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University challenge: the coronavirus funding crisis facing UK higher education

Universities across the UK are preparing for their income to drop by up to a third due to Covid-19 | PA Images

11 min read

Like many sectors, the UK’s higher education system faces unprecedented challenges as a result of the coronavirus crisis. With campuses emptying overnight, and incomes for the next academic year expected to drop significantly, the future looks highly uncertain. But can universities bounce back?

The diverse and sprawling British university system has often been cited as one of the ‘jewels in the UK’s crown’. Educating 2.3 million students each year, the sector, which contributes £21.5bn directly to the UK economy, is famed for its quality of education, research and student choice.

However, from the research-intensive Russell Group to small, specialist universities, the Covid-19 pandemic has exposed systemic vulnerabilities in the UK’s higher education offering.

With campuses emptying overnight, and incomes for the next academic year expected to drop by as much as a third in some cases, the future for universities and their students looks highly uncertain.

While universities have taken an immediate economic hit from the pandemic, with a loss of commercial opportunities and income from renting out accommodation, the financial picture for the next academic year is the main worry. In particular, the expected drop in international student numbers starting or continuing their education in the UK in September is causing grave concerns.

In 2017-18, the UK educated 458,490 international students, with 23% of those coming from China. However, Aaron Porter, NUS president from 2010-2011 and now a higher education consultant, warns that some universities are expecting reductions of up to 40-50% for international students next year, with consequences that will be felt for years.

Universities have kept local economies alive where we have seen major economic change

The University of Sheffield is modelling for losing anywhere between £70-£170m of its approximately £800m annual total income, mainly due to the loss of international students. “The scale of what we face is quite unprecedented,” vice-chancellor Professor Koen Lamberts observes.

As well as their contributions to campus life, international students are particularly valuable to UK universities as their higher fees effectively cross-subsidise both research activity and the higher cost subjects such as medicine, physics and nursing, neither of which are covered by either domestic fees or public research funding.

Lamberts says that historically this model has helped shape the UK into one of the most effective research bases in the world, with UK academic research productivity 3.6 times the world average and 76% of UK university research submitted ranked as 'world leading' or 'internationally excellent'.

“The challenge is if there are fewer international students coming in the autumn that will potentially put quite a large hole in the research funding budget for universities,” warns Dr Tim Bradshaw, chief executive of the Russell Group of universities.

While Lamberts is confident that Sheffield will survive, combining reasonable reserves with stringent cost cutting measures, Gordon McKenzie, chief executive of GuildHE, representing specialist further and higher education institutions, believes that the wider picture is bleak.

“Essentially entirely financially viable institutions have been hit by a shock to their income,” Mackenzie says. “Some institutions were in more financial difficulty than others before this, that’s known, so inevitably it will exacerbate the situation for some.”

Porter, who has been working with multiple institutions on their response to the crisis, says cash liquidity will be a major struggle, with some expecting to run out of cash by the end of 2020.

“Around 50% of universities before Covid were expecting to make a surplus of 3% or less this year. If you assume that most universities are going to lose at least 20-30% of income next year, then transitioning from basically breaking even to 30% down is big by any stretch,” he explains.

For many universities, the financial difficulties ahead will mean cuts to capital projects and investment in new R&D, as well as hiring freezes and redundancies. This could be particularly devastating for communities where universities are seen as “anchor institutions”, providing jobs throughout local economies.

Paul Blomfield, MP for Sheffield Central and chair of the APPG on Students, co-chair of the APPG on International Students and secretary of the APPG on Universities, is concerned about the impact on university towns and the 940,000 jobs supported by the higher education sector.

“A financial hit to universities will ripple into communities across the country, and there are many places, like Sheffield, where that’s very significant,” he says.

“When I was a child in Sheffield, we had about 47,000 employed in steel and 4,000 university students. We now have 2,300 people employed in steel and around 60,000 university students.

“Universities have kept local economies alive where we have seen major economic change, and of course they make a huge contribution in terms of skills, research and everything else.”

Blomfield and the sector more widely believe that the UK’s attractiveness as an international education destination has been severely damaged by itsperceived mismanagement of the Covid-19 crisis and relatively high death-rates.

They are calling on the Government to take an active role in reassuring foreign students, their families and national governments that the UK is a safe play to study in the Autumn.

Blomfield also thinks there are a number of positive measures that can be put in place through the Home Office to encourage applications. “In particular, they should let students apply for visas six months before start date rather than three month – to give them more flexibility – and actively promote the new post-study work visa,” he explains.

Nearly one in five UK applicants are changing their plans for study, of which 4% said they had definitely decided not to go to university this Autumn

Opinion is divided in the sector on how much of a drop in domestic student numbers to expect in the next academic year.

While some think that the uncertainty around the social and educational experience for students will put some off, with a UCU poll showing that 71% of applicants would support delaying the start of term to have more face-to-face teaching, others believe that the lack of work or travel opportunities will discourage students from deferring or taking ‘gap years’.

Research by the Sutton Trust shows that nearly one in five UK applicants are changing their plans for study, of which 4% said they had definitely decided not to go to university this Autumn.

In the face of some concern among smaller universities that institutions who normally have higher numbers of international students would ‘pillage’ their pool of domestic recruits, the Department for Education has put a 5% cap on the number of additional domestic students that universities can recruit on top of their existing forecasts, in place for at least one year.

