UK Higher Education Under Pressure as International Student Income Drops

The financial pressure on UK higher education continues to intensify as a growing number of universities report operating deficits, driven largely by a sustained downturn in international student recruitment. Newly published annual accounts reveal that at least a dozen additional institutions recorded financial shortfalls in the past academic year, underscoring the scale and persistence of the sector’s funding crisis.

With overseas tuition fees long used to subsidise teaching and research, the decline in international student numbers has exposed structural vulnerabilities across the university system. At the same time, increased competition for domestic students, rising operational costs, and the real-terms erosion of tuition fee income are compounding financial stress.

International Student Decline Reshapes University Finances

Many institutions point to falling international enrolments as the primary driver of deteriorating financial performance. Changes in UK visa policy, increased global competition, and shifting student preferences have reduced demand from key overseas markets, leaving universities struggling to fill revenue gaps.

In response, some higher-tariff institutions have increased domestic student recruitment to offset losses, intensifying competition and disrupting traditional recruitment patterns across the sector.

Major Institutions Report Significant Deficits

De Montfort University

De Montfort University (DMU) recorded one of the sharpest reversals, moving from a £12.6 million surplus in 2023–24 to a £22.6 million deficit in 2024–25. The university cited increased operating costs and the declining real-terms value of tuition fees as key factors.

DMU described the current environment as “unprecedented”, noting that a major fall in international students has affected both domestic and overseas recruitment across the sector. To stabilise finances, the institution has pursued income diversification through transnational education programmes overseas and implemented cost-saving measures, including £4 million spent on a voluntary severance scheme.

University of Sheffield

The University of Sheffield, a member of the Russell Group, also reported a deficit, recording an underlying operating shortfall of £11.5 million, compared with a £6.2 million surplus the previous year.

The university experienced a £56 million drop in income, largely due to a 22 per cent fall in international tuition fee revenue. Sheffield described this as a “rebasing” of the international student market caused by government policy changes, global competition, and evolving student demand.

Its Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) fell to 6 per cent of revenue, almost half its internal target of 11 per cent. The university also paid £10.9 million in redundancy compensation to more than 600 staff as part of its cost reduction strategy.

University of Ulster

The University of Ulster reported an operating deficit of £20.2 million, worsening significantly from a £5 million deficit in 2023–24. The institution attributed this to rising costs and activity levels that were not matched by income growth, alongside a lack of inflation-linked increases in teaching grants in Northern Ireland.

University of Bedfordshire

The University of Bedfordshire posted a consolidated deficit of £17.2 million, down from a £16.6 million surplus the previous year. While the university said the deficit had been carefully managed, income fell sharply from £150.4 million to £105.7 million, primarily due to a steep decline in international tuition fee income.

Mixed Progress at Other Universities

Some institutions reported modest improvements while remaining in deficit:

• The University of Hull reduced its deficit from £17.2 million to £12.9 million, despite what it described as volatile recruitment conditions and the continued real-terms decline in home undergraduate tuition fees.
  
  
• Heriot-Watt University improved its financial position through “disciplined financial management” but still recorded an underlying operating deficit of £7.9 million. The university also warned of broader risks, including geopolitical instability, cyber threats, climate change, and the growing impact of generative artificial intelligence.

Wider Sector Impact

Additional deficits were reported at:

• Bournemouth University (£7.9 million)
• Birkbeck, University of London (£7 million)
• University of the West of Scotland (£5.5 million)
• Edge Hill University (£2.8 million)

Specialist arts institutions have also been affected, with losses at Trinity Laban (£1.6 million) and the Northern School of Contemporary Dance (£50,000), highlighting that financial pressures extend beyond large, research-intensive universities.

A Sector Under Sustained Strain

The growing number of universities in deficit reflects deeper structural challenges facing UK higher education. Heavy reliance on international student fees, frozen domestic tuition caps, rising staff and infrastructure costs, and policy uncertainty have created an increasingly fragile financial model.

While many universities are taking steps to stabilise their finances, including staff reductions, international diversification, and cost control, sector leaders warn that these measures alone may not be sufficient.

Without long-term policy reform, sustainable funding solutions, and greater stability in international student recruitment, financial pressures across UK universities are likely to persist, raising concerns about the future resilience and global competitiveness of the sector.