessing efficiency and benchmarking costs
• Developing leadership skills in those mandated to deliver change and further improving governance
• Developing the current regulatory environment and supportive structures to help collaboration and transformation to go further, faster

The Taskforce has also overseen partner-produced resources offering new insights and practical tools across different thematic areas to help institutions explore structural change, operational efficiency and achieve financial sustainability.

Good governance is key to managing financial risks. UUK is supporting the Committee of University Chairs (CUC) on their review of HE governance which will result in an updated Higher Education Code of Governance which we expect will emphasise elements of prudent financial management. UUK is also working in partnership with Advance HE as well as CUC, GuildHE, Independent Higher Education (IHE) and Association of Heads of University Administration (AHUA) on ‘The Big Conversation: shaping the future of higher education governance’.

Universities Scotland will make a sector response to the Gillies and BDO report into the University of Dundee in the autumn, taking this forward by working with the Committee of Scottish Chairs, Scottish Funding Council, Scottish Government, and wider stakeholders.

The impact of financial pressures

Financial pressures across the sector are already having a serious impact on universities, with widespread redundancies, loss of provision, and cuts to R&D. A UUK member survey carried out in spring 2025 found that half of all respondents across the UK have closed courses to reduce costs (49%) in the past three years, a figure that has more than doubled in the last year alone (24%). The majority of respondents – 88% - said they may need to consider further course closures or consolidation over the next three years. 19% had reduced academic research activity in the past three years in 2025, compared to 14% who said the same in 2024, and 27% had reduced or were considering reducing other research or R&D activity, compared to 19% in 2024. A further 79% reported considering reducing academic research activity in the future (up from 34% the year before) and 83% reported considering reducing other research or R&D activity (up from 24% the year before). These cuts represent real researchers, departments, programmes, and facilities.

Students are also facing financial challenges, with the student maintenance package having failed to keep pace with high rates of inflation in recent years, frozen household income thresholds since 2008 (meaning that fewer students qualify for the maximum loan amount), amidst major increases in the cost of living. As a result, one survey found that the average maintenance loan in England covers only 54% of living costs. This has a real impact in the choices that students make about going to university (with the UCAS applicant survey 2025 showing that cost of living considerations are now the main factor influencing applicant decision-making). For those who do attend, there has been a significant increase in the proportion of students in paid employment during term time; 68% in 2025 up from 56% in 2024.

Impact of current policy and policy proposals (domestic)

Government’s decision to increase the domestic undergraduate tuition fee (in England) for 2025-26 is welcome but is only a step towards restoring the sector’s financial stability following years of decline. Despite the planned fee increase, UUK’s analysis estimates the net impact of current government policy decisions to be a £1.4 billion reduction in funding to English higher education providers in 2025/26, compared to 2024/25[1]. This is an aggregate figure across the English sector as a whole, and some institutions – such as postgraduate-only institutions, or TPS employers – are affected by the cumulative impact of policy decisions more sharply than others. For example, the erosion of the Strategic Priorities Grant (SPG), covered below, has a particularly significant impact on specialist providers and those institutions which specialise in high cost subjects.

This cumulative impact includes the increase to employer National Insurance contributions (NICs) announced at the Autumn Budget 2024 which is estimated to cost the English sector £430 million per year from 2025-26 and cost Scottish institutions £45-57 million. Similarly the rise in tuition fee limits in Wales is welcome but it is estimated that the cost to the sector in Wales of increased NICs will almost entirely wipe out the benefit.

In addition, some universities are statutorily obliged to offer their academic staff membership of the Teachers’ Pension Scheme (TPS), with little flexibility to offer alternatives that may be more financially sustainable. With employer contribution having increased by a further 5% in April 2024 to 29% - one of the highest employer contributions of any UK pension scheme - it is vital that government gives universities the flexibility to offer alternative pension schemes, as they have for the independent schools’ sector.

In the past year, government has also cut funding to several other areas of higher education. In England, the Strategic Priorities Grant (SPG) has been cut by £108 million (7.4%) for 2025/26, alongside reductions in the tuition fee for certain foundation year degrees, and the removal of public funding for the vast majority of Level 7 degree apprenticeships for individuals over age 21.

Alongside the increasing costs of their core activities and reduced real-terms unit of resource, universities have had to deliver more and invest to meet growing expectations, including the following areas:

• The sector has made significant investment in access and participation to increase equity of provision and maintain the skills development essential for local and national employers. In 2022-23, English OfS-registered providers reported spending £770 million on this agenda.
• ‘Plugging the gaps’ in other public services, including in NHS mental health support, has also required significant expenditure. A recent Freedom of Information request by The Times found that universities have increased their spending on mental health by an average of 73% in the past five years.
• Institutions investing in civic missions, such as support for local businesses, the provision of cultural and sports facilities, and partnerships with other local service providers have received little to no funding to support this work, with a UUK survey (2024) finding that nearly a fifth had scaled back community engagement.
• Conducting research with low cost-recovery, such as research for charities, where in 2022/23, 57.5% of the costs to deliver research for UK charities was recovered.

