Innovate or Perish: Are our Universities Financially Viable?


We’re all having to tighten our financial belts as a result of the current cost-of-living crisis but is the continued freezing of tuition fees causing Universities to reach a financial meltdown? Clearly, it is impacting severely on some Universities – just ask the University of East Anglia that, according to recent press reports, are £45million in debt!

The latest Spring 2023 HESA financial data shows that many Universities relying on student fees as their primary income source (predominantly post-92 institutions) are facing increasing pressure on their balance sheets as this key revenue stream reduces in real terms.  Let’s put this into perspective…..

Taking a medium sized post-92 university with 15,000 domestic undergraduate students on its books, assuming all students are paying £9250 a year in tuition fees in the 2017/18 academic year, this would equate to £138.75million annual revenue.  In keeping the status quo, by 2022-23, if the fees had been kept in line with inflation etc, they should have risen to £10,771 a year and therefore providing £161.57m of income.

To drive the point home, by freezing the fees at £9250, in real terms, this University would be £22.8m worse off per annum in 22/23 than it was in 2017/18.  In fact, in real terms, this University has lost £60.8million of revenue over the 6-year period since the freeze was introduced and of course these lost revenues will increase year on year…. This is on top of the soaring cost of heating and lighting the buildings and the increasing pressure institutions are facing from staff for increases in pay and benefits, and the pressures that moving everyone (students and staff) off campus during the Covid-19 pandemic provided!

So what is the answer to this bleak-looking predicament for the sector?

The Government are showing no signs that they will lift the cap on the fees in the short term (at the time of writing, they will be fixed up to and including the 2023/24 academic year) and therefore, to address this, the options include increasing student numbers, diversifying income streams, or reducing operating costs in line with their income. Whilst reducing costs is an option, many universities have already made the obvious cost reductions and are therefore starting to explore the more challenging and disruptive options. In a sector where Unions are strong, options to reduce their course portfolios with subsequent trimming of headcount are unpalatable for many although recently institutions are finding ways to do just this, such as Hull University in recent times.

One alternative to mitigating the real time decrease in student income is to explore options for diversifying income although this is not a ‘quick win’ activity that can be achieved overnight so therefore that leaves increasing student numbers.

Clearly there are options for increasing student numbers including lowering tariffs and increasing postgraduate taught programmes and international students.  The latter may be less of an opportunity due to the recent Government announcement removing the ability for dependants of non-domestic students (there was 135,788 of these granted last year) to apply for visas.

Perhaps more creative and innovative thinking is needed to increase the conversion of enquiring students through to enrolment and retaining them beyond.

Through increasing the use of behavioural science techniques in engaging with prospective students, together with data analytics, it is possible to shore up the student numbers and therefore reaps the associated financial benefits, without massive further investment in marketing spend.  Combine this with the creation of truly student-centric and highly responsive supporting processes, a great CRM/Student system and this could go a long way to supporting that financial blackhole.

Perhaps the financial pressures are therefore a good thing as Universities are forced to innovate more in the way they operate and look outside the sector for support in this as the tried and tested no longer delivers…..or do we just wait until a University financially crashes and burns?


About Caja

At Caja, we believe our innovative suite of Higher education solutions address many challenges faced by Universities. Our suite brings together:

  • Financial Viability Review
  • Business Transformation
  • Target Operating models and alignment of Organisational People Structures
  • Lean process reviews including the use of process automation
  • Process simulation
  • Behavioural science and the use of Nudge Theory
  • Data visualisation including predicative analytics underpinned by cognitive computing.
  • NuRe campus student-centric data ERP solution create compelling, high performing solutions for a modern day university with modern day challenges. For further details, drop me an email