loors have been marked with tape. One-way systems have been established. Lectures are moving online. But the monumental task of restoring life on campus will take much more than that.
In the course of a few weeks in March, the British university system up-ended its teaching, introduced social distancing and then, in one leap, left the physical world for the online.
It has been a learning experience for everyone: “It was penny after penny dropping about things in your institution you’d not quite realised,” Sir Chris Husbands, vice-chancellor of Sheffield Hallam University, said. “I think that was true for most vice-chancellors.”
British universities have had to pull together plans for assessment without their normal exams. To sort out admissions for school-leavers who are without qualifications. To refund students for unused services. To help students get online for classes. And a financial shock has already started to be felt: rent rebates have been made for the summer term; and universities are facing up to a summer of lost income from conferences and summer schools.
Staff too are feeling the impact. Jo Grady, general secretary of the UCU, the university staff union, says: “A number of universities moved straight away to [drop] all the hourly paid contracts. So everybody who does the third-year seminars or first-year seminars, the marking – they just lost their hours overnight. And that workload was passed over to the permanent staff.”
But however tough things have been already, they will get tougher. “Looking at my own numbers, I just don’t see how we’ll get from here to there without shutting down a few universities.” The vice-chancellor of a large British university voiced the fear which currently stalks higher education: that universities could be forced to close – or that the coronavirus could be a crisis from which they struggle to recover.
Universities say they have not yet seen an unusual deferral or drop-off rate from prospective students. One higher education manager told me a story I heard time and again: he was planning for “plummeting student numbers next year” but they have “absolutely buoyant admissions and acceptance figures”. Two told me they had record numbers of students putting deposits down on accommodation. No sign of it yet, but they do not doubt that a wave of deferral is coming – which will be a financial disaster.
Things will only crystallise in the summer. And the coming year in higher education will shape not just institutions and university towns in the UK. It will affect regions. It will determine how Britain does research – and where. It will raise serious questions about what price the UK is willing to pay to give disadvantaged young people the chance to rise.
Manchester University published what it considered its worst-case scenario about what might happen next year: 80 per cent of students from outside the EU and 20 per cent of UK and EU students could defer or drop out. On that basis, they estimate, the university stands to lose £270m in a single year.
If you work through that scenario, it means the UK universities would be down by £6.7bn from tuition fees alone. Last year, excluding one-off pension costs, most institutions ran a narrow financial surplus. They made about 3.5 per cent more than they spent. Under the nightmare scenario, the lost fees would drive the average university to a 16 percentage point deficit.
Assume, too, that universities might lose two terms of housing, catering and conference income. Social distancing is cancelling events, preventing full occupancy of buildings – and has already cost them one term of rent. That would add another £1.5bn to the losses, and the average deficit could drift out to 20 per cent. Even if that were a one-off hit, and institutions could be sure that the good times were coming back, it would mean a lot of debt for the sector to carry. For some institutions, it would mean the end.
A worst-case scenario is not a prediction. But universities are preparing for a crisis that, in some cases, could overwhelm them. This is a crisis that could have several phases – and it is expected to hit the big, famous research-intensive universities. But it will not stay there. Smaller institutions dependent on teaching income have much more to fear. It is a crisis that could yet reshape a lot about Britain, its education system, its towns and cities.
The university universe
Universities are peculiar institutions, privately incorporated but firmly part of the public sphere. They are diverse – astoundingly so. And their many varieties are what makes understanding how this crisis might play out so complex.
The size of the bubbles in this diagram shows the raw income of each higher education institution in 2019. They are arranged from left to right by their full-time undergraduate headcount and, vertically, by their physical non-residential floorspace. The size of the bubbles represent income. This solar system shows their astonishing range.
Oxford and Cambridge, on this graph, appear as the vast twin suns, set apart from the rest. If the Oxford University Press (revenue: £866m) were split from the university, the publisher would be the seventh largest higher education institution in Britain – and Oxford University would still only drop to second place. And these figures do not cover any of the floor-space, rental, conference or endowment income attributed to Oxford and Cambridge’s constituent colleges.