International student recruitment: policy impact and financial sustainability

Rising cost pressures described above have increased university reliance on international student fee income. In 2017/18, international fees accounted for 13% of total income for English HEIs. By 2023/24, this had risen to 22%, marking a nine percentage point increase. This shift reflects a deliberate policy environment in which income from international students has helped offset the erosion of real-terms domestic funding.

The pace and scale of change varies significantly by institution. Among UUK’s English membership, the largest increase over this period was 25 percentage points, rising from 39% to 64% of total income, while the smallest was a modest percentage point increase to 2%. These figures illustrate the extent to which universities, which are facing static domestic funding and constrained public investment, have responded to incentives embedded in government policy by turning to international recruitment to sustain their financial viability.

A series of recent immigration policy changes have had a material impact on international student demand. The ban on student dependants, introduced in January 2024, has contributed to sharp declines in applications from key markets, with study visas issued to Indian nationals down 32.4% and to Nigerian nationals down 62.7% in the year ending March 2025 compared to the same period two years earlier. Due to success in growing student numbers from diversified markets such as the examples above, Scottish universities were particularly exposed and accounted for over 31% of the decline in non-EU student entrants at UK universities between 2022-23 and 2023-24, despite only having 10.7% of non-EU student entrants in the UK.  At the same time, the Immigration Health Surcharge (IHS) rose by 65.1% in February 2024, and the study visa application fee increased by 6.9% in April 2025. These cost increases, combined with ongoing uncertainty around post-study work rights, have undermined the UK’s competitiveness and contributed to falling enrolments. We urge the Committee to recognise that universities’ ability to make robust financial plans, and to accurately forecast income, has been significantly undermined by policy instability in relation to visas.

This fall in international student enrolments has played a significant role in the OfS’ deteriorating forecasts. These forecasts pre-date the proposals set out in the May 2025 Immigration White Paper (IWP), which represents further risks to international student recruitment. Some of the key areas of concern are set out in further detail below:

The International Student Levy

The Immigration White Paper states that the UK Government will explore a levy on higher education provider income from international students (the Scottish Government has indicated it has no intention to apply a levy to institutions in Scotland). The Home Office assumes that the cost of a levy will be passed onto students themselves, however given UK universities operate in a fiercely competitive global marketplace – with international demand highly sensitive to price – many universities anticipate that they would need to absorb some, or all, of this tax burden. Institutions also vary in their ability to offset the levy by increasing international recruitment due to their capacity, specialism or particular set of entry requirements. Concerns have also been raised about the robustness of the modelling presented in the White Paper’s technical annex, particularly on the reliance on outdated or inapplicable data (pre-Brexit EU student trends used to assume post-Brexit EU and non-EU student trends) to justify assumptions about student behaviour and price sensitivity.

In the context of the existing, extreme financial pressures on the sector, the proposal to introduce a new tax on the sector is the opposite of helpful. Modelling by UUK shows that a 6% levy on international tuition fees would have an estimated net reduction of over £600 million across English institutions per year. The impact this will have on universities will differ across the sector, but will essentially serve to redirect funding and investment away from teaching, research, student support at a time when the sector is under acute financial pressure. For example:

• The university that faces the largest cost from the introduction of the proposed levy would stand to lose almost £42 million per year, while 19 institutions would lose at least £10 million through the introduction of the levy.
• One member estimated the impact of the levy would cost them around £6 million per year, which is almost as much as they spend on Access & Participation (£7 million per year), or the equivalent of 100 staff FTE roles.
• Another member has said it would cost them £2.7 million per year, which significantly exceeds the amount currently spent on mental health support and outreach work with Schools and Colleges combined.

UUK analysis using HESA finance and student data shows that, by the end of the 2023/24 academic year, 42% of UUK members based in England were already in deficit. We estimate that applying a 6% levy based on 2023/24 figures would push an additional 14 English universities into deficit. The levy would impact both large internationally engaged universities and smaller specialist institutions even when not pushed into deficit, reducing by 30% the average surplus of English UUK member universities. Implementation of this tax would put pressure on universities to increase international student numbers to compensate for lost income and undermine the UK’s world-leading research system, leading to less opportunity for UK students to study at UK universities through reduced choice. These consequences would contradict the government’s broader ambitions for skills, innovation and regional growth. We strongly urge the Committee to recommend that the Government does not introduce an international student fee levy.

UKVI Basic Compliance Assessment thresholds

Our members recognise legitimate public concerns about immigration and, like the government, want to ensure that the opportunity to study in the UK is only given to individuals who are genuinely here to do so. As such, we are committed to working with the Home Office on the implementation of changes to Basic Compliance Assessment (BCA) thresholds.

