LSE’s financial woes spotlight wider issues for sector

The London School of Economics will take a massive hit from loss of international students, highlighting how reliant some institutions have become on their revenue

June 10, 2020
Friends and family of a 21 year-old Law graduate from Hong Kong, celebrate her graduation with a 2:1 degree outside the London School of Economics
Source: Getty
Global: two-thirds of LSE’s students, and much of its income, come from abroad

Experts have said the London School of Economics’ status as the British university with the highest proportion of international students means it is facing an acute financial problem next year − but its case highlights wider issues within the UK sector.

In April, the LSE announced that its director, Dame Minouche Shafik, would take a 20 per cent pay cut and that other members of the leadership team would reduce their pay by 10 per cent for six months initially. Times Higher Education understands that the LSE has also discussed implementing wider pay cuts across its faculty, as well as not renewing fixed-term contracts, although no formal decision has been made.

As the most international institution in the UK, “[the LSE’s] forecasts are particularly pessimistic, and that informs everything else at this point. They are ahead of others when it comes to wider pay cuts, though of course others may follow,” one academic said.

A spokesman for the LSE said that “like most HE institutions in the UK, we may be facing a substantial loss of income in the coming year. We are putting in place a number of practical actions to mitigate this, including delays to spending on capital projects, a conditional freeze on all hiring proposals and reducing the total non-pay budget by 10 per cent, and we will undertake further borrowing.”

University and College Union regional official Barry Jones said: “We know that the LSE is facing challenges during this crisis; but instead of short-sighted cuts, we need the sector to pull together and make the case for vital funding to safeguard the future of our universities.”

Higher Education Statistics Agency data analysed by Martine Garland, a lecturer at Aberystwyth University’s Business School, showed that in 2018-19, the LSE had 8,000 non-UK students, which amounted to 68 per cent of its student body, and 30 per cent were from Asia alone.

While other institutions have higher numbers of non-UK students, such as UCL and the University of Manchester, the LSE had the largest proportion of international students at a UK university, the analysis demonstrated.

Dr Garland said the problem was that the “most successful institutions” at enticing international students now have the most problems. “It costs roughly the same to teach an overseas student, but you will have charged them twice or three times as much as a home student.”

Simon Marginson, professor of higher education at the University of Oxford, said the LSE was a special case. “It is a high-status institution without many options to fall back on. They don’t have the big medical or engineering research bases,” he said. “We are all in trouble if we can’t fill those places, the LSE more than most.”

“It is a very good institution that we want to preserve and develop; we don’t want to see it disappear or be weak,” he added. “[Its reputation] can survive a couple of bad years, even a bit longer, but it would deteriorate longer term [without a rebound in international enrolments].”

Most experts agree that what will save the LSE is its reputation – it consistently ranks among the top 30 in THE’s World University Rankings – and its cash reserves.

The LSE, however, is far from alone in facing these problems. Andrew McGettigan, author of The Great University Gamble: Money, Markets and the Future of Higher Education, said that financially weaker institutions and established universities alike were threatened by shrinking international enrolments.

“Some [well-established institutions] could absorb a one-off hit, while some will in effect need a government loan to get them through this period,” he said. “It’s not a question of bailing out unviable institutions but providing loans to universities that are otherwise financially viable and have been doing what successive governments have asked them to do, which is expand their international student intake.”

Mark Corver, founder of the consultancy firm DataHE, said there was a group of institutions, including the LSE, whose members faced losing about two-thirds of their tuition fee income as overseas traffic slowed; another group whose intake of international students was about a third and would still lose a significant proportion of fee income; and other institutions that did not enjoy those higher revenues so did not have this particular problem.

UK higher education policy, Mr Corver continued, should aim to fill the space left by international students “with the 77,390 UK students who applied last year through Ucas – [who were] interested enough in HE to pay the application fee − but were not recorded as having got in”.

“Of course, an institution like the LSE could fill its [places] – it wouldn’t get back the same levels of fee income, but we would argue some is better than none,” he said.


Print headline: Halting of international student traffic hits LSE hardest, but others in UK will also feel the pain

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Reader's comments (6)

I am speechless how Tories along with greedy university leadership teams have run British universities into the ground. We used to be world-class, but somewhere along the way, marketing teams and sales pitches took over. They say "World changers welcome", but de facto the increase in international students led to a deterioration of the quality of education years ago because each body with a pulse counts, and you can't keep up good teaching if half of the students don't understand what you are telling them. The government needs to act now and fix their mistakes: bail out the sector by boosting science and research investment; abolish all tuition fees to provide zero incentives for taking on low-quality students; fund universities using a head-count formula instead from here on out. Let excellence thrive through actual science and achievements, not shallow reputation based on brand name. Stop treating science as an industry or "sector".
“It costs roughly the same to teach an overseas student, but you will have charged them twice or three times as much as a home student.” says it all really. Once your customers realise you are ripping them off they will shop elsewhere. Overseas universities are rapidly rising up the league tables as the UK institutions rest on their laurels. COVID just precipitated an inevitable outcome.
"Once your customers realise you are ripping them off they will shop elsewhere. Overseas universities are rapidly rising up the league tables as the UK institutions rest on their laurels. COVID just precipitated an inevitable outcome." Foreign students do actually have brains believe it or not and are fully aware that they are charged more, which is the norm across the world. However, the fees charged remain competitive and are cheaper than some other comparable universities, for example in the USA. The reason uk universities follow this strategy, is because the current govt strongly encouraged them to do so when the funding rules changed and tuition fees for UK students commenced. This was to make UK universities more financially viable and competitive, keeping UK student fees lower and releasing as much financial support from central govt as possible. If you actually pay attention to the sector you will see many UK universities in the Russell group especially, are consistently improving in world rankings. The rise of foreign universities is far more to do with them upping their game, often with their govt support in a bid to attract academic high achievers, the new money into the economy they bring, and outside investment from foreign businesses.
"If you actually pay attention to the sector you will see many UK universities in the Russell group especially, are consistently improving in world rankings." No. Not if you believe the credibility of the QS rankings. Rankings of several 'leading' UK universities have been sliding in the past four years. Oxford, UCL, Bristol and LSE are some examples of the slump in the latest QS tables. Other organisations do use different data sets (or give different weight to them) in calculating global rankings, but UK universities "consistently improving" is, perhaps, a rather bold statement. The Guardian has published an interesting story online, 10 June.
Time to start slashing the overpaid managers and overpaid bureaucrats that have infected UK Universities. There are so many "quality control types" and silly meetings and committees that it is quite incredible. We should start by getting rid of the Quality Assurance Agency (QAA) and the Office for Students (OfS) - they are the root cause that makes Universities waste all this money and time on silly bureaucratic posts that achieve nothing or even negative results by wasting academics times to fill in useless reports and forms.
Some people, when they look back on the pre-covid era will be tempted to treat it as some sort of "Golden Age" for academics in the UK and, for some, this may be have been true, but all of the problems we now identify were latent within the system long before 2020. The reliance on students fees (home and overseas) the relentless pursuit of league tables (as a proxy for real quality) and the deperate desire for landmark buidlings have put the sector into massive debt and it is the debt, rather than current income crisis, which will ultimately decide the future of HE. Ambition is the real enemy of quality, not process, not government but unrealitic and unrestrained ambition. We simply do not need so many "excellent" universities, and, even if we did, they cannot all be in the top 20. The sector will diminish and the real question becomes how do we crteate and maintian genuine value in a shrinking economy.