Fixing Universities: A Collective Approach to Financial Crisis

Universities in the UK are in trouble. Big trouble with pound signs. Student fees are capped - Unis are paying about £3K a year to teach each student Research is underfunded. Grants pay only about 70 pence of every research pound. Universities are funding their own research. The once great bastions of soft power, stricter visa regulations have put off international students.

Let’s start with what won’t work.

1. The government won’t allow a higher fee cap. There’s no way they would allow the fee to pass the £10,000 ceiling given the state of student debt. It needs to go to £12K. This as been obvious since fees were introduced 15 years ago and immediately all universities charged the maximum allowed fee. No sign of “competition” between universities to teach cheaply. Why? ‘cos teaching is expensive when it involves actual teachers.
2. The government won’t increase research spending more than a token amount. Never has happened, never will happen.
3. The government won’t lift visa restrictions. The situation for international students will likely get worse rather than better.

What’s Been Tried: The Cutting Paradox

Cut costs! Universities spend a lot on people. All kinds of staff. Cut them! Well, that’s what’s happening. What’s the result? A university that cuts say 500 staff across the board will get a short term benefit of saving the balance sheet for a year or two. It’s always more complicated than you’d think because it’s expensive to get rid of people - it’s a drawn out process that involves paying voluntary severances and compulsory redundancy payments. You may be cutting £30m from your annual budget but you also have to find £10m for all these one off payments. But what are the downsides of that short term balance sheet benefit? You have just made your university smaller. Long term your income is going to go down. You’ve done a sudden shrink in response to (widely predicted) circumstances. You can pretend that “efficiencies” and “productivity boosts” will mean you can do more with fewer staff. But when your staff are already working long hours amidst the threat of compulsory redundancy, how much more productive can you get? Probably LESS productive.

But, say senior managers struggling to get by on six figure salaries, there’s no other way to cut costs. We as a university have done everything we can!

This is a true, as a university you have done everything you can do.

But collectively, as a Universities UK, with 141 member institutions, you have done jack shit.

The Ranking Tables Scam

To get where we’re going, let’s start with the pointless waste of time and money that are University ranking tables, from eg The Guardian, The Times, The Good University Guide. Every year university PR teams pore over the newly published tables to find a statement that is vaguely accurate and sounds good - “proud to announce we’ve vaulted two places in the guide”, “now the highest rated institution … in north west suffolk”. The truth is that if you ignore the dumb ranks, and look at universities’ average scores over a few years they’re all pretty much the same. Wealthy universities do well, upstart institutions with no money do poorly. The rest are middling. Whisper it: there’s not much difference between them.

For all the money spent on marketing, promoting the unique aspects of the campus, the courses, the people, the buildings, the ethos, etc. Most universities in the UK teach mostly the same courses with the same content.

The problem with universities promoting themselves as unique institutions is that they do everything own their own. (because they’re unique!). Except they aren’t. They are all spending huge sums on the same things - Virtual Learning Environments, Digital Exams, Intranet platforms.

The £1.5 Billion Solution

In IT alone, 15% savings could be made by working together. Thats up to £250 million a year across the sector.

Universities claim they can’t do this, and must remain independent, citing competition-law concerns and autonomy. Competition Law is a not a problem. The IT service providers will lobby that it is, but this is where your letters to junior ministers come in.

And autonomy? do me a favour. Whose autonomy? “The university”. The university should have “autonomy” to choose between say Moodle, Blackboard, Canvas and Brightspace for it’s online learning platform? What you mean is that senior management and a special working group wants autonomy. They want to flex their bulging senior management muscles. But for every single person who would actually use the system - the lectures putting crap on it, and the students using it - there is no autonomy at all. They have to use the system they’re provided.

It’s yet another example of the outdated and inefficient management structure of universities costing them millions.

And universities already use collective procurement through UK Universities Purchasing Consortia (UKPC), and other regional bodies. This currently saves about £500 million a year. Nice. but with full nationwide collective procurement, this could be tripled to about £1.5 billion per year. Which would be even nicer.

A Case Study: Ethics Systems

Let’s look at a case study. Most universities in the UK use Infonetica Ethics RM for processing ethics applications for research with human participants. Most people who use these systems don’t know that because each university has a separate contract with Infonetica and brands their internal version with their own stupid name for it. It’s a generally slow and clunky system, but that’s common for IT in the education sector. As anyone who has ever applied for ethical approval on this system is only too well aware, it takes hours to figure out what do to and how to complete the online forms in a way that won’t result in multiple length rejections. And as anyone who has ever reviewed ethics applications submitted this way knows only too well, it takes far too long to review each problem and highlight the inconsistencies with uni policy.

