UK universities set to lose £17bn by 2027 as inflation bites

• Capped tuition fees will see UK universities lose more than £17bn in income in real terms over the next four years, as inflation remains persistently high.    
• Universities have already lost about £6bn in real terms since 2017, with the pace of losses accelerating.    
• Amid such financial constraints, more innovative use of technology is absolutely key to helping universities deliver more with less.    

UK universities are set to lose more than £17bn in real income over the next four years as persistent inflation erodes the value of tuition fees, according to research from higher education software provider TechnologyOne.

Universities have already lost about £6bn in real terms since 2017, with the pace of losses accelerating. Higher education institutions lost roughly £1.42bn in the 2021-22 academic year, almost ten times the amount it lost in 2017-18 (£145m). Despite UCAS predicting a rise in student numbers, by 2027 universities are expected to be losing £5bn to inflation each year.

Tuition fees for domestic students have been capped at £9,250 since 2017, giving universities limited options to offset the impact of rising prices. TechnologyOne’s findings bolster university Vice-Chancellors’ recent concerns about the ‘broken’ tuition fees model.

Universities are increasingly turning to international students to plug this funding gap – UCAS projects a 60% increase in international students in its ‘Journey to a Million’ report, with a 75.6% increase in higher education applicants from outside the EU. However, even a marked rise in the influx of international students is unlikely to offset the deficit. Given the financial constraints, leveraging smart technology is key to helping universities do more with less.   

It’s not just universities feeling the pressure. TechnologyOne research from March found that students had seen their cost of living rise by 13.6% over the previous year, around a fifth more than the price rises felt by the general public.

Leo Hanna, Executive Vice President at TechnologyOne in the UK, said:

“Universities have no room for error when it comes to spending decisions, as their financial constraints will only increase over the next four years.

If tuition fees remain fixed, the higher education sector must prioritise long-term forecasting, especially given the forecast uptick in student demand. Universities need access to streamlined and comprehensive data to make informed decisions.

For this, the technology at the core of a university has never been more important, smart investments made today will be crucial in helping universities find savings and serve students better tomorrow. More effective flows of data, which an integrated SaaS enterprise resource planning solution enable, help departments drive intelligent digital services and improved decisions on investment.”

Vanessa Wilson, University Alliance CEO, said:

“The analysis from TechnologyOne is a stark illustration of how bad things could get for the university sector over the coming years. Universities now make a loss on every home undergraduate, and that loss is set to grow with inflation. This is evidently financially unsustainable in the long term and will ultimately impact on student and staff experience, for example through deteriorating facilities or a reduction in staff:student ratios or student support services. 

“Universities are more than just institutions of teaching and research, they are economic anchors for their communities, supporting innovative businesses to scale and grow and delivering the technologies and skills for new industries to flourish. An unsustainable university system makes for a less stable economy in all areas. 

“To preserve the high quality of our sector and our ability to attract investment, talent and world-class research it is vital that the higher education provider unit of resource be restored to 2012 levels as soon as practically possible. We believe this can be achieved in the short term through a combination of effective policies, regulatory reform and top-up funding. At the same time, universities will naturally also be looking at their own systems to ensure they are running as efficiently as possible. Innovative universities like those that University Alliance represent know that technology will be at the heart of driving effectiveness and efficiency.”