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Current funding model will lead to university closures, report says

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Hepi paper explores how universities will react if income levels do not increase

If politicians fail to properly engage with the financial crisis facing England’s universities, institutions may have to move towards “more flexible” staffing models, a former vice-chancellor has warned.

In a paper published by the Higher Education Policy Institute, Chris Husbands, who was vice-chancellor at Sheffield Hallam University from 2016 to 2023, said that if the government does not “seriously address the difficulties hemming in the sector” then participation rates will fall and some institutions will go under.

Modelling what would happen if higher education funding continued at its current level, Husbands found that the costs of sustaining research in both research-intensive and teaching-intensive universities would become “more challenging”.

In this scenario, he wrote, “almost all universities were required to focus research investment and time on a smaller number of areas of relative institutional strength”.

“International recruitment was differentiated across the sector, with those universities able to satisfy the increasingly onerous demands of the visa regime embedding their position, while other universities were required to recruit more selectively.”

Tuition fee levels in England have been capped at £9,250 for several years, eroding their real-terms value. At the same time, the Home Office has cracked down on access to student visas, damaging another income stream for universities.

Under the scenario, Husbands found that “soft” mergers involving shared services and combined provision “became common and gave way in a growing number of cases to ‘hard’ mergers in which institutions combined”. The Russell Group of research-intensive universities also reduced in size as the performance of some members waned. 

“Universities employed staff on a more diverse range of contracts characterised by more flexible terms and conditions. Universities which maintained less flexible contracts found it difficult to operate nimbly,” the report said.

Husbands said there was “no realistic way through the issues facing English universities without thinking about the future shape and size of the sector”.

“The shape of higher education in 2024 is a consequence of previous interactions between universities and policy,” he said. “It could—and will—change. Whoever wins the election on 4 July will need to think hard about the higher education the country needs and is willing to support.”

‘Ambitious approach’

Meanwhile, the Russell Group has published a general election manifesto in which it calls on the next government to implement “a more sustainable approach to funding”.

“We will continue to play our part in looking to drive down costs and be more efficient, but the funding available to universities and colleges—the unit of resource per student—must start to increase to reflect inflation so we can protect the quality of education and deliver outstanding and work-ready graduates,” the manifesto states.

“As we head towards a general election, we call on the next government to take an ambitious approach and make the most of what universities offer, to help create positive change for the UK’s future,” said Tim Bradshaw, chief executive of the Russell Group.

A version of this article also appeared in Research Fortnight