UNITED KINGDOM
A British university which earned a global reputation for pushing at the frontiers of international higher education has revealed that it faces cuts of around £95 million (US$121 million) over the next two years.
Coventry University’s Annual Report and Financial Statements document shows that income for this financial year is likely to be around £85 million (US$108 million) less than anticipated “arising from the lower than expected [student] intake in autumn 2023, along with anticipated intakes in January and May 2024 being below budgeted expectations”.
The university declared a relatively small deficit of £2.4 million for the year ending 31 July 2023 – down from a £32.9 million deficit for 2021 when it made a £35.9 million payment to settle outstanding pension liabilities following withdrawal from the Universities Superannuation Scheme pension scheme.
Costs growing faster than income
However, Coventry’s financial results commentary for the year to the end of July 2023 warns that costs are growing faster than income, with the largest component being agents’ commission in respect of overseas student recruitment which increased from £38.7 million to £54.9 million.
“Bad debt costs, including write-offs and larger allowances for doubtful debt, have increased by £6.4 million, reflecting the increase in late payments of tuition fees by the student population,” adds the report.
The financial commentary describes student recruitment in autumn 2023 as “challenging” and said this will have an effect on future plans.
Full-time UK and EU student fee income fell by 20.1% to £125.1 million, compared to £156.6 million – but full-time international student fee income rose by 31.9% to £232.8 million, indicating growth despite the “increasingly challenging market”.
The total balance on borrowings as of 31 July 2023 was around £185 million, the financial statements showed.
The latest forecast following lower than expected recruitment in autumn 2023, along with anticipated intakes for this January and May 2024, are below budgeted expectations, with income for the year to 31 July 2024 expected to be in the region of £85 million “adverse to budget”, said the report.
“This reduction in income is expected to result in a significant deficit in the 2023 to 2024 financial year.
“As a result of this reduction in income, and the expected deficit this creates, it has been identified that around £40 million of savings will be required in the year to 31 July 2024,” said the report.
Additional savings of £55 million will be required in 2024 to 2025.
Targeted savings
The annual report describes the situation as “an emerging scenario” and said actions to effect the required level of savings “remain under discussion”, but are broadly expected to include contractor fees for digital services, software purchases, and other digital services operating costs, “along with staff cost savings coming from a mix of vacancy turnover, targeted redundancies and activity closures in management layers, research, and further restraint-freeze on recruitment”.
The report adds: “The targeted savings are expected to ensure sufficient cash to continue in operation along with avoiding breaching covenants with sufficient headroom, however this is highly sensitive to changes in income.”
The sale of non-teaching buildings is already being considered and Coventry is also looking at selling university-owned buildings and reducing its capital programme.
Wider financial crisis
Coventry’s cash flow challenges are part of a wider financial crisis facing a growing number of UK universities, with vice-chancellors and sector leaders warning that the Conservative government’s increasingly negative tone towards immigration and its targeting of international students as an easy way to reduce net migration before a general election, expected later this year, is driving foreign students away from the UK.
The government’s decision to ban foreign students from bringing dependants with them for one-year taught masters’ degrees, which took effect from January 2024, is widely expected to drive down the number of students coming to the UK, especially from India and Nigeria.
A Coventry University spokesperson told University World News: “Many universities have been relying on the higher fees paid by international students who value quality UK education, but the UK government is making it harder to recruit international students and we are competing against the likes of Australia and Canada who are more welcoming.”
Coventry University has long been seen as a sector leader in diversifying income. It has transformed into a global education group delivering teacher training, apprenticeships, executive education and continuing professional development to various industries and government bodies with partnerships around the world, supported by a network of global hubs in key markets.
Transnational education
It is a market leader in transnational education, with a joint institute in China and thousands of learners studying Coventry University degrees in more than 40 different countries. It has partnerships with 150 higher education providers worldwide.
As well as its main operation in Coventry it has a campus in Scarborough on the North Yorkshire coast and another in London aimed at international students. It has outposts in Poland and Egypt and is building a new ‘badged campus’ in Morocco.
The Coventry University spokesperson told University World News: “We now need to go further and faster with this transformation, while continuing to maintain and improve services to students and our business and research partners around the world.”
Some industry insiders approached by University World News suggest university managements announcing cuts and likely redundancies, including Coventry and Sheffield Hallam, may be using the current crisis in recruitment from the more lucrative overseas student market as “an opportunity to attack the cost base under the cover of ‘circumstances’” and “getting their retaliation in early with aggressive statements on cuts being necessary” ahead of widely predicted further falls in international recruitment later this year.
More red flags
However, Labour’s Shadow Minister for Further Education and Universities Matt Western, who represents Coventry’s neighbouring Warwick and Leamington constituency in the British parliament, said he is “shocked, but not surprised” at cuts being announced by universities.
“There are some really strong headwinds facing the sector. Coventry is big news, but they will not be alone,” he said.
Sheffield Hallam University is just one among many to warn of expected drops in international recruitment this year and has invited its 1,700 academic staff to apply to a voluntary severance scheme, with a university spokesperson also blaming flat undergraduate fees for UK students, which have been frozen at £9,250 for more than a decade, together with inflation and rising pension costs for the financial challenges.
Other universities raising financial red flags include Staffordshire, Brighton and Huddersfield, and the Financial Times reported on 11 January 2024 that York University is lowering the entry requirements for some international students in response to “financial challenges”, according to an internal memo seen by the newspaper.
Accommodation vacancies
Another indication that universities are not bluffing about the perilous state of the market comes from student accommodation experts who have told University World News that despite a serious lack of student housing in many UK towns and cities, average purpose-built student accommodation occupancy in Coventry last year was 70%, according to property search and data platform, StuRents.
“Sheffield fared better but still had major occupancy issues in places,” said Dan Smith, founder of the Student Housing Consultancy and the Good Management Group.
He said universities hit by severe international recruitment falls may have to drop rates and boost incentives to returning students and that marketplaces and agents should expect higher commission. “I’ve seen this work nicely in Leicester,” he said.
“The UK government has a lot to answer for. These universities will not be the last, but I think many of us in the student accommodation and international student recruitment sector saw this coming a mile off,” he added.
‘Flight to quality’
Smith also pointed to what he called a “flight to quality” with students from China, and now India, becoming “more discerning” and picking Russell Group and other highly ranked universities over “tier-two” universities.
“Combine this with a right-wing government creating a hostile environment for international students and we have a perfect storm facing UK higher education.
“This will be a real concern to any secondary universities and of course the student accommodation that relies on these international students,” said Smith.
Looking ahead, Mark Ovens, a senior partnerships director at Studyportals, whose brief includes the UK, Europe, Middle East and Africa, told University World News: “Those who have listened and planned well and who already have a broad range of recruitment channels across a global portfolio will still likely be fine.
“I think it’s the institutions who are slow to move that will struggle.”
He said universities making cuts now are the ones “who have accepted that they’re entering a difficult period and want to become as streamlined as possible as a pre-emptive measure”.
Ovens added that many “middle-tier” UK institutions like Coventry recruited large numbers of EU students before Brexit and when those students could no longer access funding for UK study their number fell sharply, but “the downfall was masked and compensated by a post-COVID bounce in interest from the likes of India and Nigeria. Now this is falling it seems that there are no other markets to fall back on – leaving these universities exposed”.
Nic Mitchell is a UK-based freelance journalist and PR consultant specialising in European and international higher education. He blogs at www.delacourcommunications.com
