London’s higher education industry appears to be booming, with London universities recording massive profits, but the financial picture is more complicated than it looks.
University College London (UCL) brought in almost £1 billion in 2022-23 from tuition fees and education contracts, according to a new study by Edumentors.
Moreover, King’s College London (KCL) brought in over half a billion pounds for the same academic year.
However, the financial health of London’s universities will be impacted by the Government’s recent clamping down on international students – who are a huge source of revenue for higher education in the capital.
London School of Economics and Political Science (LSE), for example, saw almost two-thirds of their student population come from international students, and UCL more than half.
These are both way over the national average, which is just 30%.
Recent Conservative Government policy has made it tougher for international students to study within the UK.
This was done through measures such as banning masters students from bringing in dependents.
The impact this is having on university finances is already showing, with Home Office data finding that study visa applications from January to July 2024 were 16% lower than the same period in 2023.
These measures are impacting London’s universities, as whilst home fees are capped, universities often charge international students four times as much, and are reliant on this extra cash flow.
Whilst the measures do put London’s universities at risk, the funding model itself raises questions both of ethics and stability.
Global Governance and Ethics student at UCL, Nick Miao, shared his thoughts on UCL’s funding model, which is reliant on international students.
Miao said: “Students are getting the same quality of teaching.
“The problem comes when you’re paying £30k, because when you’re an international student, you’re looking at the student experience as a whole.”
He believes that because international students pay such high fees, this means they often cannot afford to get involved in extracurriculars, and so don’t get to take advantage of the whole student experience.
Miao added: “The whole operation is really run like a business.
“Blind pursuit of economic growth in a university doesn’t really work because your product is students, and students are real people.”
Once you take away UCL’s expenses, it was left with a £216.3 million surplus for the 2022-23 academic year.
Asked what UCL should use this money for, Miao claimed: “Staff, lecturers and postgraduate teaching assistants are chronically underpaid.
“There’s a big disparity between what the teaching body and university management earn.”
Rose Stephenson, Director of Policy and Advocacy at the Higher Education Policy Institute (HEPI), believes university leader salaries are justified.
Stephenson said: “They’re running global organisations, they’re overseeing tens of thousands of people.”
Asked about the wider financial picture for UK universities, she said that the higher education sector is losing a billion pounds a year on teaching undergraduate students paying home fees.
Stephenson pointed out that HEPI’s findings have shown that 70% of institutions are likely to return a deficit next year, and about 40% will have fewer than 30 days liquidity.
She explained: “Universities are really struggling financially at the moment.
“In theory, if all of their income stopped, they would only have 30 days worth of cash in the bank.”
Furthermore, whilst UCL and KCL both appear to have massive incomes, their high student numbers means they have high spending requirements.
UCL has annual energy costs averaging around £50 million.
When incomes are compared with the amount of students, LSE appears to be London’s only university in a stable financial position.
This is most likely due to its intake of international students being more than double the national average.
Therefore, even LSE’s financial stability is at risk with ever harsher immigration policy expected.
London’s higher education institutions are only just getting by financially and are heavily reliant on a precarious income source.
So with the amount of students from abroad declining, the picture looks bleak for their futures.
Stephenson added: “I don’t have the answer, and if I did, I would be very popular.
“You could ask more of graduates, but that’s a hard ask. You could look to the public purse, but there isn’t really any public money.
“You could look to employers for some kind of funding for the higher education system, but they’ve just had the National Insurance contribution hike.”
A UCL spokesperson said: “UCL is ranked among the world’s top 10 universities for education, research and innovation, and we were recently named the Sunday Times University of the Year 2024.
“This is testament to the dynamic, diverse and thriving community of UK and international students and staff, who make UCL such an extraordinary place to study and work, and this is reflected in our National Student Survey results that shows overall satisfaction consistently rating above 75%.
“The income we receive at UCL is spent on directly on student education, support and experience, as well as our world-leading research, that informs our inter-disciplinary teaching.
“Furthermore, feedback from our regular staff and student surveys help inform the ongoing improvements we make to our student and working culture experience, along with the important updates we need to make to our large and historic London campus.
“We are proud that UCL graduates across all our academic disciplines go on to have highly successful careers, working globally for private sector companies, governments and public sector organisations, research institutes, charities, NGOs, and as entrepreneurs.
“Our graduates take with them extensive networks that bring life-long social, cultural and professional benefits.
“UCL has the most students of any UK university, which directly reflects our tuition fee income.”
The UK’s higher education system is stuck.
Students are growing increasingly dissatisfied with how their tuition fees are spent, calling for a better allocation of resources to enhance the university experience.
But universities don’t seem able to fund these improvements.
If these financial challenges aren’t addressed, the UK’s once illustrious higher education system could face collapse.
As the situation grows more dire, the pressure is high to find a sustainable solution to protect the future of all UK universities.
Picture credit: Surya Prasad via Unsplash
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