English Universities Under Pressure: Financial Strains Deepen as Income Falls for Third Consecutive Year

Universities across England are confronting one of the most serious financial crises in recent memory.

A new report by the Office for Students (OfS), the higher education regulator, reveals that university income has declined for the third year in a row, with deeper cuts and further disruption anticipated across the sector.

The decline in international student recruitment — a key source of income for many institutions — is cited as a primary driver of the downturn.

As a result, universities are making significant cutbacks, reducing spending on infrastructure, staff, and academic programmes, while planning to sell off hundreds of millions of pounds’ worth of assets.

This article takes a closer look at the findings of the OfS’s annual financial health assessment, what it means for students and staff, and how government policy, immigration changes, and market competition are shaping the future of higher education in England.

Universities in Deficit: A Sector in Retreat

According to the OfS, the financial outlook for English universities has worsened considerably over the past year.

Falling numbers of international students, combined with inflationary pressures and capped tuition fees for domestic students, have left many institutions operating on slim margins or outright deficits.

“Financial challenges in the sector remain stark,” said Philippa Pickford, Director of Regulation at the OfS. “We’re seeing declines in the level of surpluses and liquidity, with nearly half of institutions forecast to be in deficit next year.”

Some universities are already slashing costs.

Spending on building maintenance, new campus projects, and academic programmes has been significantly reduced.

The regulator also forecasts that more than £400 million worth of land and property will be sold off during 2025 as institutions attempt to shore up their finances.

International Students: The Broken Lifeline

For years, UK universities have relied on international student fees to cross-subsidise the shortfall caused by static domestic tuition rates, which have failed to keep pace with inflation.

However, this model has come under severe strain.

New figures show that recruitment of overseas students for 2024–25 is now expected to be 21% lower than previous projections, primarily due to post-Brexit visa restrictions, tighter immigration rules, and growing global competition from countries like Canada and Australia.

This has triggered staff redundancies, course closures, and programme consolidations at multiple institutions, with the University and College Union (UCU) estimating that 10,000 jobs have already been lost across the sector.

Table: Key Pressures Facing English Universities (2023–2025)

A Warning to Universities: Time to Restructure

While the risk of immediate closures remains relatively low, the regulator is taking a firm stance.

The OfS said it is in close contact with several institutions where there are real concerns about financial viability.

If left unchecked, some of these universities may face collapse within the next few years.

“The majority of students would never have to worry about a university failure,” reassured Pickford. “But this is about sending a clear message that universities need to take action now to avoid that future.”

The report urges institutions to rethink their business models, consider partnerships or mergers, and look closely at their financial accounts and long-term plans.

The OfS even suggested that prospective students should begin consulting publicly available financial statements before applying to universities — a stark shift in how students might choose where to study.

Immigration Policy and the Political Crossroads

At the heart of the crisis is a contentious political issue: the UK’s stance on international students.

Changes implemented since 2023 have introduced tighter limits on post-study work rights and family visas, making the UK a less attractive destination for overseas applicants.

Jo Grady, General Secretary of the University and College Union, criticised the government’s approach, warning that further restrictions could push some universities beyond recovery.

“The Home Office must now think again and pull any further attacks on international students. If Labour acts like Reform-lite and erects more barriers, universities could go under,” she warned.

Yet, there is evidence that the public remains supportive of welcoming international students.

A new poll by More in Common for University College London found that 51% of voters believe it is beneficial for the UK if foreign students stay to work after graduating — including a third of those who voted for Reform UK in 2024.

Government Response and the Role of the OfS

The Department for Education has defended its policies, pointing to forthcoming reforms and proposals designed to stabilise the sector.

Bridget Phillipson, the Education Secretary, stated:

“Further reforms are needed to fix the foundations of higher education, and universities must do more to make their finances work.”

She reaffirmed that raising domestic tuition fees would be part of the government’s strategy, with additional changes expected in a white paper due later this summer.

The OfS has been asked to refocus efforts on financial sustainability, enhancing its monitoring of university reserves, liquidity ratios, and long-term risk exposure.

What Could the Future Look Like?

While universities are currently managing the crisis through cost-cutting, asset sales, and hiring freezes, the OfS has modelled a possible future where market competition intensifies and prestigious institutions dominate recruitment.

Under this scenario, less well-known universities could find themselves squeezed out, unable to compete on either price or reputation.

The result?

A two-tier higher education system — one of well-funded, research-intensive universities and another of struggling, teaching-focused institutions operating on the margins.

By 2027–28, the OfS forecasts that two-thirds of universities could be in budget deficit unless major structural changes are made.

Implications for Students and Staff

While students are not yet directly affected by closures, the consequences of the financial crisis are already being felt in tangible ways:

• Course options are narrowing, especially in arts and humanities

• Class sizes are increasing in some departments

• Student support services are being scaled back

• Research budgets are being redirected or frozen

• Lecturers and tutors face increased workloads due to staffing cuts

For academic staff, job security has become a growing concern, with contracts not being renewed and departments being reorganised or merged.

How Should Prospective Students Respond?

With the sector in flux, those planning to apply to university in the next few years should consider taking a more strategic approach:

• Check university financial statements — available via OfS or the institutions themselves

• Compare course stability — some programmes may be under threat due to low enrolment

• Look beyond rankings — factors like support services, cost of living, and course delivery may now matter more

• Ask about post-study work policies — especially if you’re an international applicant or looking to go abroad

Conclusion: Reform, Reality, and the Road Ahead

The financial pressures facing English universities are not temporary.

They reflect deeper issues about how higher education is funded, how students are supported, and how government policy interacts with the global academic market.

Unless there is a meaningful review of funding models — particularly the reliance on international fees to subsidise domestic teaching — the sector may face further decline, with knock-on effects on graduate outcomes, social mobility, and regional development.

The OfS has sounded the alarm.

The question now is whether universities and government will take the necessary steps — not just to survive, but to rebuild a resilient, inclusive, and sustainable higher education system for future generations.