Some universities are already expecting to lose more than £100m as foreign students cancel their studies, with warnings that the impact of coronavirus will be “like a tsunami hitting the sector”.
Several organisations are now planning for a 80-100% reduction in their foreign student numbers this year, with prestigious names said to be among those most affected. The sector is already making a plea to the government for a cash injection amounting to billions of pounds to help it through the crisis, as it is hit by a drop in international student numbers, accommodation deals and conference income.
Universities are already lining up online courses for the start of the next year, but academics are concerned about the impact on first-year students new to university life. Many institutions have recently borrowed heavily to pay for attractive new faculties, often designed to attract overseas students. It comes against a backdrop of declining numbers of university-age students in the UK and the previous uncertainty around Brexit.
Andrew Connors, head of higher education at Lloyds Banking Group, said the crisis has felt “less like a perfect storm and more like a tsunami hitting the sector”. Banks have not had urgent requests from universities, as big financial hits are expected later in the year. However, he said that “while the immediate impact we are seeing in the sector is slower, the overall impact of Covid-19 is potentially deeper and longer”.
In a blog for the Higher Education Policy Institute (Hepi) published today, he writes: “Many institutions are modelling reductions of between 80% and 100% in international student numbers. Every university we have spoken to expects to be impacted and for some the potential loss to income is projected to be greater than £100m. And that is before you factor in that losing new students has a multi-year impact.”
He adds that he expects banks to offer UK universities loans where needed, given their significance in the economy. He warns, however: “I worked through the financial crisis of 2007/08 and it does not compare in my experience to what we are witnessing now – this crisis has touched everybody in some shape or form and many previously viable businesses are now in a fight for survival.”
The Office for Students, the independent regulator of higher education, has already streamlined its rules in the wake of the crisis, calling for universities to sound the alarm if they fear they’ll run short of cash within 30 days.
Universities UK, the industry body, has proposed a series of measures to the government to double research funding and offer emergency loans to troubled institutions, as well as placing a cap on the number of undergraduates many institutions can recruit in 2020-21.
Nick Hillman, Hepi’s director, warned that universities only had limited options to cut their costs. “There are things they can do to mitigate the impact, such as doing all they can to ensure international students keep coming, pausing the development of their estates, doing less research, looking at their staffing and persuading home final-year students to stay on for postgraduate study. But some were in financial difficulties even before the current crisis.
“If international student numbers are down a lot, we have a big problem. The ones with lots of international students could still potentially fill their places with home students (who pay lower fees) but that just leaves a problem lower down the tree.”
Few sectors or industries will be untouched by the devastating impact of coronavirus, whether it’s airlines that have grounded their flights or popular restaurant chains closing. Our world-class university sector, which contributes more than £95bn a year to the economy, creates nearly a million full-time equivalent jobs, and delivers £13.1bn in exports, is no exception.
Despite this emerging financial threat, universities are rising to the challenge of helping the NHS and local communities to fight coronavirus. This incudes testing for a vaccine, ventilator development, donating equipment and facilities to the NHS, and releasing almost 5,500 year three student nurses from 35 UK universities opting to join NHS frontline staff.
Universities will also have a central role to play in the recovery of the economy, revitalising communities and helping people rebuild their lives. We can develop skills, knowledge and research, drive regeneration, social mobility and innovation, and provide civic leadership in towns and cities.
But there is a severe economic storm to be weathered, with both short-term cashflow issues and medium-term income challenges threatening universities’ financial sustainability.
In the current financial year (2019-20) UK universities are facing losses in the region of £790m from accommodation, catering and conference income, as well as additional spend to support students learning online as a result of the virus.
Further ahead, there’s the risk of fewer students starting at UK universities from the autumn. At a time when universities are already managing the demographic dip in the 18-year-old population, this is a real concern. The many international students who chose the UK may either stay closer to home, or be forced to because of an inability to meet language testing and subsequent visa processes in time. Much of the £6.9bn contribution of international students to UK universities is at risk, while previous estimates suggest the total net benefit to the UK economy from international students is £20bn per year, around £100,000 per non-EU student.
Universities are doing all they can to reduce costs, sometimes through taking difficult decisions. Whether it is recruitment freezes or tighter controls on spending, there will need to be some pain on this.
But we cannot face this financial storm alone. Without proactive support from government – both through investment and policy changes – some universities will face financial failure, with severe impacts on their students, staff, local community and regional economy.
Universities UK has reached out to the chancellor, along with the secretaries of state for education and business, to present a package of measures designed to support universities across all four nations of the UK. Their support would ensure universities remain able to withstand the very serious financial challenges posed by Covid-19 and play a central role in the recovery of the economy and communities.
Within this package is a call for targeted support for key courses that will educate the next generation of public sector workers, and for retraining and reskilling people whose jobs are affected by coronavirus. We are also asking for funding support for universities to maintain the UK’s research excellence, and policies to encourage international students to study here.
We have also proposed transformation funds to support some universities to adapt over the next few years to achieve longer-term sustainability, and a focus on ensuring high-quality provision of skills to meet the economic needs of the post-Covid environment. Reskilling, and a focus on local communities and businessess needs, will be a key part of that. If this means strengthening partnerships between universities and further education colleges, then that would be something to celebrate.
Universities are committed to doing everything we can to support the immediate coronavirus effort, and to help students, communities and society rebuild following it. By supporting both the financial and policy measures we propose, the government can help universities to play a central role in the nation’s recovery.
Alistair Jarvis is the chief executive of Universities UK