Foreign student downturn pushes more universities into deficit

A dozen UK institutions have joined the growing list of those recording deficits in their annual financial accounts, with many blaming the problem on a decline in international student numbers and subsequent increased competition for domestic students.

With several universities already reporting sizeable financial gaps for 2024-25, newly released accounts highlight the scale of the financial challenges facing the sector.

De Montfort University (DMU) moved from a £12.6 million surplus in 2023-24 to a £22.6 million deficit last year. The university said increased costs and a reduction in the real-terms value of tuition fees had created a tricky economic climate.

“Like most English universities, we are facing unprecedented financial challenges,” DMU said in its 2024-25 accounts.

“A major fall in international students has disrupted both home and overseas recruitment patterns across the sector, and some higher tariff institutions have over recruited home students to make up their shortfalls.”

The institution said it has taken steps to address this, such as diversifying its income through expanding transnational education operations abroad, and cost reduction measures, including spending £4 million on a voluntary severance scheme.

The University of Sheffield became the latest Russell Group member to record a deficit for the year. Its underlying operating deficit of £11.5 million was down from a surplus of £6.2 million the year before.

It suffered a £56 million fall in income for the year, which was mainly driven by a 22 per cent reduction in international tuition fee income. Sheffield said this reflected a “rebasing” of the market as a result of changes in government policy, increased global competition and shifting student demands.

Its Earnings Before Interest, Taxes, Depreciation, and Amortisation fell to just 6 per cent of revenue, which was almost half its target of 11 per cent.

Sheffield also paid £10.9 million in compensation for loss of office to more than 600 employees as part of its programme of tailored cost reductions last year.

The University of Ulster recorded an operating deficit before other gains and losses of £20.2 million, which was a worse position than its deficit of £5 million in 2023-24.

The institution said this was a result of rising costs and activity, which had not been matched by income growth, and a lack of inflationary growth in funding body teaching grants in Northern Ireland.

The University of Bedfordshire said its consolidated deficit of £17.2 million had been “carefully managed” with “long-term sustainability firmly in view”. This deficit, which was before adjustments for pension costs, was down from a surplus of £16.6 million in 2023-24.

The institution’s income fell from £150.4 million to £105.7 million, mostly as a result of a significant reduction in international tuition fee income.

The University of Hull improved from a deficit of £17.2 million to one of £12.9 million in 2024-25, despite what it said was a challenging year driven by volatility across student recruitment markets and the continuing real-terms decline of home undergraduate tuition fees.

Heriot-Watt University also improved its financial position through what it described as “disciplined financial management” but remains in an underlying operating deficit of £7.9 million.

On top of international student recruitment issues, the institution warned of other challenges from global economic uncertainties, geopolitical conflicts and tensions, the ongoing threat of cyberattacks and climate change, and risks from the proliferation of generative AI.

Deficits were also recorded at Bournemouth University (£7.9 million); Birkbeck, University of London (£7 million); the University of the West of Scotland (£5.5 million); and Edge Hill University (£2.8 million). In addition, there were losses at art schools including Trinity Laban (£2.9 million) and the Northern School of Contemporary Dance (£50,000).

patrick.jack@timeshighereducation.com