English universities ‘lose £3 billion real income’ in three years

The English sector has lost about £1 billion in real income for each of the past three years because of inflation, analysis suggests.

The real-terms value of the £9,250 tuition fee for domestic undergraduate students – effectively frozen since 2012 – has fallen to below £6,000, causing many of the sector’s financial difficulties.

However, analysis from the consultancy dataHE shows the impact of inflation when converted to today’s money, with the current fees worth almost £13,000 in 2017. Funding per student is sliding fast and will soon fall below the low point of £8,800 in the mid-1990s and reach roughly half the per-student resource of 2012, it suggests.

“With no solution in sight yet, these values are already within financial planning timelines for universities,” said Mark Corver, co-founder of dataHE.

“The unit of real resource will affect quality of student experience.”

Dr Corver said funding levels for UK students were “unusually low”, with universities left unaided in a commercial market but unable to take action because of increasingly distorting price controls.

The analysis follows controversial comments from Shitij Kapur, the vice-chancellor of King’s College London, who said funding per student needed to be increased to between £12,000 and £13,000 to ensure financial sustainability.

On an aggregate level, dataHE has modelled a small increase in English recruitment to universities of about 1 per cent.

But approximating the total income for this group by year of entry, dataHE estimates that English providers will have £9.9 billion to support teaching the 2024-25 entry cohort – down from about £13 billion, in 2024 prices, just three years previously.

“From this perspective, universities are nursing a £3 billion cut, around 30 per cent, in their annual funding for this dominant activity, and over a period too short to allow much accommodation,” added Dr Corver.

The aggregate real income for 2024 is similar to the mid-2000s but is now spread more thinly across increased student numbers.

DataHE’s analysis also found that growing intakes and rising unit of resource helped raise income from domestic university students to 0.52 per cent of UK gross domestic product a decade ago. However, it has since fallen to about 0.36 per cent – the lowest level since the mid-2000s.

“UK universities are often acknowledged as a rare national asset,” added Dr Corver.

“The sector forms over a tenth of the top-ranked 200 in the world, whilst simultaneously supporting a strong expansion of young participation in higher education, most notably so from poorer areas.

“It seems then increasingly risky to continue to cut so deeply at their foundations if expecting this valuable advantage to remain.”

patrick.jack@timeshighereducation.com