Financial resilience in changing times
How can Higher Education finance teams plan for the future?
The UK Higher Education sector finds itself at a pivotal juncture. Changing politics, regulations and socioeconomics means that the financial model that has underpinned operations for over a decade is now showing signs of strain. For finance leaders across the sector, the challenge is no longer simply about balancing the books; it’s about reimagining the institutional model to ensure long-term viability.
To support the higher education sector through this period, in this insight we have summarised the main influencing factors and outlined our key priorities for Higher Education finance leaders.
Influential changes
Although not new news, recapping the macroeconomic changes that have led us to this juncture is crucial to effectively forward plan.
Changes in income
Due to policy changes and global uncertainty, the sector’s long-standing reliance on international student income has been disrupted. In addition, domestic tuition fees remain capped, eroding in real terms year after year. According to the Office for Students (OfS) nearly half of the UK Higher Education providers are forecasting deficits this year, with liquidity and surplus levels falling across the board.
Although the Department for Education (DfE) forecasts a 26% increase in student loan outlay by 2029–30, driven by rising average loan amounts and a projected 10% increase in undergraduate entrants, this positive news is overshadowed due to the fact that for the past few years, the DfE’s repayment of student loan calculations provided to the Office for Budget Responsibility were wrong. As Wonkhe’s Jim Dickson summarises: “That matters because when Michelle Domelan and Nahdim Zahawi were selling the switch in the last Parliament, they did so on the basis that student finance would be put on a more sustainable footing by ‘ensuring more students are paying back their loan in full’”. This places universities on the backfoot when it comes to the government's move forward spending strategies.
Case study: Cardiff UniversityConsequent to these funding changes, the first six months of 2025 has bought news from some major universities of job cuts because of reduced funding levels. Despite being the largest university in Wales and a member of the Russell group, Cardiff University has confirmed plans to cut 400 staff and close several courses in January 2025, due to the declining international student applications and rising cost pressures. With a reported £30m black hole in its budget, it’s clear that change is needed in order to survive. Cardiff University is certainly not alone in this – in 2025 alone, Hull, Durham, Edinburgh, Newcastle and Strathclyde Universities have all announced significant job cuts in an attempt for long term financial sustainability. |
Changes in politics
There have been a myriad of changes to the political landscape over the past ten years. Most recently with the new Labour government promising a more strategic approach to education and skills. The 2025 Spending Review signalled increased investment in further education and skills, but the implications for higher education were unclear. While there is talk of inflation-linked tuition fees and a renewed commitment to research and development, the sector awaits clarity on whether these will translate into meaningful financial relief.
The Industrial Strategy, aligning with the government’s broader ‘Plan for Change’, places universities at the heart of regional economic development. Yet, this ambition is not yet matched by a funding model that enables institutions to deliver on these expectations.
Culminating regulatory pressures
Rising costs, demographic shifts, and a more competitive global education market, highlights that the underlying pressures for universities are structural. Institutions have responded with cost-cutting measures, course closures, and capital deferrals, but these are short-term fixes.
The OfS continues to emphasise financial sustainability as a condition of registration, with increased scrutiny on estates investment, capital deferrals, and reliance on short-term borrowing. There is also growing concern over the rise in subcontracting and franchising arrangements, which require robust governance.
A 2020 research study by Henley Business School highlighted concerns about the potential for collapse of some UK universities due to ineffective governance. In particular, the report found that 30% of council members lacked external governance experience, highlighting the importance of a qualified board in sound decision making.
Case study: University of DundeeNews in June 2025 highlights the issue with continued governance failings, as the publication of an independent report into the University of Dundee’s financial collapse sees the principle and two senior members of the governing body quit, as the problems were deemed “self-inflicted”. These criticisms covered a wide range of governance issues, including the culture of the university’s leadership team, the lack of accountability by the governors and senior officers, the quality of management information and the lack of agility in responding to financial challenges. The report reflects that balancing the books is only one of the many parts of the governors’ responsibilities; what’s equally if not more important is the robust governance of the institution to respond to a changing political and financial environment. |
How can the sector respond?
In response to the current challenges, Universities UK has called for a fundamental rethink of how universities operate. Their Transformation and Efficiency Taskforce advocates for a shift from competition to collaboration, urging institutions to explore shared services, structures, and joint ventures to unlock efficiencies and preserve access. This is not merely about cost-cutting. Strategic collaboration can enable universities to maintain provision in vulnerable disciplines, meet local skills needs, and invest in digital transformation. It also offers a pathway to resilience that does not rely solely on student recruitment growth, a strategy that is increasingly risky.
To this end, the role of the finance function is evolving. Finance leaders must act as strategic partners, helping to guide their institutions through uncertainty. In response, we see several strategic priorities emerging:
- Integrated scenario planning: Institutions must move beyond linear forecasting. Finance teams should develop robust, multi-scenario models that account for volatility in student numbers, inflation, and policy shifts. These models should inform not just budgeting, but strategic decision-making at the highest level.
- Capital discipline and investment strategy: With borrowing costs rising and liquidity under pressure, capital allocation must be tightly aligned to institutional priorities. Investments in digital infrastructure, estate rationalisation, and sustainability should be evaluated not just on financial return, but on their contribution to long-term resilience.
- Cost transformation: Efficiency must be pursued through structural change. Shared services, automation, and process redesign offer opportunities to reduce cost while enhancing service quality. Benchmarking and cost transparency will be critical tools in this effort.
- Revenue diversification: Institutions must look beyond traditional income streams. Lifelong learning, micro credentials, commercial partnerships, and philanthropic income all offer potential but require investment, agility, and a clear value proposition.
- Governance and risk management: As financial risk increases, so too does the need for strong governance. Boards must be equipped with timely, transparent financial information and a clear understanding of risk. Finance leaders should ensure that risk appetite is clearly defined and that mitigation plans are in place for downside scenarios.
How Crowe can help you
The coming years will test the sector’s resilience, but they also offer an opportunity to reshape the financial and operating model of UK higher education. Institutions that embrace collaboration, invest in transformation, and align their financial strategy with their mission will be best placed to thrive.
Crowe are working with institutions across the UK to navigate this transition supporting with scenario planning, financial modelling, and governance reform. If you would like support specific to your organisation, please get in touch with your usual Crowe contact.
Contact us
