Economic crisis in university funding broadens, impacting overall economy
Universities across the North East and Wales are making significant contributions to their regional economies, accounting for 6% and 4.9% of regional Gross Value Added (GVA) respectively, well above the UK average of 3.5%. Institutions like Cardiff University in Wales and Durham University in the North East are key players in this success story.
However, the higher education sector in the UK is currently facing a series of challenges. The Department for Education announced a £108m cut to the 2025-26 Strategic Priorities Grant (SPG), a move that could exacerbate financial pressures already being felt by many institutions.
As a result, funding is being redirected away from subjects like media studies, journalism, publishing, and information services, and prioritized for medicine, science, technology, and engineering. This shift in focus is creating a demand-and-supply problem, with more than half of student applications for high-cost courses but only 47% of enrollments last year.
Even with tuition fees rising slightly, they will still fail to cover the cost of most courses, leaving universities having to cover the difference. This situation is made more challenging by the fact that the model of universities plugging the gap left by capped domestic student fees by expanding their offering for international students is now faltering. International enrollments fell 17% in 2024 due to stricter visa rules and political pressure to reduce migration.
The government's proposal of a 6% surcharge on overseas tuition fees could cost English universities over £600m annually. The Higher Education Policy Institute has warned about the potential impact of this surcharge, raising concerns about its effect on the sector's financial stability.
Economist David Schmutz explained that while London and the South East receive the largest economic benefits from universities, their productive and diversified economies make them less reliant on the sector. In contrast, areas like the North East and Wales rely more on international student spending and university wage flows, making them disproportionately vulnerable to any decline in the sector.
The sector is forecasting a third consecutive year of decline in financial performance, with more than four in ten institutions expecting a deficit this year. This has led to around one in five departments shutting down due to financial pressures. Half of UK universities have reported course closures over the past three years, according to Universities UK.
The cuts to journalism courses risk undermining access, quality, and opportunity in journalism education, potentially impacting trusted reporting at a time when it is more important than ever. Some institutions are pursuing structural changes, such as the planned merger of Kent and Greenwich into a 'super university'.
These challenges highlight the need for a comprehensive review of the UK's higher education funding model to ensure that institutions can continue to provide high-quality education and contribute positively to the economy.
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