What does Brexit mean for universities’ financial health?
When it comes to their finances, universities have had a torrid past few months. Towards the end of 2017, the head of the National Audit Office argued that universities would be accused of mis-selling if they were regulated like the financial services sector, in terms of the value for money they provide. More recently, vice-chancellors have been excoriated for their incredibly generous levels of remuneration at a time of growing student debt, while lecturers have gone on strike over proposed changes to their pensions that could leave them £10,000 worse off in retirement. With Jeremy Corbyn having campaigned on a platform of scrapping tuition fees during last year’s general election, Theresa May has attempted to shore up her image with young voters by warning universities about the burden their costs place on students. Before Brexit is even brought into consideration, the financial outlook for higher education is clearly challenging. Will leaving the EU offer university bursars any cause for optimism, or is it simply one more problem to grapple with?
A system under strain
Universities are currently running a gauntlet of students dissatisfied with the value they are getting from their courses, reinforced by politicians who are increasingly vocal in support of those students (whether out of principle or electoral self-interest depends on the politician). Not that the political class is blameless in the current debate around university finances. When in 2012 the coalition government authorised the steep increase in tuition fees to £9,000, the assumption was that graduate earnings would balance out the higher debts being incurred, to the benefit of both students and the Treasury. Unfortunately, that proved to be a misjudgement, with the majority of graduates now expected never to pay off their entire loan.
The government sought to reduce taxpayers’ exposure to the cost of higher education by restricting maintenance loans and increasing tuition fees’ interest rates, much to the chagrin of students. From universities’ perspective, the funding settlement remains imperfect, when the cost of high-quality teaching is not covered even by the increased fees (endowments and international students’ even higher fees help to make up the difference). How to make higher education funding less burdensome for students, more accurately matched to universities’ actual costs, while at the same time representing value for taxpayers? In the face of this Gordian knot, rather than Brexit presenting a sharpened sword, it can only offer yet more entangling rope.
Brexit’s expected impact on university coffers
In its most recent annual report on the sector’s finances, Times Higher Education flagged Brexit as one of the most serious challenges facing universities. This varies in intensity according to how dependent an institution is on fees from EU and overseas students (the latter category paying a great deal more). At 15 establishments, including a number of London’s internationally competitive universities, over 25% of total income is derived from non-UK students. For these institutions, like the global-facing London School of Economics, any tightening of the student visa policy or impression that Britain has become less welcoming as a result of Brexit could leave a serious dent in student recruitment.
Grant Thornton’s chief not-for-profit operating officer, quoted in the report, emphasises that the potential loss of fees from foreign students is only one part of the problem. “If universities have a lot of international research and teaching staff there is some nervousness that these are the people who will be lost [due to Brexit]”, posing an issue of lecturer supply that could exacerbate any decline in demand from lucrative overseas students.
The Higher Education Funding Council for England concurs with that outlook, its financial forecasts running up to 2019–20 repeatedly citing the uncertainty generated by Brexit as a significant concern for universities. Setting aside income from students’ fees, there is also the risk of losing access to EU funding, if the UK government fails to negotiate ongoing participation in schemes likes Horizon 2020 and its successor programmes. Some universities may even suffer when it comes to securing national grants from British funding bodies; if their performance in the research excellence framework suffers as a result of EU staff brain drain, they will be less competitive in the struggle for UK research grants.
What if Brexit leads to a changeover at Number 10?
Whether David Cameron gambling that a referendum would silence his party’s Eurosceptics, the Labour establishment doubting that Corbyn could endure as party leader, or May believing that a snap election would strengthen her majority, nothing can be taken for granted in politics at present. That said, without intending to make an actual prediction, Brexit certainly has the potential to play a role in defenestrating a second Prime Minister, or perhaps even the government as a whole. Labour are far more enthusiastic than the Conservatives about reforming university funding to reduce students’ debt burden, another financial challenge that Brexit may inadvertently bring about for the higher education sector. In the unlikely event that Brexit is stopped, university bursars may well end up breathing a sigh of relief.
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