To support this process and ensure all UK universities have sufficient time to adapt their international recruitment strategies, we believe it is essential that the government works with the sector to:

• Phase the introduction of new BCA thresholds. While visa refusal and enrolment rates could be managed with in-year changes by sponsors (such as pausing recruitment from certain regions), completion rates are based on longer-term trends, and it would be wrong to apply the completion threshold to sponsors who will have recruited students under previous BCA thresholds.
• Share real-time data and market intelligence as it relates to international student recruitment. UKVI already provide study sector briefings based on feedback and trends which universities self-report. However, these updates are often produced months after a threat or issue has been identified. While all sponsors undertake their own due diligence, they cannot know whether an issue is localised or sector-wide. While the UK higher education sector has a strong track record on visa compliance, reforms to improve data-sharing between UKVI and universities could prove transformational in our ability to mitigate risk and abuse of the system.

• Implement the new Red-Amber-Green banding system on a confidential basis. UUK believe a banding system, used internally, could be helpful in enabling earlier interventions with sponsors before a threshold is breached. A public list, however, creates significant reputational risk for the UK HE sector as a whole and could be misunderstood by banks and sponsoring bodies, affecting students’ ability to secure finance or visas even where no formal action has been taken against the institution concerned.

Without a phased implementation and support from the Home Office, the tightening of the BCA thresholds poses a significant financial and reputation risk to the sector given it increases the likelihood that a university is subject to restrictions on international student recruitment or, in the worst case, having their license revoked.

We also urge the Committee to press the Home Office to commit to taking proportionate action in respect of BCA thresholds, recognising that the revocation of a sponsor licence should be a last resort, and which could have existential consequences for a major university. Robust action plans, accompanied by stringent recruitment limits while compliance is achieved, has been shown to be effective in addressing failures. Any decision to revoke a licence should be taken in consultation with other government and local stakeholders.

Graduate route visa

UUK welcomed the government’s commitment to retain the Graduate route which is essential to the UK’s competitiveness as a study destination. We remind the Committee that the original purpose of the introduction of this visa was in order to support the attractiveness of the UK as a study destination, and not to address labour market needs. The university sector needs stability in the international visa regime in order to develop robust forecasts and financial plans. Government should therefore commit to retaining the Graduate Route in the long term, at 18 months (with 3 years for PhDs). We also note that there is still significant uncertainty over the timing of the changes and which students they will apply to. We would urge the government to clarify this and ensure that any student starting a programme in 2025/26 would still be eligible to apply for the Graduate route under its current terms, provided they meet the criteria.

Wider implications for government priorities

The UK’s success in attracting international students is beneficial to universities, but also to the nation as a whole. International education is one of the UK’s largest service sector exports; the international graduates educated in the UK make an enormous contribution to the UK’s Soft Power; and spending by international students has a considerable local economic impact in towns and cities across the UK. The economic benefits of one intake of international students to the UK economy stands at £41.9 billion while the total UK revenue of education related exports and transnational education activity (TNE) in 2022 was £32.2 billion, of which higher education accounted for 73.4%.

However, while this is recognised in Ministerial rhetoric, action has diluted the capacity to sustain and grow the UK’s position. Cuts to the GREAT Study UK budget; to the capacity in the Department for Business and Trade to support Education Export activity; to funding to support the outward mobility of UK students through the Turing Scheme (cut by 29% in the Comprehensive Spending Review) and funding via the OfS Strategic Priorities Grant to support international mobility all contribute to weakening rather than strengthening UK reach.

Government should recognise the wider contribution of international students and invest accordingly in maintaining the UK’s world leading position as a destination for study. Recent cuts to the GREAT Campaign Study UK budget should be reversed. The forthcoming Soft Power Strategy should place the UK’s universities at its heart, as powerful actors in the development of abiding relationships around the world. The Government’s own capacity to support international education activity should be strengthened, including by reversing recent cuts to staffing levels in the Department for Business and Trade (DBT) education team.

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

The current funding settlement for universities is not sustainable in any part of the UK. To place universities on a sustainable financial footing, government needs to address funding shortfalls in domestic teaching and research, while providing stability in visa policy relating to international students. Policy on HE funding and immigration must align.

Following the conclusion of the 2025 Spending Review, the UK Government should commit to an ongoing indexation of the domestic undergraduate tuition fee cap and maintenance loan for students at institutions in England, alongside protecting the Strategic Priorities Grant (SPG) as a minimum. The SPG provides vital funding for high-cost activities, including for the highest-cost subjects (such as medicine and many STEM subjects), supporting access and success for disadvantaged students, and highly specialised provision via World Leading Specialist Provider Funding. However, its real-terms value has eroded significantly in recent years, with the value of the SPG per FTE domestic student declining by 33% between 2018-19 and 2025-26.  In the most recent year (2025-26), the overall SPG allocation saw a 7.4% cut in real-terms compared to 2024-25. This decline in grant funding has also impacted high-cost subjects where overall allocation also fell in real-terms by 18.4% between 2018-19 and 2025-26. Increasing the SPG would rebalance the contribution to the cost of teaching, which is currently heavily skewed towards individual graduates. Such a policy would acknowledge that there is a public as well as a private benefit flowing from students choosing degree-level study.

