At the time of writing this article, we have been reminded in the UK that 5 years ago we were grappling with the coming into force of the EU-UK Withdrawal Agreement on 31 January 2020, soon to be followed by the declaration by the World Health Organisation (WHO) in March 2020 that the outbreak of the Covid-19 virus was a global pandemic.
In its updated report in November 2024 on the financial sustainability of higher education providers in England, the higher education sector’s regulator in England – the Office for Students (OfS) – noted that “the financial context for the sector is becoming even more challenging”. Key to this statement was the OfS’ modelling of student numbers coming into higher education institutions across England, suggesting that this is 10% lower for UK undergraduates than the sector’s forecasts for 2024-25 and 23% lower for non-UK entrants.
The OfS modelling included an estimate of an additional £371 million coming into the sector following the Retail Price Index linked increase in the UK undergraduate tuition fee for academic year 2025-26. However, it also included an estimate of additional National Insurance costs for the sector of £133 million in 2024-25 and c£430 million each year from 2025-26.
This week has seen the announcement of several major redundancy programmes across the UK higher education sector, including reports that a Russell Group university proposes to cut 400 academic jobs and cut a range of courses, including nursing, music and modern languages.
The regulator itself announced at the beginning of December last year that it was temporarily suspending its processes for registering new higher education providers and for considering applications by registered providers who are seeking degree-awarding powers or university title. This decision was expressly stated to be on the basis of “refocusing resources to support its work in response to the financial challenges affecting higher education providers in England.”
The OfS noted that “Our priority at this time must be applying our finite resources to managing risks for the students already in the system”, noting that “If we didn’t make these changes now, there is a real risk we would not be able to effectively discharge our duty to monitor financial sustainability and ensure that students’ interests are protected.”
Universities UK in its “Blueprint for Change” (September 2024) called for a “fundamental rethink” of regulation in the higher education sector, arguing that it needed to be more proportionate and that it should be reframed to recognise the public benefits of higher education. Concern was expressed about the focus on consumer protection, noting that the higher education sector is not a “pure market”.
The OfS is currently consulting on its new strategy for 2025 to 2030 which has been running from 12 December 2024 and concludes on 20 February 2025. In outline the consultation has proposed that:
“Our proposed strategy takes forward the four strategic priorities identified by the Public Bodies Review. These align with the findings of our research and engagement. They are quality, the wider student interest, financial sustainability and protecting public money. Our continued commitment to equality of opportunity is integrated throughout these priority areas, ensuring that it remains central to everything that we do.”
The OfS strategy review document helpfully notes that the current context includes an array of “global macro-economic trends” such as technological change, geopolitical volatility, demographic and migratory trends and changing demands of the labour market. However, the OfS highlights that “financial sustainability is the most significant, growing challenge for the sector”. On this front, the proposed strategy states that the OfS will “work with the sector to improve financial management, including the approach taken to understanding and assessing risk, the credibility of institutions’ forecasts and the scenarios they plan for in their forecasts.”
The OfS will also “maintain an up-to-date assessment of market exit risk”. This plays through into its proposed strategy relating to ensuring that registered higher education providers are “effectively governed” to “successfully navigate an environment of increased financial and strategic risk”. This will mean in practice that the OfS will “ensure that tests for institutions seeking registration effectively identify those not yet ready to enter the regulated system, and that our regulation of established institutions can facilitate swift action wherever management and governance issues arise.”
It is noteworthy that the OfS proposes that it seeks to become a “prescribed body” for whistleblowing legislation which would give additional protection for workers wishing to raise public interest issues.
We will explore in a separate article, in due course, the OfS’ proposals for regulating quality in higher education.
In addition to these proposed refocused activities, the OfS will also need to be preparing for its significant role going forward in respect of freedom of speech and academic freedom on campus following the Government’s recent announcement that it intends to implement the Higher Education (Freedom of Speech) Act 2023.
These present significant challenges for the UK higher education sector. The OfS has suggested that many higher education providers will need to take “increasingly bold action” to address the financial impact of the challenges in the short, medium and long terms. Providers facing financial difficulties are encouraged by the OfS to seek external advice and assistance and to engage with the OfS at an early stage, along with other stakeholders and funders.
We will also await the Government’s proposed reforms to the higher education sector in the Spring which The Secretary of State for Education has indicated will include priorities around higher education: playing a stronger role in expanding access and improving outcomes for disadvantaged students; making a stronger contribution to economic growth; playing a greater civic role in communities; raising the bar further on teaching standards; all with greater efficiency and collaboration across the sector to ensure financial sustainability.
There is considerable recognition of the role that is played by higher education in the UK. The Secretary of State for Education has noted that higher education institutions make a “vital contribution” to our economy and society. The OfS in its consultation regards higher education as a “national asset” and London Economics in its report for Universities UK on the economic impact of UK higher education estimated the sector’s contribution (in 2021-22) at approximately £265.35 billion. Perhaps the statement from Professor Dame Sally Mapstone DBE FRSE (President of UUK) on the launch of the Universities UK Blueprint for Change best sums up the situation:
“We stand at a fork in the road in the history of the UK’s universities. There is now a clear choice. We can allow our distinguished, globally competitive higher education and research system to slide into decline. Or we can act together, as institutions and with government, to ensure that our universities are able to deliver for the nation into the 2030s.”
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2025.