Top English campuses forecast £458 million fall in foreign fees

The most selective English universities are forecasting drops of almost half a billion pounds in income from overseas students this year, new figures suggest.

Four high-entry-tariff institutions are predicting falls of more than 40 per cent in such income due to the pandemic, according to an update on financial sustainability from the Office for Students (OfS).

The report says that despite problems caused by the Covid-19 crisis, the aggregate financial position of the sector “is sound”, thanks in part to stronger “overall student recruitment in 2020-21 than many were predicting”.

However, it warns that the aggregate performance does not “reflect the picture for individual providers. There continues to be a significant variation between providers and a widening spread of financial performance.

“For the vast majority of providers we are not currently concerned about short-term financial viability, although there is a small group of providers (a number in single figures) that we are monitoring more closely.”

Sector-wide figures from the report, which compares actual financial data from 2018-19 with institutions’ forecasts for last year and 2020-21, predict that total income will drop by about £700 million this year.

This includes an overall fall of more than £600 million in overseas fee income and a £200 million drop in income from other activities such as catering and conferences. Research income is forecast to pick up by about £200 million after falling back by around the same amount in 2019-20.

A breakdown of the figures shows that the biggest hit to overseas fee income is due to be felt by the most selective institutions in terms of entry tariff, with year-on-year falls amounting to £458 million this year, a 13 per cent drop.

Although this would still represent an increase in income from non-European Union student fees for this group compared with 2018-19, there are some individual institutions where the fall is predicted to be large. Twelve high-tariff institutions are forecasting a drop of more than a fifth and four of more than 40 per cent in overseas fee income this year.

Elsewhere, the report says the sector is expecting a “significant” decline in operating cash flow – the amount of cash from day-to-day operations required to meet ongoing obligations like salaries – of 59.2 per cent to £1.2 billion this year. In high-tariff providers, this is predicted to fall from around 7 per cent of income to well under 1 per cent.

It also says that the sector’s overall liquidity “is expected to decline by over 16 per cent in 2020-21, as a consequence of [a] forecast decline in financial performance, but still remains strong at £10.3 billion”.

The overall level of surplus, income minus expenditure but not including fluctuating pension liability estimates, is meanwhile expected to fall from £3.8 billion in 2018-19 to £2 billion (5.8 per cent of income) in 2020-21.

There are also warnings in the report about the ongoing uncertainties in university finances related to the pandemic, pension scheme valuations and Brexit.

It points out that 2020-21 “is the final year that EU students can enter English higher education providers on the same fee and financial support terms as UK students”.

“The detail of the UK’s future relationship with the EU will also have currently uncertain implications for other EU-related activities of the English higher education sector.”

Nicola Dandridge, chief executive of the OfS, said that the financial update suggested “the effects of coronavirus on university finances are not as severe as was first feared, though there is significant variation between different universities.

“There are a number of uncertainties which will continue to affect finances both now and into the future, not least the fact that it is still not clear what the overall impact of the pandemic will be.

“The OfS will work constructively with any university in financial difficulties, with our overarching priority being to protect the interests of students. At this point in time, though, we believe that the likelihood of significant numbers of universities or other higher education providers failing is low.”

simon.baker@timeshighereducation.com