To support and maintain financial stability, in the immediate term, UK universities need sustainable growth in international students underpinned by a clear commitment to robust recruitment practices, and a stable policy environment. This includes working with government to embed the measures on agents and the changes to the BCA metrics, alongside stability on the Graduate Route, improvements to Home Office data-sharing, phased-in compliance thresholds and a joined-up, cross-departmental International Education Strategy. Given financial challenges facing the sector, the introduction of a levy on international student fees would only serve to exacerbate the current crisis, while counterintuitively increasing the reliance of the higher education sector and wider skills system on international student recruitment. It is for these reasons we believe the levy should not be introduced. Only through a stable and coherent policy framework, and a sector commitment to sustainable recruitment, can the UK maintain its global leadership in higher education and ensure its long-term financial sustainability.

It is not only the interaction between international student enrolments and tuition fees that needs to be considered, but also research funding and areas of substantial expenditure for universities. Quality-related (QR) funding for research needs to be protected for universities in England (and the equivalent grants in Scotland and Wales) and action should be taken to enable greater flexibility within the Teachers’ Pension Scheme. Government can enable universities to explore opportunities for greater efficiency, by removing VAT on shared services.

Higher Education Insolvency Protections

The responses in this section are focussed on universities in England only. As higher education is devolved in Scotland, Wales and Northern Ireland, there are different regulatory environments in all nations. Medr will continue its consultation on its new regulatory framework in Wales this autumn.

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

It should be a shared objective of government, higher education leaders, funders and regulators to avoid insolvencies. University leaders and governing bodies have the primary responsibility for this, however government, funders and regulators have an important role to play in providing policy clarity and stability and adequate funding.

No university-specific insolvency regime exists. A variety of insolvency regimes do exist for businesses, and the application of these to universities is complicated by the wide range of legal structures at play. Insolvency can typically take three forms:

• Liquidation (‘winding up’): creditors force a business to shut down after failed attempts to recover debts. Assets are sold to pay debts, but unsecured creditors might not get anything. This is the most ‘disorderly’ exit and occurs where there has been little warning or preparation.
• Receivership: an appointed receiver takes control to liquidate assets to recovering funds due to creditor when a company is unable to make payments on a loan. This may keep a company out of bankruptcy, but it rarely continues in its original form.
• Administration: a temporary legal status is applied to offer interim protection to an insolvent business. There is a period granted to either save the institution as a going concern or wind-down slowly.

(Source: Public First (2024) Institution overboard)

An orderly exit (where a provider closure is foreseen and managed in a way that allows arrangements to be put in place to help students complete their course) is clearly preferable to a disorderly exit. The following managed procedures could mitigate the negative effects of insolvency and protect students:

• Short-term financial support to allow an institution time to reshape or resize.  
• Merger with or acquisition by another entity.
• Teach out e.g. allowing students to complete their course and avoid disruption in the short term. Realistically this is only likely to be possible in combination with another option e.g. merger. 
• Transfer of students and provision to another provider.

While there has been much discussion of the need for a specific regime for insolvency in the university sector, there are several factors which may complicate this, including the risk that it makes institutional failure more rather than less likely and adds little additional protection than currently offered. As a result, Universities UK’s current view is that it would be preferable to work with government, regulators and other sector bodies to clarify how existing arrangements can apply to higher education institutions, supported by stronger contingency planning at institutional level, and at the level of government, regulators and funders.

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

Students

To be prepared for the eventuality that a provider is no longer able to deliver a course, run a campus, or continue to operate, the OfS ongoing registration condition C3 requires all providers in England to have an approved student protection plan (SPP). An SPP must include the provider’s assessment of any risks to the continuation of study of their students, the likelihood that those risks will crystallise, and the severity of the impact on students if they do. The plan must also set out the measures to mitigate the risks that the provider considers to be more likely to occur. It should contain information about the provider’s refund and compensation policy for cases where it is not possible to preserve continuation of study.

Proposals recently consulted on by the OfS to amend the initial conditions of registration for new providers include proposals for SPPs to be replaced by providers’ own policies. The OfS has indicated the intention for these changes to SPPs to eventually extend to all providers. This change has the potential to improve clarity for students and reduce regulatory burden.

If the OfS judges there to be a material risk that a provider will exit the market and stop delivering higher education, it can require the provider to comply with a Student Protection Direction (SPD) under Condition C4. This will be enacted where a provider cannot demonstrate that it is likely to have access to sufficient funds to meet its day-to-day costs, and any other liabilities due, within the next 12 months, including where this is likely to be reliant on specific factors and the OfS judges there to be material uncertainty.

An SPD can require a provider to produce a Market Exit Plan which would outline the specific student protection measures that would be necessary, should a provider cease to deliver higher education. These move beyond the higher level SPP and include:

• Putting in place and/or implementing any Student Protection Measures specified by the OfS, which can cover teach out and student transfer arrangements, exit awards and unit certification, information, advice and guidance, complaints, refunds and compensation, and archiving arrangements.
• Doing (or refrain from doing) identified actions that the OfS considers necessary to ensure a Market Exit Plan or Student Protection Measures are implemented effectively.

