Can we fix the financial crisis in higher education?

The higher education sector is currently facing a major crisis, with a perfect storm of political and economic factors placing many institutions – even those seen as prestigious and previously infallible – at the receiving end of serious financial pressures. Domestic fee caps that have only just been lifted after remaining unchanged since 2017, cost inflations, and real-term cuts to student support have placed many institutions in extremely vulnerable positions, with two in five (40%) now predicting deficits, according to the Office for Students.

At a glance: what’s challenging the higher education landscape?

• Change is hard to enact
• Declining student numbers
• A struggle to retain talent

With the government – for the time being – ruling out any possible bailouts, it seems the onus is firmly on higher education institutions to balance their own books and mitigate the impact of the impending crisis. Indeed, many universities have already been forced to take action, ranging from voluntary redundancy schemes to the nearly £100m worth of cuts that one university plans to make over the coming two years.

This decline in the fortunes of the UK’s higher education landscape is both perplexing and concerning, partly because it has historically been deemed world-leading – contributing billions to the economy and wielding influence upon the global stage – and partly because it invites us to ask ourselves whether our idea of who a university education is for – and what it should look like – needs to change.

One thing is for sure, fixing the problem will need more than just money thrown at it. Tackling the root causes of the disruption is the first step to not only solving the sector’s fiscal troubles, but providing it with the reform it needs to serve our social and economic interests. So, what major challenges is the higher education landscape currently facing?

1. Change is hard to enact

As with many historic institutions, internal politics, dynamics and traditions have long been an integral part of the cultural fabric at universities, and as a result, relations between academic and non-academic staff can be hard to mediate. This disconnect can make change difficult, particularly when it comes to cost-saving measures. Academics might find it hard to understand why certain niche courses might need to be cut, for example, or why specific subscriptions – which may only benefit a very small portion of the university – cannot be maintained. 

This volatility is compounded further by the tendency towards unionisation in the higher education sector. At one London university, staff went on marking strikes in response to planned job cuts, demonstrating the challenges that institutions face when it comes to striking a balance between managing costs and avoiding backlash from academic staff members.

Financial models at colleges and universities that lack long-term sustainability should alone be enough of an incentive to instigate change, but the fact is that a lack of accessibility and equity in education is costing us dearly in many ways. According to a recent report by the cross-party think tank Demos and the Co-op, a lack of social mobility is costing the UK £19bn a year – making reform in higher education a social, economic and political imperative.

2. Declining student numbers

Though university has traditionally been seen as both a rite of passage and the best route to a fulfilling, well-paid job and subsequent career, attitudes among young people have seen a slow but distinctive sea change in previous years. A reluctance to incur debt that – in some cases – may never be paid off, as well as a perceived disconnect between the skills taught by universities and those employers are ultimately looking for, has drawn many people to more vocational avenues such as apprenticeships and other training schemes.

The declining domestic intake is ascribing more importance than ever to international student cohorts – who are charged higher fees – but this brings its own set of challenges. Attracting students from a wide range of countries can present logistical difficulties, leading institutions to instead focus their efforts on specific locations. This strategy, however, can make universities more vulnerable to economic and political volatility, with Nigeria’s recent currency devaluation – which impacted several UK institutions – a recent example. Moreover, since January 2024, international students have been unable to bring family members on all but post-graduate research courses and courses with government-funded scholarships, which is putting a further dent in student numbers.

3. A struggle to retain talent

The higher education sector is currently facing a number of challenges when it comes to attracting and retaining talent, with salary constraints one of the leading causes of these. This does not merely apply to academics but also non-academic staff, and to digital practitioners especially. Many institutions are in the midst of digital transformation programmes – such as ERP systems change-ups – that have the potential to drastically improve efficiencies and streamline processes long-term, resulting in significant cost savings. To bring these transformation projects to fruition, however, very specific and in-demand technical skillsets are required – many of which are proving hard to find.

Indeed, research that we conducted in collaboration with the University and Colleges Information Systems Association (UCISA) last year suggests that challenges with the recruitment and retention of tech staff have been proving a serious obstacle to many institutions – 68% say they’ve had a vacant tech role for over six months, while 57% don’t think their organisation’s recruitment process helps them source the right people.

It’s clear that a sector-wide strategic rethink is needed to solve these talent management challenges in higher education, with the implementation of a digital and technology allowance, prioritisation of upskilling and reskilling, and introduction of national career pathways just a few recommendations for improving the sustainability of its digital workforce.

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