Universities will collapse without £2.5bn emergency loan pot, report warns
The Government should draw up a £2.5 billion emergency loan pot to stop ailing universities from collapsing, a new report has said.
The lack of a plan to deal with the potential collapse of some UK universities is causing an “unsustainable level of uncertainty” for students, according to consultancy Public First and the University of Warwick.
They called on Government to take urgent action to prevent universities going bust and warned there is a “contagion risk” for the entire higher education sector if one goes under.
In a report published on Friday, they urged ministers to create a £2.5 billion “transformation fund” to provide state-backed loans to universities that could prove cash injections would save them.
Public First said repayable loans would act as a lifeline to universities that have plans in place to secure their future but not enough money to enact them.
The report called for the issue to “be near the top” of the new Government’s priority list as “everyone shares the risk from a disorderly exit”.
Crisis talks for emergency plan
It comes as ministers hold crisis talks about the future of several universities amid fears that some could be pushed under later this year.
The Departments for Education and Science, Innovation and Technology are understood to be in accelerated talks to produce an emergency plan if one or more fails.
The Telegraph reported earlier this week that top universities are preparing for potential takeovers of former polytechnics facing financial crises, with growing fears about those without the long-standing reputation of some of their peers.
About 40 per cent of universities in England are expected to run budget deficits this year, according to the Office for Students.
Three universities are thought to be in serious financial peril, and universities believe Labour will pressure the sector to manage their own financial problems rather than provide a taxpayer bailout.
Bridget Phillipson, the Education Secretary, said on Monday that universities were expected to manage their own budgets before seeking help from the taxpayer.
Speaking to the BBC Radio 4’s Today programme, she said: “Universities are autonomous and there are expectations around how they manage their budgets, and I would expect them to do that without seeking any calls on the taxpayer.”
The report called for the Government to create a special administration regime for higher education to protect students in case universities go bust. It said this could be modelled on elements of other national infrastructure, including rail, designed to safeguard national public assets under the law.
It also suggested the role of England’s higher education watchdog should be rebalanced to take a “more proactive” approach to managing and forecasting financial risk.
Universities have been hit by a dramatic drop in international student numbers, which had been propping up the sector as domestic tuition fees remain frozen at £9,250.
Home Office figures in April showed a Tory crackdown on foreign student visas has slashed the number of dependants they are bringing to the UK by 90 per cent.
The number of overseas students applying for visas also fell by 15 per cent, from 39,900 in the first quarter of 2023 to 35,000 in the same period in 2024.
‘Crucial inflection point’
Jonathan Simons, partner and head of education at Public First, told The Telegraph the crisis could soon become critical for many universities if student numbers drop further.
“This summer is a really crucial inflection point - domestic student and particularly international student numbers could be the trigger for a lot of universities,” he said.
“By this autumn, a lot of those risks may have begun to materialise”
A Department for Education spokesperson said: “We are committed to creating a secure future for our world-leading universities so these engines of growth can deliver for students, taxpayers, workers and the economy.
“We recognise the immediate financial strain that some providers are under and the Education Secretary has been clear that we are working closely with the Office for Students to monitor risks and protect students. We will set out further details shortly.”