The OfS has published an overview of recent market exit cases, illustrating how OfS registration conditions have been applied and how providers at risk of closure have interacted with the OfS. The OfS employed specific conditions of registration (before the introduction of Condition C4) and SPDs to instruct providers to produce market exit plans which enabled the OfS to closely monitor the planning and execution of student protection strategies. 

To inform its regulatory interventions, the OfS also requires providers to submit reportable events. On financial issues, among other financial indicators, they expect providers always to submit events if the provider’s liquidity is likely to drop to below 30 days’ average expenditure, unless this is the provider’s normal cash management policy or is mitigated through an agreed revolving credit facility, overdraft or other financing.

In England, students can submit complaints to their university about anything their provider has done or failed to do. If the decision of the university is unsatisfactory, in many cases students can then raise these complaints to the Office of the Independent Adjudicator (OIA) for further consideration. Generally, if the OIA review of a complaint is ‘Justified’ or ‘Partly Justified’ they may make a recommendation or recommendations that the higher education provider should follow. There have been some instances in recent years in which the OIA has handled complaints from students affected by market exit, where recommendations included financial compensation where students had suffered or would suffer financial loss. In these cases, the appointed Joint Administrators considered the amount as the total owing to the student as an unsecured creditor and payment was made directly to the student.

Other stakeholders and implications

There are likely to be a large range of other stakeholders impacted by insolvency of a university these include, but are not limited to:

• ongoing research contracts
• specialist national research or teaching capacity
• impact on the local economy and job losses
• impact on public services which may be dependent on the institution for the supply of their workforce
• potential impact on pensions
• the placement implications for students on professional programmes where placements are a compulsory element of the programme
• legal and contractual obligations to funders, industry and international partners
• visa implications for international students and staff
• the receiving provider of any students
• credit transfer arrangements

Current insolvency regimes do not support the systematic engagement of national and local stakeholders who would need to be engaged to work through these implications.

Are additional safeguards needed to strengthen protections?

It is increasingly our view that the consequences of a large scale institutional failure would be so significant that policy effort should be primarily focussed on averting this outcome, rather than on mitigating its impact after the event.

The ramifications of a failure of a higher education provider are likely to, depending on context, go far beyond the need to find alternative provision for students.

The theory and practice of dealing with a failure may also be very different. While it may be theoretically possible to transfer students from one provider to another, in practice the viability of this will depend on multiple specific factors, including the preferences and qualifications of students, capacity in alternative institutions, geography, and the availability of financial support for potential receiving providers. At scale, the complexity of placing thousands of students with alternative providers could be considerable. It would also depend on timing. For instance, placing students with alternative providers during the late stages of the summer, when institutions are occupied with confirmation and clearing, may be additionally difficult. Placing PhD students is additionally complex due to the very specific requirements of research supervision.

Contingency planning

We strongly believe that more robust contingency planning for provider failure is necessary, and that Student Protection Plans are not a sufficient answer. In England, Student Protection Plans (SPPs) should be replaced by institutionally-owned policies. Contingency plans which are proportionate to the level of risk, and subject to proportionate scrutiny by the OfS, should be developed where there is a risk of failure. Dependent on risk-level these contingency plans should not only consider the protection of students, but the wider issues highlighted above.

The OfS has already developed a more comprehensive approach to this issue, learning from issues it has dealt with over the last few years. It is crucial that this learning and refinement of practice continues.

A proportionate approach to management of financial risk and the development of contingency plans by the OfS is required. If not, there is a real danger that the OfS increases rather than reduces risk of provider failure by diverting management and governance attention from crucial financial turnaround activity and into satisfying regulator demands.

We strongly believe that the OfS needs financial as well as regulatory tools to address potential provider failure - including the ability to provide short term financial support to allow an institution to restructure, resize or, in extremis, to embark on an orderly wind down.

For institutions at no risk of financial failure, onerous requirements to develop contingency plans may represent a waste of institutional resource and effort which would be much better directed to delivering for current students and staff. An approach which allows the OfS to take a proportionate approach to the need for detailed contingency planning would be preferable.

Regulation

Reportable events are used by the OfS as a financial risk indicator. In addition to the required reporting of low liquidity and events that are mandatory to report, there are some events where a provider will need to make a judgement about whether a report is required or not. This can be done through a ‘materiality test’ where a provider must consider ‘whether a reasonable provider intent on complying with all of its conditions of registration and acting in the interests of students and taxpayers (rather than in its own commercial, reputational or other interests), would consider the event or matter to be material’. The OfS will apply this same test when assessing the materiality of an event.

The OfS should consider better feedback mechanisms to ensure greater shared understanding of materiality, to support a more consistent approach to reportable events in this area. For example, the OfS could provide more advice and feedback to providers about the point at which the scale, impact, and rationale for a redundancy programme would be considered ‘material’ and therefore reportable to the OfS.

