UK Edition
Universities are overestimating on student recruitment, watchdog warns as bankruptcy fears loom
Universities are overestimating student recruitment and the amount of money that can be made, the watchdog has said, amid mounting concern about bankruptcies.
Higher education institutions need to stop making such “ambitious assumptions” about growth in student numbers over the next four years, according to the Office for Students (OfS).
The regulator has written to all universities to alert them to the fact that their forecasts on student numbers are out of step with reality.
Overall, universities are expecting a 10 per cent growth in student numbers over the next four years, which is equivalent to an increase of 171,000 full-time students.
This includes a predicted increase of around 78,000 full-time undergraduates from the UK and European Union, whose tuition fees are fixed at a maximum of £9,250 each year.
However, a demographic dip in the British population of 18-year-olds means that there will be five per cent – or 41,000 fewer – students over the period.
Sir Michael Barber, chair of the OfS, said: “Our analysis suggests that the sector has made over-optimistic student recruitment forecasts – both nationally and internationally.
“With the number of 18-year-olds in the population falling significantly between now and 2022, not every university will be able to recruit the number of students they had hoped to.
“Universities should be wary of relying on over-ambitious recruitment targets, and look at student numbers realistically rather than over-optimistically.”
The watchdog’s warning comes at a time of rising concern about the universities going bankrupt. A number of universities are believed to be on the verge of bankruptcy, with several relying on short-term bridging loans in order to prevent going into administration.
Universities which are already under financial pressure could be plunged into extreme difficulty if they fail to recruit sufficient numbers of students in the coming years, since tuition fees are a major source of income.
The OfS has previously said that failing universities will not be bailed out by the taxpayer and must reform if they are to survive. Earlier this month it emerged that the government is appointing someone to brief ministers on "how insolvency arrangements work".
The expert will provide education ministers with an "understanding of the financial health" of each university, while "developing and maintaining" an understanding of the risks facing the entire sector, according to the job advertisement.
Amid fears that students at bankrupt universities could be left empty-handed, the OfS has assembled a register of higher education institutions which, by law, requires them to put in place robust student protection plans.
In order to secure access to student loans, the universities must establish sustainable finance models, approved by the regulator, as well as contingency plans to transfer students to complete their studies. If this is not possible, the regulator will ensure that students are compensated.
A Department for Education spokesperson said: "To ensure students are protected – through the OfS – we have required universities to set up protection plans that will set out what students can expect to happen in the event of course, campus or department closure, or if an institution exits the market.
“We have given the office for students a range of powers to tackle any university that is not being run in a financially-responsible way.”
A spokesman for Universities UK said: “This report highlights that Universities are operating in a challenging environment with increased competition, a freeze in undergraduate tuition fees and significant increased cost pressures.
“To manage risks like fluctuations in student numbers and remain internationally competitive, universities need to be able to maintain cash surpluses and invest in the student experience, and it is important that the funding system allows them to do so. "