This is for many reasons, usually related to the decisions originally made when the uni set up the system with Infonetica many years ago, and the complete lack of useful documentation. Fixing systems with bad UI and bad documentation is slow and expensive. So unis don’t do it. But if the same system is used across more than a 100 universities, each uni’s contribution to fixing the problem is now only 1% of the time and cost. It’s practically free.

Shared Teaching Materials

But I would go further than that. Above I noted that most university courses are the same. Does it matter where you study psychology, or mechanical engineering or history? Especially where there is an oversight body (eg the BPS for psychology), there are great similarities, let’s put it that way. so it’s perplexing why individual lecturers spend so many hundreds of hours duplicating the efforts of hundreds of other lecturers replicating similar teaching materials (slides, videos, handouts, worksheets) and assessments (exams, essays, mcqs etc). Modify a shared core, people. Saves time and money.

With all these savings, even in the current crisis in UK HE, there would have been no need for compulsory redundancies. None at all.

It’s too late to save me. But I’d like to think that lessons could be learned. Go out there and make this happen, people!

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A Comprehensive Recovery Plan

In brief: Years of frozen home-student fees, higher inflation and a recent policy squeeze on international recruitment mean almost half of English universities forecast an operating deficit this year. If Westminster cannot or will not repair the funding model, institutions must take responsibility for their own financial resilience. They can do so without abandoning their charitable mission by (1) diversifying teaching income (micro-credentials, TNE and degree apprenticeships); (2) commercialising research more intelligently; (3) growing philanthropy and endowments; (4) sweating estates and raising low-cost capital through green and social bonds; and (5) driving costs down via sector-wide shared-service platforms. Doing all five together creates a balanced portfolio that reduces exposure to any single government lever.

1. Why the Status Quo is Unsustainable

• Domestic tuition has been capped at £9,250 since 2017; in real terms it is now worth barely £6,000. The Russell Group calculates that universities already subsidise each UK undergraduate by £2,500 a year, rising to c. £5,000 by 2030 if nothing changes.
• The Office for Students’ latest stress-test shows 43% of providers expect to post a deficit in 2024-25 and sector cash reserves are shrinking.
• Financial pressure is visible to students: 68% now work in term-time and satisfaction with “value for money” has fallen sharply.
• Universities UK warns that new migration rules and frozen fee caps will strip a further £1.4bn from institutional income by 2025-26.

2. Guiding Principles for Non-profit Independence

1. Retain charitable status. Surpluses must continue to be reinvested in teaching, research and civic mission.
2. Protect academic freedom and public trust. Diversification should not compromise integrity or transparency.
3. Pursue portfolio balance. Combine multiple revenue and efficiency moves so no single activity dominates risk.

3. Diversifying Teaching-related Income

International Pathways and Transnational Education (TNE) UK universities taught 558,000 students offshore in 2021-22 and TNE growth has out-paced on-shore recruitment every year since the pandemic. Scalable franchise or joint-campus models (e.g. Coventry’s global network) spread regulatory risk and generate licence fees with lower capital outlay than a full branch campus.

Micro-credentials and Lifelong Learning HEIs already earn about £720m a year from short-course CPD; demand is rising as employers refresh digital skills. These flexible products are insulated from Home-Office visa controls and priced for margin.

Degree Apprenticeships With tuition funded through the apprenticeship levy and salaries paid by employers, degree apprenticeships bring net positive cash while widening participation.

4. Building Philanthropy and Endowments

• Oxford’s Oxford Thinking campaign raised £3.3bn in gifts between 2004-19
• Cambridge’s central endowment has grown to £4.2bn (net asset value, June 2024)
• Structured matching schemes and donor-advised funds can accelerate gift income while keeping control in university hands

5. A Phased Action Plan for Leaders

1. 12 months: map all third-stream income, set clear margin targets for CPD, micro-credentials and contract research
2. 24 months: establish or join a shared-services consortium; issue first sustainability-linked private placement if CAPEX pipeline >£100m
3. 36 months: launch a global alumni gift-matching challenge and shift at least 5% of investment portfolio into mission-aligned venture funds
4. Five-year horizon: aim for ≥30% of total income to come from non-state, non-regulated tuition sources

Conclusion

Independence is not a binary switch but a spectrum. By broadening income streams, locking in low-cost mission-aligned capital and sharing back-office functions, UK universities can restore financial headroom and strategic autonomy while remaining firmly not-for-profit. The exemplars already doing this prove it can be done without sacrificing public purpose—or educational quality. What is required now is the collective will to emulate and scale these approaches across the sector.