Receiving providers

Protections and support for higher education institutions which may be asked to take on students in the case of a provider failure would remove existing barriers. Providers receiving students from insolvent institutions currently have no protection in relation to potential administrative or regulatory consequences of taking on students from an insolvent provider. Receiving institutions will need to invest significant effort in reviewing students’ learning outcomes and completed modules, potentially providing additional academic support to make up for any missed learning and providing pastoral support to help students adjust to a new university after a period of uncertainty and disruption. There are currently no regulatory protections for institutions taking on a large volume of students (who they may or may not have admitted under normal circumstances), and this can act as a disincentive for institutions to engage in transfer arrangements. With this in mind, we believe the OfS should, for example:

• Commit to including this as ‘context’ in their regulatory decision-making to avoid deterring institutions from accepting transfer students. For example, in any assessment of the quality conditions, particularly those reliant on the B3 metrics, OfS will need to recognise the unique circumstances affecting these students and their outcomes. Other regulatory activity such as access and participation plans and targets also need to be considered as student demographics change as a result of transfers. To ensure providers are willing to take on large numbers of transferring students, the OfS needs to provide reassurance that doing so will not put them at greater risk of regulatory action elsewhere.

• Ensure there is provision in the National Student Survey (NSS) for any students transferring in their final year to participate but for the data to be disaggregated. There will need to be similar considerations attached to data collected through the NSS, for example, if there is a large cohort of students who have been transferred from one provider to another.

Going further

Protection schemes that go further and change the current legislative environment or involve fundamental reform of the existing regulatory environment have been suggested elsewhere. Any proposed options will have benefits and risks, and so we would suggest a principles-based approach when considering and exploring the implications of these policy solutions.

There are four overarching considerations:  

• The primary policy objective should be to avoid provider failure.
• How to avoid developing a policy that leads to higher costs to the very institutions that can least afford it.
• The extent to which money is diverted from teaching, learning and research.
• The extent to which the OfS or government broadly has the existing legal powers to achieve a similar outcome. 

Some have argued for a scheme similar to the Further Education (FE) Special Administration Regime (SAR). Under this regime, the Secretary of State for Education can apply for an education administration order (EAO) appointing an education administrator to manage a college’s affairs, business and property. The SAR process enables a college to trade whilst insolvent to enable a teach out, transfer of students to another provider, or a potential managed sale or merger. However, an SAR is not without risks and would need to be nuanced if specifically applied to HE.

The SAR process is complex and incurs significant costs, which would likely exceed those seen within FE, further increasing financial pressures and directing efforts away from avoiding insolvency.  It is possible that implementing a SAR may lead to reclassification of HE as part of the public sector which would have implications that risks further destabilisation of the sector’s finances. A detailed consideration of the risks and benefits of introducing a SAR (including accounting for the wider implications for the higher education sector as a whole) would be required before considering this option. Therefore, a SAR for HE should not be pursued unless it would provide significant additional protections than already in place.

While the introduction of sector level compensation schemes on the lines of the Financial Services Compensation Scheme have been widely discussed, there is a real challenge in a sector in which teaching is already loss-making, in that such a solution would divert resource away from teaching students in institutions at no risk of failure into a scheme from which they will never benefit.

Ramifications of Institutional Insolvency & Regional Impact

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

The consequences would be felt by not only students but staff, researchers and the wider higher education sector across the UK, leading to wide reaching impacts on the local economy with the loss of jobs and income to local businesses. Students would face the disruption to the continuity of learning (as covered in section six), emotional and personal disruption, possible relocation and financial loss. Similarly, staff would need to secure new jobs, potentially leaving the local area and exacerbating the economic impact of an institution closing.

The regional and wider sectoral impact of a higher education provider becoming insolvent would be considerable. Key aspects are outlined below.

Economic impact

In 2021-22 the combined economic impact of UK universities stood at £265 billion a year through activities such as their teaching, research, spending in local economies and income from, and the spending power of international students. In 2021-22 UK universities supported around 768,000 jobs. Nearly half (382,500) of these jobs are indirectly delivered, through increased economic activity resulting from universities, such as student employment in local businesses like restaurants and retailers, or construction companies, who benefit from the economic stimulus universities create. Universities in the North West alone support 75,500 FTE jobs. The equivalent figure for the North East is 35,500 FTE jobs and equates to approximately 3.5% of all FTE jobs in the North East. Closure of a medium or large university resulting in mass job losses would have a severe impact on the local economy, beyond direct job losses at the university. The impact on local business will be extensive through the loss of spending in local economies and as students (and staff) leave the community.  

Universities have a substantial impact on society through their critical role in contributing to public services, with more than 191,000 nurses, 84,000 medical specialists and 188,000 teachers expected to graduate from UK universities between 2021 and 2026. Universities also directly deliver public health services to local communities. Large scale market exit would jeopardise the provision of essential public services as well as the pipeline of talent entering businesses and charities of all sizes.