While the Government also has announced a package for £2.6bn in tuition fees and £100m in research funding to be paid early, many in the sector still do not believe that this is enough to cover the black-hole in funding, and are desperate for more clarity.

“The problem with it is the Government is waiting for the risk to materialise, and that feels too late,” explains GuildHE’s Gordon McKenzie. “Because by the time the risk really does materialise and the students don’t come, then you really haven’t got the time to provide the support.”

Porter agrees, highlighting that many universities won’t actually know how many students will be coming right up until the start of the new academic year. Lamberts warns that the cuts to research programmes are already starting, noting “every day that passes causes more damage to our capacity to bounce back.”

“No university is at immediate risk of falling over. But we have to make decisions now about reducing costs for next year, we can't wait. And that means that the damage to the research base in the UK is already underway,” Lamberts explains.

“If we were to only intervene in September or October, we would run out of cash, we will effectively become insolvent.”

Claire Sosienski Smith, NUS vice-president for higher education, believes the sector needs to be underwritten to provide stability and allow institutions and students to plan properly.

Mackenzie suggests that financially well-managed institutions should be guaranteed a set percentage of their income that the Government won’t let them fall beneath. “It’s the sort of guarantee that may not be needed, if reasonable numbers of home students turn up,” he explains.

In our 200 seat lecture theatres if we have 1 metre distancing, we can accommodate safely 100 students. If we have 2 metre distancing, we are only able to accommodate 30 students

For the students who do come to campus in the Autumn, the experience will be very different to previous years.

As well as the absence of club nights and what some may regard as a “typical” Freshers’ Week, most universities will be offering a “blended learning” experience, with a combination of socially-distanced face-to-face and virtual teaching and practical course elements.

Much of the sector adapted well in the immediate lockdown period, moving lectures, tutorials, assessments and even practice clinics for health students online.

Planning is now well underway  for the new academic year, with universities considering rota systems for  students  on campus, one-way systems, extended learning days, and “pop-up libraries” with spaced out computer banks.

Hygiene and cleaning rotas, particularly in areas like laboratories with shared equipment, will be dramatically increased.

Academic years may be frontloaded with theoretical modules, with practical elements coming later on when socially distancing is hopefully relaxed further.

However, there are some courses, such as drama, art, teaching, health and medical courses, where either course closeness or placements are vital.

“It’s not possible to have training that isn’t reliant on physical closeness. They haven’t yet come up with a way to deliver a baby at a social distance,” explains Professor David Green, vice-chancellor at the University of Worcester, which has a large focus on both teaching and healthcare courses.

For Green, advice from the Government on what social distancing will be in place in September is crucial to planning.

“In our 200 seat lecture theatres if we have 1 metre distancing, we can accommodate safely 100 students. If we have 2 metre distancing, we are only able to accommodate 30 students,” he says.

The implementation of “student bubbles” will also be crucial for the delivery of some courses, particularly those like theatre which involve close personal contact.

In the proposals being discussed by universities, groups of up to 20 students would create households who live and study together and do not have to socially distance.

How enforceable this would be is a matter of some debate however, and Sosienski Smith raises concerns about ensuring appropriate support students in “bubbles” where interpersonal relationships may break down or instances of bullying and harassment take place.

Another key issue that universities are considering is the economic impact on students, who either may lose out themselves financially due to Covid-19 or be unable to receive financial support from families. According to the NUS, 62% of higher education students work while they study – and many of them in hospitality or retail jobs, which are at high risk.

This could have a particularly negative impact on students already affected by the “digital divide”.

For both Sosienski Smith and Mackenzie, the Covid-19 crisis has highlighted aspects of disadvantage usually hidden by the campus experience, such as lack of access to stable internet connectivity or computers, disabled students who would usually have specialist equipment, and the impact of caring responsibilities on student’s education.

Many universities have stepped up to provide laptops, internet dongles or grants and bursaries during the immediate crisis, and plans are being put in place how to ensure support is available through the next academic year.

There are also concerns about the use “notoriously unreliable” predicted grades for admissions, which may unfairly exclude disadvantaged students.

This is one reason that the University of Worcester has chosen to expand the number of courses it offers January starts for, to allow those unhappy with their grades to sit A-Levels in the Autum

However, another vital reason is that, as Professor David Green explains, they expect huge numbers of older adults to be made redundant in the next six months, and a January start would allow those who wish to retrain to start sooner.

“We imagine the Government will probably give people a retraining grant, which is much preferable to dumping a load of people on Universal Credit,” he says.

He continues: “We see that as our responsibility, we feel that’s what we’re here for, to educate people and give them the opportunity to make more of their own human potential and serve people in their chosen field.”

Many of his contemporaries agree, placing high value on the role of higher education institutions in maintaining the skills pipeline as the UK rebuilds its economy.

While acknowledging that universities will face a tough couple of years, Green is optimistic about the future. “Fundamentally, there will be a demand for universities. The medium-term outlook is excellent," he says.

He concludes: “The most helpful thing the Government could do is ensure there’s money for students, particularly mature students, to access higher education… Universities need the opportunity to have an earn out, rather than a bail out.”


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