Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
“Ambitious reform” of funding and regulation is needed to stave off financial crisis in UK higher education as competition for students is stopping cash-strapped universities joining forces to cut costs, a review has warned.
Sir Nigel Carrington, chair of the Transformation and Efficiency Taskforce, said the “marketisation” of higher education since tuition fees in England rose to £9,000 in 2012 had led institutions to “operate as islands”.
Last year ministers agreed to increase domestic tuition fees in England in line with inflation for three years, taking the annual payment to £9,535 in 2025-26 and likely above £10,000 this parliament.
But Carrington, former vice-chancellor of the University of the Arts London, said the funding situation was still “unsustainable” as the real value of fees had fallen by about 40 per cent since 2012.
Securing the sector’s future required a “fundamental rethink of how higher education operates at a national level” and a commitment to “ambitious reform” from universities and policymakers, he added.
The review by the task force set up by Universities UK, the main lobby group, called for ministers to stabilise university finances, create a “transformation fund” and remove regulatory barriers to collaboration.
But it added that universities also needed to “urgently” look at cutting costs by integrating services and procurement.
A long-term funding squeeze and softening enrolment of international students has exacerbated a financial crisis in higher education, with universities taking drastic cost-cutting measures to avert a wave of insolvencies.
Half of UK institutions have said they have closed courses, while one-quarter have made compulsory redundancies in the past three years.
Carrington said there had already been “an enormous amount” of retrenchment in the sector, warning that without more support from government the UK was in “real danger of falling down the global league tables” and compromising the quality of teaching and research objectives.
As well as stabilising the sector’s income, Carrington called for clarification on competition laws around university collaboration and a shift in “philosophy” from the Office for Students, the sector regulator, which had been “built on a foundational pillar of promoting competition”.
The report pointed to examples of collaboration such as the University of London, a federation of 17 institutions that share services, and the joint campus operated by Falmouth and Exeter universities in Cornwall.
Efficiencies could also be made by leveraging sector buying power with a “more strategic, cross-institutional approach to purchasing” in areas such as software, it found.
While mergers “may be appropriate in a few cases”, Carrington said they were not a “quick fix” and were unlikely to be desirable for most institutions.
Nick Hillman, director of the Higher Education Policy Institute, a think-tank, said the report confirmed the sector would emerge from the current crisis “looking very different”.
“Universities know they need to balance their past fierce competition with a bit more co-operation,” he said, adding that the task force was right to question whether full mergers would deliver effective change.
“The key test will be following through. There have been past comparable sector-wide initiatives which have gone nowhere.”
Baroness Jacqui Smith, skills minister, said that while the government had taken “tough decisions to put universities on a firmer financial footing . . . universities must do more to deliver opportunity for students and growth for our economy”.