Institutional failure would also put at risk the local and national growth agenda. All eight growth-driving sectors of the Industrial Strategy are reliant on high level skills which only a well-funded higher education system can supply. UUK analysis shows that, in 2024, the average proportion of graduates in the workforce of the eight industrial strategy priority sectors was 64%.

Financial pressures will continue to affect research and development opportunities that are not easily rebuilt. Universities play an active part in kickstarting economic growth through their innovation, commercialisation and business support activities. In Scotland for example, universities are the primary providers or key partners in most of Scotland’s company incubation capacity, as well as leading in the hosting of Tech Scalers, both of which drive increased capacity to the research commercialisation eco-system. In 2021, investment into university spin-outs reached £5.3 billion, and since 2019 more than 24,000 spin-outs, start-ups and social enterprises have emerged from UK universities. The turnover from and investment into spin-outs is experienced in every corner of the UK. London Economics research estimated that for every £1 of public funding for research, the UK higher education sector generates £9.90 through its research and knowledge exchange activities. Spending on research by the higher education sector supports 121,500 jobs across the UK (in addition to jobs created by knowledge generated through research) and knowledge exchange spending by the sector also supports 39,600 jobs.

Confidence in the higher education sector

Any large-scale failure could prompt a loss of confidence in UK universities as stable and world-leading places to study, despite most of the provision remaining high quality and sustainable. A failure at scale would likely impact students’ confidence with implications for both domestic and international recruitment, which in turn may push more universities into financial difficulties. Similarly any decline in the reputation of the UK university sector internationally could work against the government ambition to attract top research talent to UK institutions as part of the overarching ambition to drive growth through research and innovation.

Lending to the higher education sector

The prolonged instability or failure of one institution is likely to cause banks and other lenders to lose confidence in the sector, leading to universities facing less favourable borrowing terms (e.g. higher interest rates) or even struggling to access finance altogether. As well as limiting universities’ day-to-day activities, this would particularly affect their ability to invest in long-term changes that may improve their sustainability, further exacerbating the sector’s financial challenges and potentially creating a ‘domino effect’.

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

Universities and the industrial strategy

Universities are critical to the success of a growth-driving industrial strategy, and to the sector plans, which must capitalise on the higher education sector’s contributions including:

• Developing a high-skilled workforce for the nation
• Collaborating with businesses, further education colleges and Mayoral Strategic Authorities to bring coherence to skills supply across and within regions
• Being place makers: strengthening industrial clusters, generating spin-outs, and driving regional growth and embedding the industrial strategy into local growth plans
• Embedding entrepreneurial education across the curriculum and supporting entrepreneurship
• Encouraging inward investment and attracting talented researchers
• Strengthening research capabilities and driving the growth sectors of tomorrow

Local economic actors

Higher education institutions (HEIs) are anchor institutions and significant local economic actors. The higher education sector brings talented people together which attracts high-growth companies to co-locate with universities. In their own right, HEIs are a key export sector which attracts foreign and domestic investment to the UK. The £265 billion total economic impact of the higher education sector on the UK economy can be broken down into regions:

HEIs support local growth in their communities through the direct impact of their spending and the spending of their staff and students. Across the UK, universities generate £70 billion of economic impact through their direct spending and they are taking steps to ensure that the local impact and benefits of their spending is increased.

In many regions, HEIs are a leading employer. Through hiring local residents and encouraging staff to participate in local volunteering, HEIs solidify their role as place makers. In 2021-22, universities employed 385,000 FTE jobs, with an additional 382,500 being indirectly created by the sector. For example, jobs generated by universities account for up to 12% of the workforce in Wales, including direct and indirect employment created by the presence of students and staff. 

Skills

HEIs contribute to their local economies through the provision of high-level skills. This is crucial because according to Skills England occupations requiring higher education are expected to see the most employment growth by 2035. HEIs do this through a diverse offer to learners including undergraduate and graduate degrees, degree apprenticeships, level 4 and 5 qualifications and modular courses. HEIs also work collaboratively with FE providers to upskill and retrain the workforce and expanding provision to “cold spots” – areas that suffer from lower than expected rates of progression to higher education.

Through this training and education, HEIs ensure workforces are highly skilled, which has tangible impact at the local level. Approximately 51% of graduates in the UK remain in their place of study. This retention benefits local economies and communities. It allows for more equal distribution of skills across the country, while retained graduates spend their income locally and pay council tax, lifting the fortunes of local businesses and people through a multiplier effect. 

HEIs commit to making local skills provision inclusive and impactful. In 2023-24, universities provided over 4.1 million learner days of continuing professional development and continuing education, to individuals, small and medium sized enterprises (SMEs) and those sponsored by their employers.

Supporting local businesses and entrepreneurs

HEIs are uniquely placed to support both large industry partners and smaller companies, which is important given, on average, 9 out 10 businesses in the UK are SMEs. In some regions and in Scotland and Wales - where the local business base is predominately SMEs - business support services and consultancy are critical. In 2023-24 HEIs provided consultancy services to businesses over 61,700 times, including with SMEs 35,900 times.

