UK universities face financial strain as student visa rules tighten, reducing international enrollments. Rising costs and tuition freezes worsen the crisis.
Since May 2023, the UK government has implemented sweeping changes to student visa policies, limiting the ability of international students to bring dependants. Effective from January 1, 2024, only students enrolled in postgraduate research programs, such as PhD courses, or those receiving government-sponsored scholarships for courses exceeding six months, are allowed to bring family members to the UK. Previously, international students across various academic programs could bring dependants, leading to a surge in dependant visas—from 16,000 in 2019 to approximately 136,000 in 2022.
Between the 2018/19 and 2021/22 academic years, international students significantly boosted the UK economy. In 2018/19, they contributed an estimated £28.8 billion, a figure that surged to £41.9 billion by 2021/22—an increase of 34% over three years. This economic impact included tuition fees, accommodation, living expenses, and other expenditures.
However, a recent Times Higher Education (THE) report reveals that UK universities are now grappling with severe financial difficulties. The study of 2023-24 financial accounts shows a substantial drop in net cash from operating activities. Of 113 universities examined, three-quarters generated less cash than the previous year, and 87% produced less than in 2021-22.
The report found that nearly a quarter of institutions ended the year with a net cash outflow from their core business—rising from 10% in the prior year and just 4% in 2021-22. Collectively, these universities generated £1.2 billion in net cash, a dramatic fall from £2.5 billion and £4.5 billion in previous years.
Bob Rabone, former chair of the British Universities Finance Directors Group (BUFDG), highlighted the severity of the situation. “Until corrected, it will mean an institution has reduced capacity for future setbacks or to fund future investment,” he warned.
The crisis has led to widespread cost-cutting measures, including faculty layoffs, as universities struggle to cope with rising staff costs, inflation, declining international student enrollment, and changes to visa policies. The median net positive cash inflow per institution dropped to £7 million in 2023-24, compared to £16 million the year before and £27 million in 2021-22.
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Some institutions have suffered repeated years of negative cash flow. The Open University reported a negative cash flow of £60.2 million for the third consecutive year, while Queen’s University Belfast recorded £26.5 million and the University of Bedfordshire £18.1 million in losses. However, institutions like Oxford and Cambridge reported negative cash flows of £58.6 million and £58.3 million, respectively, due to substantial investment portfolios and variable investment performance rather than operational losses.
Erica Conway, Chair of BUFDG and Director of Finance at the University of Birmingham, attributes the decline to inflation, rising costs, and frozen tuition fees. “I would expect it to take two to three years to turn it all around in full and to see increases in surpluses for this sector—even if there was the ability for us all to grow income, which there is not,” she said.
Despite financial constraints, some universities have managed to weather the storm. The University of Manchester led in cash generation, reporting £88.7 million, followed by Imperial College London at £81.1 million and the University of Exeter at £75.5 million. According to Conway, these institutions improved their cash flow by increasing international student enrollments or implementing cost-reduction measures.
This analysis also highlights growing financial pressure across the sector. Nearly a third (31%) of UK universities reported underlying deficits after adjustments, up from 22% in 2022-23. Cambridge University, for example, recorded a £16 million operating deficit, primarily due to rising staff costs. Similarly, Durham University posted an £8 million deficit, citing increased operational costs, frozen tuition fees for domestic students, and stricter visa rules for international applicants as major financial challenges.
Despite the economic downturn, Conway remains hopeful that universities can adapt. “It is clear all universities are seeking to address their operating models, and much is going on across the sector,” she said. “This is challenging for us all, but at the same time, it is very positive that we are responding to the market position.”
With UK universities facing increasing financial strain, the coming years will be pivotal in determining how institutions navigate economic sustainability while maintaining their academic excellence.