But note the asteroid belt of small places at left. They include some new institutions, and some very old. The three tiny Catholic universities – Leeds Trinity, St Mary’s and Newman – are in there. The Courtauld Institute (better known as an art gallery), the music schools and Royal Agricultural College are down there too.
At the very far right, there are the undergraduate giants: Manchester, Nottingham, Leeds, Coventry, Manchester Met and Nottingham Trent – each taking about 25,000 full-time students. And note, too, the physical and income gaps between them. Some institutions have more space per student, and some have more diversified incomes than others.
The sector performs a huge variety of roles. In 2018-19, there were 1.8m undergraduates and 585,000 postgraduates. Even that disguises a universe of differences. Some of those students are research scientists in labs, working on vaccines to the coronavirus. Others are historians in archives. And still others are trainee teachers, nurses or managers.
There is variety in the way universities relate to their hinterlands, cities and towns. Some seem like cuckoos occupying an alien town. Others live in symbiosis – manufacturing jobs have been anchored in Sheffield and Doncaster by research and training at Sheffield’s two universities.
Sir David Bell, the Sunderland vice-chancellor, says: “I look at all the local students who are studying nursing are coming in to train as teachers, or in engineering or computer science. Many of those will stay in the region. In fact, many of them will stay within the greater city of Sunderland. But they themselves have encountered and experienced a kind of social mobility, which is not quite the same as leaving home and never coming back – but actually, is incredibly powerful and important for the city in the region.”
While some institutions are primarily teaching institutions, others see themselves, above all, as research engines: the UK produces 16 per cent of the world’s most cited articles. But the sector is also unusually important domestically: in the US, 14.9 per cent of research happens in universities. In Germany, it is 17 per cent. In the UK, the figure is 26.9 per cent.
If, as the Tory manifesto puts it, they want to “use science and research to unite and level up our country, giving people opportunity and hope”, that is likely to involve a significant role for the universities. But it is also unbalanced. A small number attract a disproportionate amount of UK research spending: inner west London, Oxford and Cambridge attract 41 per cent of state research grants.
The coming crisis will affect all of them, but not all in the same way. Let us go through a thought experiment about a plausible chain of events, based on what universities are planning, that might show how chaos could rip through the sector.
In recent weeks, vice-chancellors have increasingly started to assume that British first-years will, by and large, take their places for next year. Certainly, you can tell a story about a lack of alternatives driving students onto courses. But there are forces pulling the other way, too: do not underestimate problems for students who rely on part-time jobs to fund their studies. So, for our experiment, let’s start with assumption that only 10 per cent of UK first-years defer their places and don’t attend in the autumn.
The hopes for non-UK students are much gloomier. Recruiting EU students might have been tough anyway: it would have been the first admissions round since Brexit. But the UK remains a good location for them: they are, for now, still treated like UK students for the purposes of fees and financing. Let us assume new arrivals from the EU are expected to be down by one quarter.
Looking further afield, several vice-chancellors brought up worries
about critical foreign coverage of Britain’s handling of the coronavirus deterring would-be students from outside the UK or EU – notably critical write-ups in the Indian press. Visas worry a lot. As one vice-chancellor put it to me: “They’re keen, but most of these young people have not met the Home Office yet”. For our thought experiment, assume new non-EU students get halved.
People already on programmes may defer too – in some cases, because they cannot see how they can do their research or receive their tuition in a socially distanced manner. And the drop-out rate might well rise. For our modelling, we also assume that 5 per cent of home and EU students will not return next year and that 10 per cent of non-EU students decide to delay their return for a year – if only because the practicalities of returning may defeat them.
These numbers are not the Manchester nightmare, but are at the moderate end of the scenarios being considered by universities. In this thought experiment, a £2.5bn fee loss moves the average institution from a surplus of about 3.5 per cent to a deficit of about 4.5 per cent. Losing the equivalent of two terms of rents and conferences could push that average down to below 9 per cent.
The future of research
The hardest hit institutions in our scenario in absolute terms include a lot of very famous institutions: UCL would lose £111m in fees. Manchester, King’s, Edinburgh, Leeds and Warwick more than £60m. If you look across the whole so-called Russell Group, a “mission group” of 24 research-intensive universities, the losses are very large.