Some HEIs also pool their resources to leverage co-investment into local emerging businesses, through regional investment vehicles such as Midlands Mindforge and Northern Gritstone. The purpose of these vehicles is to develop regionally responsive funding ecosystems, to provide greater opportunities for ventures outside of London and the South East to scale, preventing the displacement of economic impact. To date, Northern Gritstone’s activities have secured £312 million, supported by investments from local authority pension funds.

Place-making

This section relates to England only, where particular local mechanisms allow for universities to engage in whole-place activity.

HEIs foster strong partnerships and collaborations, in their localities for example through the development of Civic University Agreements, or through networks of universities such as in the North East, Yorkshire, London and Greater Manchester.  Many HEIs support decision making at the local level, including through the design of local growth plans both inside Mayoral Strategic Authorities (MSAs), where this is a requirement, and outside of MSAs, where local growth planning is recommended but not obligatory. Universities also have a significant role to play in accelerating regional devolution in their areas, through policy support and analysis and fulfilling their roles as convenors. The development of the Industrial Strategy, the associated Sector Plans and the commitment to Local Growth Plans provide an opportunity to enhance the role and impact of universities on economic growth and opportunity.

The provision of public services

Local communities rely on effective public services, which are currently stretched in all regions and nations. Access to local, high-quality healthcare and school education is a prerequisite both to boosting productivity and to ensuring that every individual has the opportunity to fulfil their potential.

Universities are key providers of the skilled and committed workforce that the public sector needs to deliver, improve and innovate. However, applications for public sector courses such as in nursing, midwifery and teacher education have fallen since 2021. In healthcare, a step change is needed to deliver the NHS long-term workforce plan (LTWP). The Health Foundation estimates that the proportion of first-year higher education students in England training to be NHS clinical professionals would need to increase by 50 per cent, from one in nine of the total first-year student intake in 2022–23 (76,300 students) to one in six (125,700 students) in 2031–32.

HEIs and their communities

The relationship between HEIs and their communities goes beyond university spending and core activities. It is an active and pervasive commitment to local people. The most recent HE-BCI data shows that:

• HEIs are reaching more people through public engagement. Figures for the number of attendees at public events run by universities, such as lectures, performance festivals and exhibitions, as well as views and downloads of media produced by universities grew from over 550.6 million to over 745.7 million between 2021–22 and 2023–24. This is a 35% increase in engagement.
• Most public events and university-produced content are offered to local communities for free. The increase in public engagement overall (35%) is matched by the increase in engagement with free events and content produced by universities. In 2023–24 there were over 739.8 million people who attended free events at universities or watched and listened to free media.

Other examples of community engagement include: open days and events, learning opportunities for adults, volunteering, access to facilities and the provision of legal and employment advice.

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

Government, regulators and higher education institutions should adopt a clear and shared principle that it should be a priority to avoid a disorderly institutional failure. The emphasis of work from institutions, regulators and governments should be on how such an eventuality can be avoided, rather than on how to manage the consequences after the event.

The sector must act itself, taking proactive steps to achieve transformation and efficiency and developing robust contingency plans where the risk of failure is high. Regulator, funders and government must create robust contingency plans too, which consider the whole functioning of a university, including but not limited to student protection.

In addition to taking action to provide sustainable levels of funding to universities across the UK, Government should work with the higher education sector to establish a workable Transformation Fund in England. This fund should support sector collaboration, promote financial sustainability and drive economic growth.

There is a real and significant risk that continued financial pressures will continue to necessitate action by universities short of insolvency, such as course closures and reductions in research and development capacity and capabilities that are not easily rebuilt. Preventing ‘cold spots’ in provision across a wide range of subject areas will be crucial to both national economic growth and closing regional gaps in prosperity. As such, the health of disciplines and national strategic capacity in research should both be subject to significantly better oversight. Our recent work on transformation and efficiency found that the abolition of the Higher Education Funding Council in England (HEFCE) had left gaps in funding, support and, crucially, oversight of the overall functioning of the whole university system. This has created a lack of oversight of the capacity and national coverage of teaching and research provision and a reduced ability to act to support universities in severe financial distress.

Government should work collaboratively with the sector to create a funding and regulatory framework that is more supportive of collaboration, addresses gaps in sector stewardship and creates a cohesive system in which higher education and research, policy and funding levers are better aligned to address this.

Similarly, one of the opportunities identified by the Transformation and Efficiency Taskforce relates to ‘pursuing innovative collaborative structures’ including federations, group structures and partnerships around functions, such as existing research alliances and collaborations to deliver courses that are hard for one university to sustain. A commonly cited barrier to collaboration, particularly around teaching, was competition law and nervousness about breaching it. The Competition and Markets Authority (CMA) have engaged with key sector stakeholders to understand where competition law concerns are preventing collaboration, and the UUK Taskforce will continue to support the CMA including the production of bespoke advice and guidance.

August 2025

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