Industrial Strategy advisers urge ‘radical action’ on HE finances

Key advisers to the Labour government’s industrial strategy have warned university finances pose a “material strategic risk” to delivering its goals, urging ministers take “radical action” in response.

In its annual report, the Industrial Strategy Advisory Council warns that “financial and capacity constraints” facing both the higher and further education sectors are a “material strategic risk” to delivering the key framework.

“The government must take radical action, likely including an independent review of the sectors’ sustainability, recognising in full the broad role they play across skills, research, innovation and regional growth,” the council says.

The council is chaired by Clare Barclay, president of enterprise and industry (EMEA) at Microsoft, with Nancy Rothwell, former vice-chancellor of the University of Manchester as deputy chair.

Funding pressures in higher education are emerging as a risk to future skills development in the industrial strategy, the council says.

England’s 16 to 18 population is projected to increase by 70,000 between 2025-28, and colleges could need up to 12,400 additional teachers by 2028-29 compared with 2020-21 levels. These needs come as 36 per cent per cent English higher education providers already reported a deficit in 2024-27, it says.

“Greater devolution of post-16 skills and employment functions creates an opportunity to align provision more closely with local labour markets…and develop more coherent pathways across education and employment,” the council says.

But “devolution alone cannot address system-wide capacity and funding pressures,” the council says, recommending that the government consider developing a 10-year plan for the “capacity, capability and funding required” to meet its workforce needs.

In a foreword to the report, Barclay and Rothwell said: “The government’s new emphasis on reindustrialisation, devolution and place-based growth represents an opportunity to streamline execution within the government and turbocharge delivery and impact of the IS. We must take that opportunity.”

Libby Hackett, chief executive of the Russell Group, said the report was “spot on”. “This [finances] does constitute a material strategic risk to the UK’s economic growth and we support their call for radical action to be taken,” she said.

“The financial sustainability of our universities is not simply an education issue; it is an economic and national resilience issue that is crucial to the success of the Industrial Strategy and to UK growth and jobs.”

She added: “An independent review of tertiary education is needed to give government the evidence and long-term plan needed to help secure the UK’s talent, research and innovation base for the next decade.”

frances.jones@timeshighereducation.com