On the Cusp: Are we about to see the first University go bust?

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The new academic year is well underway, but are we about to witness the first University go bust? In recent years, universities have grappled with various challenges that threaten their financial sustainability.

Universities continue to struggle to deliver a sustainable financial model with intense pressures due to:

  • Inflationary pressure on tuition fees, which have remained frozen since 2016 and have steadily lost value, putting institutions at a financial disadvantage. These fees are now worth about £2500 a year less than in 2016. The real question is how long can universities absorb these financial losses before reaching a breaking point?
  • The loss of previously accessible EU funding for research
  • The tightening of visa regulations and global uncertainties contributing to a reduction in international students choosing the UK as their destination for higher education.
  • The need to replace outdated legacy systems and transitioning more up-to-date systems to cloud-based solutions creating additional financial burdens

With limited income diversification options and uncertain government timelines for reviewing student fees, many universities are battling for their very existence.

So, what’s the answer? How can they weather this storm?

There is no magic wand, unfortunately! However, many solutions can still be adopted at the local level to improve their financial position, including everything from closer management of student enquiries, streamlining enrolment processes, utilising behavioural science techniques for student recruitment and enhancing student retention efforts.

Maybe, there is another answer at a macro sector level. Perhaps it’s time for universities to adopt a new model of operating, similar to that of multi-academy schools. An approach such as this is beginning to make financial sense as it become imperative universities adapt to the current financial landscape. By pooling resources and creating shared service offerings for back-office functions, institutions in close proximity could reduce operating costs and create a more sustainable future. Thereby ensuring the continued development of the future skills and our future workforce.

Implementing shared service offerings under a new operating model could lead to a seismic change. It may not be an easy journey, but without a fundamentally different approach that sees the sector truly adapting and innovating, the first University going bust very soon is a reality.

The challenges may look formidable, but they are not insurmountable. By taking proactive steps at both the local and sector levels, universities can review where it might be helpful to improve their financial health and ensure their continued existence, drive really successful graduate outcomes. One thing we know is that higher education institutions must adapt and innovate in response to the changing landscape of academia.

If you are interested in exploring the ways financial sustainability can be addressed in your University, Caja offers a University Health Check service, covering people, processes, technology, and data to identify quick and long-term strategies for achieving financial success.

Contact us at admin@cajagroup.com or 01782 443020 for any inquiries.