UK universities are at risk of bankruptcy, a study finds

Thirteen (13) UK universities may not be viable in the long-run without a Government bailout, according to the Institute of Fiscal Studies (IFS). 

A research report funded by Nuffield Foundation that was released earlier this week found that universities with large amounts of international students are most at risk of drop in income following the Covid-19 pandemic.  

In a comment for the BBC, a spokesperson for The National Union of Students said: “The crisis had exposed many of the flaws inherent in running our education like a market.

“When funding is so unstable, it’s no wonder that our universities and the jobs of thousands of academic and support staff are now at risk. We are of course especially concerned about the risk to students that this instability poses.” 

In the IFS report, Elaine Drayton and Ben Waltmann, research economists, wrote: “Universities are facing big losses across a range of income sources and investments. These losses could cause serious financial problems, including – in the extreme – insolvency.”

“These losses could cause serious financial problems, including – in the extreme – insolvency.”

They added: “Most institutions will be left with reduced net assets which could increase financing costs and will leave them less well placed to cope with future adverse shocks.”

The study suggests that higher education institutions may encounter an income drop of anywhere between £3bn and £19bn— an equivalent of half the higher education sector’s annual income. 

The factors affecting the significant losses in income include fewer international student admissions, reduced income from student accommodation and on-campus activity as well as increases in deficits of university-sponsored pension schemes. 

Impact on students and lecturers

Following the Government guidelines on Covid-19 many universities are planning for an online-only return come Autumn. Others are anticipating reduced admission figures this academic term. 

These new Government rules also mean that some university departments may experience reduced teaching time and shorter contact hours between teaching staff and students as all sessions will be held online.

We have yet to see the full impact of Covid-19 on higher education, however, redundancies are already being planned at universities, such as Goldsmiths. Mass cuts to teaching staff contracts are already underway, according to a Guardian opinion article published by a Goldsmiths staff member.

Lecturers at Goldsmiths criticised the university earlier this month for their plans to casualise up to 500 teaching staff in anticipation of reduced admission figures. 

Lecturers at Goldsmiths criticised the university earlier this month for their plans to casualise up to 500 teaching staff

Lecturers at Goldsmiths also held multiple union protests at the beginning of the year against the shrinkage of their pension schemes as well as the transference of many staff from permanent contracts to freelance ones. 

Goldsmiths also does not currently plan on returning to the new term in October with full in-person teaching with students also not having full access to all university facilities.

Goldsmiths is currently exploring alternative teaching options, including blended teaching with distance and online learning as an option from October. 

Goldsmiths is exploring alternative teaching options, including blended teaching with distance and online learning as an option from October. 

Students and staff will also not have full access to all university facilities.

Drayton and Waltmann wrote: “The biggest losses will likely stem from falls in international student enrolments (between £1.4 billion and £4.3 billion, with a central estimate of £2.8 billion) and increases in the deficits of university-sponsored pension schemes, which universities will eventually need to cover (up to £7.6 billion, with a central estimate of £3.8 billion). In addition, the sector faces lockdown-related losses of income from student accommodation and conference and catering operations, as well as financial losses on long-term investments.”

“The biggest losses will likely stem from falls in international student enrolments…”

The study found that institutions with large international bodies will be the ones most at risk. International students are predicted to have an impact on university finances because they also pay higher fees than UK/EU students. According to data collected for the 2020 World University Rankings, 35% of Goldsmiths students are international. International students at Goldsmiths pay anywhere from £6000 to £12000 more per year than local students. 

Are international students likely to return to Goldsmiths this year?

A group of international students at Goldsmiths wrote an open letter to the University last week voicing their concerns over the University’s handling of the Covid-19 pandemic. 

The students wrote that they have concerns over the ‘inappropriate and threatening letters from fees and debt-collection agencies’ and ‘unclear status of future annual bursaries in some departments’ during lockdown. 

The letter also largely addresses the difficult experiences students have had being in communication with the University and subsequent difficulties with the Home Office. 

An international student (who wishes to remain anonymous) at Goldsmiths said: “During the quarantine my tutors and the course leader have tried to give us, the students, the support that the SMT ( senior management team) failed to provide. My international friends and I feel very uncertain about our future in Goldsmiths and some have decided not to return for another year. 

My international friends and I feel very uncertain about our future in Goldsmiths and some have decided not to return for another year. “

They added: “In this uncertainty, we are losing a lot of money because of our university fees, the rent we pay for our flats or the plane ticket prices, which can mean that many won’t be able to afford to continue their education in the UK.”

Prior to Covid-19, the Warden had spoken on the institution’s financial hardship and had been making efforts to create cost-savings across all functions of the University. This study shows that the previous financial hardships have only been exacerbated by the Covid-19 outbreak. 

The University has been contacted for a comment.