Universities will be hit by a £2.6 billion shortfall in the next academic year as a result of the coronavirus pandemic’s impact, according to an analysis by London Economics for the University and College Union.
A report from the consultancy, which has previously compiled reports for the government and the Higher Education Policy Institute, says that most of the loss will come from a reduction in international student recruitment. The report estimates that there will be a 47 per cent decrease in international student enrolment in the next academic year due to coronavirus, costing the sector £1.5 billion.
Approximately £612 million of the £2.6 billion loss will come from a drop in domestic student enrolment, which the report estimates will fall by 16 per cent, with a further £350 million from a fall in European Union student recruitment, which the report estimates will also fall by 47 per cent.
According to the report, almost three quarters of UK institutions will be left in a “critical financial position where income only just covers expenditure”, but all institutions will be hit in some way.
And it says the loss in income could result in 30,000 jobs being lost in universities and a further 30,000 being lost in local communities, without government intervention. The knock-on effect of the income loss will be a £6 billion hit to the UK economy, it says.
The analysis looks at the impact of the economic downturn on student behaviour and the expected rate of students deferring their places and finds that, compared with 2018-19 first-year enrolments, approximately 231,895 students will no longer enrol in UK higher education in 2020-21.
This includes 111,000 fewer UK-domiciled students, 28,410 fewer EU students and 92,345 fewer non-EU students, which amounts to a total decline in international students of 120,755.
In 2018-19, UK institutions’ total income stood at £37.63 billion, more than half of which came from tuition fees and teaching grants.
The analysis split universities into four clusters: Oxbridge in cluster one; mainly pre-1992 universities in cluster two, including the rest of the Russell Group; with newer institutions in clusters three and four.
It finds that the top two clusters would be hit hardest by the loss because they are the most reliant on international students. The report estimates tuition fee income from EU and non-EU students accounted for between 51 per cent and 58 per cent of total tuition fee income in 2018-19 for clusters one and two, compared with between 11 per cent and 24 per cent for clusters 3 and 4.
Jo Grady, UCU’s general secretary, said that the results were “alarming”.
“Our world-renowned universities are doing crucial work now as we hunt for a [coronavirus] vaccine and will be vital engines for our recovery both nationally and in towns and cities across the UK. It is vital that the government underwrites funding lost from the fall in student numbers. These are unprecedented times and without urgent guarantees, our universities will be greatly damaged at just the time they are needed most,” she said.
Alistair Jarvis, chief executive of Universities UK, said that the report “helpfully” highlighted the “critical financial risks for the sector”, including the risk of financial failure at some universities.
UUK has also called on the government to take “urgent action” to support institutions during the crisis caused by the pandemic with a series of proposals that include financial support and a student number cap.
However, Hepi director Nick Hillman warned against overly pessimistic predictions. “No one can accurately and securely predict what will happen with the progress of Covid-19. Nor can we know for certain its full impact on educational institutions,” he said.
He said that in recessions young people often turn to higher education rather than entering an unstable job market and added that it also seemed “odd” to assume that there will be fewer first-year enrolments at Oxford and Cambridge, when they are so severely oversubscribed every year.
“I do not underestimate the severe impact of Covid-19 on higher education,” Mr Hillman said. “But, given the diversity of our higher education sector, we must ask if it is right for modelling to assume every single institution will face a recruitment crisis right across the board.”
A Department for Education spokesperson said the government understands that the outbreak “poses significant financial challenges to the sector and are extremely grateful for the work universities are doing in the response.”
The chancellor has announced an “unprecedented package” of financial support and “recently confirmed universities’ eligibility for these schemes, and we are committed to working closely with the sector to understand the financial risks they might face, stabilise the admissions system, and help them access the support on offer,” the DfE said.
