The Office for Students (OfS) has cautioned universities about misplaced optimism in their forecasts for future student numbers.
In its report – Financial sustainability of higher education providers in England – the sector watchdog says “providers will need to reassess their financial assumptions and forecasts”.
The OfS says 122 out of 183 universities project student number increases of more than 5% over the next four years, with most providers anticipating growth in intake from the UK, EU and ‘overseas’ students.
Sector-wide, institutions are forecasting an extra 171,000 students in total, a rise of more than 10%. Around 78,000 are expected to come from the UK and EU, despite the looming threat of Brexit and a projected decline of 5% in the 18-year-old population.
The English higher education sector is in reasonable financial shape, although as this report shows performance does vary between providers – Sir Michael Barber
The report says: “Providers’ forecasts indicate a general weakening of financial performance over the next year, with improvements thereafter. Some of this forecast improvement is due to ambitious assumptions about growth in student numbers.”
It adds: “The majority of these providers are not reliant on such projected growth to ensure their financial viability and sustainability, but they may need to reduce their projected costs if their student recruitment ambitions are not met. We are closely monitoring those providers that are reliant on growth in student numbers to continue to meet our requirements for financial viability and sustainability.”
OfS chair Sir Michael Barber said: “The English higher education sector is in reasonable financial shape, although as this report shows performance does vary between providers. We have registered 337 universities and other higher education providers, and each must demonstrate they are financially viable and sustainable.
“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.
“This is particularly important at a challenging time for the sector overall. Uncertainties ahead include the UK’s future relationship with the EU, possible policy changes resulting from the Augar Review, and increased pension costs. Universities need to have a good grip on costs and base their actions on realistic forecasts.
“It remains our position that we will not bail out universities or other higher education providers facing financial failure. However, we are ready to work creatively with any provider facing challenges – especially if they come to us with any difficulties early.”