‘Increased risk’ of market exit after £3.4 billion losses – OfS

There is an “increased risk” of a large higher education provider “suddenly exiting” the market as a result of rising costs and poor recruitment, according to the Office for Students (OfS).

Sector finances “appear to be towards the most pessimistic end” of scenarios modelled by England’s regulator, its board was told in December, according to minutes released this week.

The OfS said in May last year that a “reasonable worst-case scenario” involving no growth in UK entrants between 2023-24 and 2026-27 and a “significant reduction” in international students would plunge 84 per cent of providers into deficit.

Philippa Pickford, director of regulation, and Will Dent, head of financial sustainability, told the meeting that financial risks were “escalating across the sector, with providers under serious financial pressure”.

They said the regulator was operating a system whereby data from providers and other sources “is triaged” to identify those needing more detailed scrutiny.

“Prioritisation includes the size of a provider and the number of students potentially affected”, the minutes add.

Data-sharing agreements with Ucas and UK Visas and Immigration allow the OfS to “monitor the exposure of providers to key recruitment risks”, they say.

“We are also in close communication with lenders, so that we can anticipate their responses, and with government departments and other funding bodies with an interest in or influence on financial sustainability”.

In her update to the meeting, OFS chief executive Susan Lapworth said that there had been some “worrying reductions” in student numbers for many providers.

While UK undergraduate recruitment had increased by 1.3 per cent overall, there was “significant variability across the sector”, she said, with lower tariff providers seeing declines of between 2 and 5 per cent.

“We estimate that approximately 100 providers have failed to meet UK undergraduate recruitment targets that they reported in January 2024; and we estimate that approximately 150 providers could have failed to meet the international recruitment targets reported in January 2024”, Lapworth adds.

Coupled with the impact of the rise in employers’ national insurance payments, the regulator expected “an overall annual net income reduction of about £3.4 billion from 2025-26”.

tom.williams@timeshighereducation.com