Challenges facing finance professionals in the higher education sector today

The higher education sector is facing significant financial challenges, leaving some universities – including the most prestigious institutions – with difficult decisions to make. Two in five (40%) universities are now predicting deficits, according to the Office for Students, and with the education secretary recently ruling out government bailouts, the onus is on universities and colleges to balance their own budgets.

Finance professionals in this sector are now presented with the challenge of mitigating these financial impacts. Many higher education institutions have already implemented cost-saving measures, including voluntary redundancy schemes, with one university needing to save almost £100 million to remain financially afloat. Finance teams have significant barriers to overcome, stemming from both external pressures and internal dynamics within universities, so difficult decisions will be necessary to ensure the financial sustainability of the sector. Here, we explore some of the key factors contributing to these challenges:

A growing financial dependence on international students

The cap on tuition fees for undergraduate courses has remained unchanged since 2017. Rising costs and a fixed income from UK undergraduates has led many universities to turn to international students as a source of revenue, since they can be charged higher tuition fees. However, being dependent on this strategy brings its own set of challenges. Attracting students from a wide range of countries can be logistically difficult, leading institutions to instead focus their efforts on specific locations. This strategy, however, can make universities more vulnerable to economic and political instabilities, with Nigeria’s recent currency devaluation – which impacted several UK institutions – a recent example.

What’s more, recent changes to the financial requirements for spouse and partner visas, along with restrictions on bringing dependents to the UK through student visas, have affected international student numbers. Students may opt to study elsewhere if they cannot bring their families with them, which can affect university revenues and create additional hurdles for finance professionals to have to overcome.

Contending with an environment that’s resistant to change 

Some finance directors are having to contend with pushback from academic staff regarding cost-cutting measures. This disconnect means it’s difficult for academics to grasp why certain niche courses might need to be cut or why specific subscriptions, which may only benefit a very small portion of the university cannot be maintained. 

The situation is further complicated by a heavily unionised environment. For example, at one London university, staff went on marking strikes to protest proposed cuts, highlighting the resistance that finance professionals must navigate. It can be tricky for them to find the right balance between managing costs and avoiding backlash from academic staff members.

Pressure is mounting as fewer students are entering higher education

There is a growing reluctance among school-leavers to incur debt without the guarantee of a high-paying job post-graduation. This has led to an increase in apprenticeships and a shift in perception of university education from a rite of passage to a luxury or a pathway to specific careers. The shrinking pool of university applicants means it’s important that institutions have a compelling offering that will attract them, which may include expensive campus renovations and costly research funding. 

Research funding is crucial for maintaining the reputation and prestige of universities, especially within the Russell Group, but it’s highly competitive and can be loss-making at initial glance. This creates a catch-22 situation where finance employees must balance the financial strain of research funding with the need to uphold their academic standing, or risk dropping in the university league tables and attracting fewer students, losing revenue as a result.

Digital transformation could be the key to financial sustainability

Finance professionals within the higher education sector are needing to adapt to these evolving challenges by developing innovative financial strategies, thereby finding a way to balance cost reductions with strategic investments. 

Significant efforts have already been made in this vein, with growing investment in digital transformation already happening across the sector – driven by the principle of spending money to save money. This could drastically improve efficiencies and streamline processes long-term, resulting in significant cost savings. There are an increasing number of opportunities for finance professionals in this space, including roles such as finance transformation consultant, finance projects manager and finance systems specialist. It’s more important than ever before to be attracting and retaining high-quality specialist finance talent into the higher education sector, since these professionals will be instrumental in steering universities towards long-term financial sustainability.

Our expert consultants can help you find the specialist finance professionals you need to help solve these challenges. For access to the most sought-after talent or for further market insights, reach out today.