Financial stress is not a good reason for universities to merge

Two in five UK universities are contemplating a merger, according to a Universities UK survey. Really?

As someone who’s just been through the process of creating a new university through merger, that number seems conspicuously high. Read literally, the headline might suggest that of 166 universities in the UK, 66 are actively considering merging, shrinking the sector by 33 institutions. That’s a lot.

In reality, the survey says something rather more limited, but still significant. Run across March and April, it drew 48 responses – a little more than one-third of UUK membership. The respondents were finance directors, not vice-chancellors or governing authorities. And in addition to the 40 per cent who were open to or actively considering merger or acquisition, 81 per cent were considering digital transformation, 71 per cent shared procurement and 65 per cent were open to federations or alliances. Yet only a very small number had already taken on large-scale structural change.

So there’s no demonstrable merger wave here; the survey is framed around what organisations might do if conditions worsened. But it does show that what may once have been unthinkable (or improbable) is now garnering more open consideration.

What has brought about this cultural shift, of course, is the financial environment. According to the Office for Students, 35.8 per cent of English providers reported a deficit in 2024-25, and nearly 43 per cent were forecast to do so in 2025-26. The sector’s forecasts then rely heavily on substantial growth in student recruitment. But if recruitment instead remained flat, UUK estimated that this would push nearly 60 per cent of providers into deficit by 2028-29, commensurate with nearly £2.7 billion cumulative net-income losses against those forecasts. UUK estimates recent policy decisions will reduce funding to English higher education providers by £3.7 billion cumulatively between 2024-25 and 2029-30.

But while such financial stress creates a unique form of institutional openness, it doesn’t necessarily create good strategy. A distressed institution may well be less merger-ready than a healthier one because it has less cash, management bandwidth and capacity to absorb disruption. Pressure is more likely to erode the aligned leadership, integration capability and political stamina that are all needed to create a new, healthier institution.

Moreover, mergers are not short-term prospects. The OfS warns that much sector risk management remains short term and that optimistic recruitment assumptions can postpone necessary decisions about structural changes. In choosing to merge, leaders must choose deliberately to move from short- to long-term thinking, selecting a precise future form and determining how to fund and deliver it. They must survive several years of consequential disruption and use the opportunity to advance decisions hitherto avoided – or else it is an exercise in futility.

Outcomes like the universities of Manchester and Aalto have taken 15-20 years to truly succeed because they involved successive steps towards the creation of new universities rather than simple mergers. But this is the key to ultimate success. Merging is not, in itself, a destination, and willing partners do not guarantee success. The articulated destination must be clear, demonstrably achievable and better than the alternative.

The first question, then – even for leaders and governing authorities under pressure – is not should we merge? but what type of institution do we want to try to create? And the second question relates to the best means to achieve that end. It may be a merger – but what about alliances, federations or shared services?

Merging institutions must remember that legal consolidation can precede institutional completion by years – the Technological University Dublin, formally established in 2019, is illustrative here. Similarly, federated French combinations such as Paris-Saclay and Paris Sciences et Lettres (PSL) have achieved near-term visibility and scale – but retained governance complexity and haven’t realised the possible benefits of integrating across functions such as HR, IT, estates and student services.

Many full mergers, too, fail strategically because they simply place two inherited operating models inside one legal entity – marriages of convenience rather than the forging of new ambition, identity and governance through union. Ask yourself: “What value will our new institution create?”, “What could this new institution do that the antecedents could not achieve independently?” “What will our new institution stop doing?” and “What will its programmes, systems, structures, campuses look like in five years’ time? In 10?”

If the destination is clear and compelling and if merger is the best means to achieve it then a course can be set, with authorities, resources and oversight. Then comes the design work, the integration, the curricular construction, the systems and the planful transition from duality to unity.

That also requires external stakeholders to play their part. Purposeful merger requires an enabling legal route, transition funding, regulatory coordination and a mandate to make difficult choices. UUK is calling for VAT flexibility and a government-backed Transformation Fund to “enable and accelerate university-led change”. Governments cannot responsibly encourage consolidation while requiring institutions to carry all transition costs and public-policy risks.

Without a higher-education restructuring framework the UK has limited means to stave off higher-education insolvency. Merely postponing decline by tinkering around the edges is not a great strategy either.

Nevertheless, a willingness to discuss mergers is not the same as a readiness to create an institution that is academically sharper, operationally simpler and more strategically capable than its progenitors. A merger is not a path for the faint-hearted, the unsure or the unprepared.

If universities are going to do it, they need to do it right.

David Lloyd is principal of BlueRange Advisory, which provides independent strategic counsel for consequential change. He was vice-chancellor and president of the University of South Australia from 2013 to 2026 and founding co-vice-chancellor of Adelaide University 2024-26.