English universities face autumn ‘tipping point’ as financial crisis looms

Universities in England face a “tipping point” this autumn engulfing some of them in financial crisis, according to vice-chancellors, who say urgent government intervention may be ​needed to stop institutions from going under.

The warnings come as hundreds of thousands of sixth formers in England, Wales and Northern Ireland await their A-level results next Thursday. Their decisions on where and when to attend higher education will be a make-or-break point for several universities.

David Maguire, vice-chancellor of the University of East Anglia, said that “an awful lot of institutions are placing extremely large bets on this recruitment round” and warned: “Quite frankly I don’t think there are enough students to go around.”

Sector leaders who spoke to the Guardian said that, until improved long-term funding was secured, the most likely short-term solutions included mergers between institutions, and reorganisations such as pruning departments.

Maguire said that with international student recruitment falling sharply, universities were having to “aggressively” recruit more UK undergraduates in the clearing admissions process.

“I think the tipping point will follow clearing – it’s usually 1 October before the dust has settled and people know how many students they are going to get,” he said.

“I think some [governing] councils will be calling in the books, as it were, and assessing the financial viability of their organisations. So I’m very worried about the months of October, November and December.”

This year’s clearing could be more fraught for students who get worse than expected results, according to a forecast that the number of top A-level grades awarded will be lower than last year. Prof Alan Smithers, of the University of Buckingham, predicts there will be 16,000 fewer A and A* grades awarded than in 2023.

Bridget Phillipson, the education secretary, has said that universities in England should not expect a government bailout, arguing that they are autonomous institutions that should rely on their own resources.

One vice-chancellor – who declined to be named – said this year’s admission round was “doubly dangerous” because declining numbers of domestic and international students were coupled with higher costs, meaning that even compared with a year ago universities were having to spend more while receiving less revenue.

Related: UK universities face ‘irreversible decline’, global league table suggests

“It’s like Ernest Hemingway said about the two ways of going bankrupt – gradually, then suddenly. We’ve had the ‘gradually’ part,” the vice-chancellor said.

Another vice-chancellor said that many universities would have to “cut hard and stumble through” the crisis.

Already 67 institutions are carrying out redundancy and restructuring programmes, setting off bruising industrial disputes. On Friday the University and College Union announced that Sheffield Hallam University staff were the latest to vote for strikes next month, in protest at what it said were “unprecedented” job cuts.

Jo Grady, UCU’s general secretary, has written to ministers asking them to bring forwards plans for support. “Anything short of an emergency rescue package for the sector will be insufficient to stave off catastrophe,” she said.

While ministers acknowledge that universities have been starved of funding by the previous government’s decision to keep domestic undergraduate tuition fees at £9,250 a year since 2016 – and now worth about £6,000 in real terms – sector leaders say the biggest risks involve universities that borrowed heavily and are now in danger of breaching the covenants that could force them to repay loans.

Two recent reports – one by PwC and another by the Office for Students (OfS), the higher education regulator for England – have forecast that 40% of England’s universities will run budget deficits this year.

Glen O’Hara, a professor of modern and contemporary history at Oxford Brookes University, said a handful of universities were at “breaking point”, making the summer admissions round critical.

“There is even the possibility that one or two universities simply won’t be able to go on mid-year, though that is still something of an unlikely nightmare scenario. More likely would be really savage cuts to save the institution from bankruptcy, and likely some local mergers or federal arrangements brokered by the Office for Students and the Department for Education (DfE),” O’Hara said.

Earlier this week the OfS launched a tender worth up to £4m for auditors to “undertake financial risk and transformation planning assessments” of universities in England, with the regulator preparing for what the tender described as “potential market exits” or closures.

Maguire, a senior IT executive before entering university leadership, urged the government to seek to help institutions before the situation worsened.

Related: Sharp fall in international applicants wanting to study at UK universities

“My experience from working in the private sector is that for every pound you spend before [a crisis] it costs tenfold after. So I think the government is misguided here and they should recognise the severity of the situation. They really ought to be encouraging universities to look for opportunities for merger, for reassessing their provision, and doing this in an organised and controlled fashion,” Maguire said.

“The reality is that universities are massive employers. If a university goes down, the loss of jobs, the cost of dealing with students and the overall impact on the local economy will reflect very badly on the government, and I don’t think that’s in anyone’s best interests.”

The DfE said: “The government is acting to establish certainty and sustainability for the higher education sector, securing our universities as engines of growth, excellence and opportunity.

“That is why we are refocusing the role for the OfS, concentrating on key areas including monitoring financial sustainability. We are committed to creating a secure future for our world-leading universities so they can deliver for students, taxpayers, workers and the economy – and play their part in breaking down the barriers to opportunity.”