New Employees: Demand in Decline and Supply on the Up
Increased competition for students, falling numbers of 18-year-olds and tightened immigration rules impacting the number of international students applying, are all contributing to increased financial pressure on UK universities.
This is according to Duff & Phelps. In addition, the removal of the cap on the number of students a university can recruit has opened up a new aggressive market whereby more institutions are lowering entry requirements, according to UCAS the university admissions service. This has subsequently had a major knock-on impact throughout the sector.
This combined with a dramatic fall in the number of 18-year olds is having an immediate financial impact on some universities who are seeing falling numbers – and the loss of the income that is intrinsically linked with that.
Philip Duffy, Managing Director, Duff & Phelps, stated: “Revenue from international students is a critical source of additional income for many institutions, which funded a number of expansion plans within the sector. Enrolments have plateaued since 2012 when the visa rules were tightened, and again in recent years with the uncertainty caused by Brexit, which has added to the woe.
“Contributing to this risk are a number of internal financial pressures in the sector not least rising staff costs including pensions and the apprenticeship levy,” he added.
Moody’s, the international credit agency, is reporting that many universities have in recent years been investing in new facilities to attract students but doing so through borrowing, putting further strain on the balance sheet.
Mr Duffy continued: “Tertiary education is not safe from collapse. The Chairman of the Office of Students – the industry regulator – Sir Michael Barber, has publicly stated that any institution facing bankruptcy will not get a taxpayer-funded bailout.
“With reports claiming that there are at least three UK universities on the brink of bankruptcy some serious questions need to be asked. Many universities are in close proximity to one another, leading to increased competition for students. Reputation and value propositions are key factors in the university selection proves. Struggling universities need to act now or they may risk going under as the taxpayer is not about to write a cheque to bail them out,” continued Mr Duffy.
“Now is the time to streamline course offerings or even shut them altogether and identify assets to dispose of by paying down borrowings to avoid bankruptcy or seek professional help from restructuring specialists.”
(Source: Duff & Phelps)