The reason research-intensive places are so exposed to this crisis is that one of the clearest relationships in the university system is between research and fees from non-EU students. This is usually presented as a virtuous cycle: high prestige institutions attract foreign students, who will pay a lot for the privilege.
But there is another way to look at it: the government’s increases in research spending have not kept pace with the cost of the universities’ work. So institutions have expanded research spending and filled in the gaps in their research budget with fees from overseas students.
Analysis by the Higher Education Policy Institute found that English and Northern Irish universities received around £8.5bn for research in 2017-18, but spent £12.2bn. The government’s internal numbers are very similar. Britain funds its research base with grants, and by getting universities to run profitable teaching businesses to make up some of the shortfall.
Overseas students are a big part of that. HEPI found that, looking at
students at English and Northern Irish institutions, they paid £4.9bn in fees and received £3.5bn of resources in 2017-18. These 272,000 non-EU students paid, on average, £5,100 more than it cost to educate them. In addition, they rent rooms and buy food from the universities.
Koen Lamberts, vice-chancellor of the University of Sheffield, said: “The main stability risk to UK higher education from Covid-19 is not that home students defer, or go to their local institution. It is that international students do not turn up in number and that their absence puts the UK’s research capacity and capability at risk.”
This is a risky business model – universities have made long-term commitments to research and lenders based on selling a flow of short courses to overseas students. As direct government subsidy for buildings dropped off, they also borrowed more: since 2012, the average institute went from borrowing 21 per cent of their income to 41 per cent.
Some of them, in addition, are very exposed to revenue from student rent, catering and conferences. A two-thirds hit to that income line would cost Durham more than 8 per cent of its total revenue, with York, Leeds and the LSE all set to lose more than 5 per cent. Our scenario shows the LSE would suffer the biggest relative hit overall of this group – an 18 per cent fall.
Warwick would lose almost £95m from rent, conferences and fees – slightly less than the university’s own central estimate for what will happen. Stuart Croft, the vice-chancellor at Warwick, said: “We have been very open with our staff and students. In 2020/21 we predict that the impact of the pandemic will be to reduce our income by a total of £105 million.”
These institutions have some flexibility: lots have covenants on their lending that have required them to maintain a reasonable operating surplus each year, so they entered this period of uncertainty better placed than a lot of businesses. The Russell Group, as a whole, holds £4bn of cash on its balance sheets (although Oxford and Cambridge hold £1.2bn of that).
Building projects which can be cancelled are being cancelled. One Russell Group vice-chancellor told me: “Anything under construction, anything under contract continues, we don’t waste money… But we’ve got plenty of other stuff that’s still pre-contracts. So we’ve been able to pull out… to help the cash position.”
Nottingham enters this crisis with the least cash on hand. But this class of universities is relatively asset-rich, and has room for more borrowing or – if it comes to it – asset sales. Professor Croft said Warwick has “put in place a clear and bold recovery plan built around £50 million in savings and a £50 million bank loan”. The government has, in addition, brought forward the timing of payments to ease any cash-flow issues. These institutions do have room to breathe.
The universities, however, need to know what comes next. Even if we get a vaccine relatively fast, disruption could take years to work its way out. Institutions, at this moment, do not know what a sustainable business looks like for the 2021-22 academic year; they will only get a clear sense of what September looks like in August.
Their worry is that the old world may not be coming back, so they need to cut research spending to get back into balance. But if they cut too hard now, they will not be able to bring back what was lost. Given that a lot of scientific research relies on a continuing pipeline of students becoming post-doctoral researchers, university leaders fear delay could lead to scarring of their capacity. They worry about the sector’s ability to press pause on some research projects and then pick them up later.
Some of the plumbing of the research machinery is already freezing up. Michael Arthur, provost of University College London, said: “I’m concerned about the early career researcher pipeline. For example, we have 1,288 members of staff who are on funded contracts that end between April and September 2020. Many of these are post docs who would ordinarily get a new grant or might change departments, institutions or go into industry. What I’m worried about is that these opportunities may no longer be there and the UK’s research infrastructure will be deeply damaged in the long-term as a result.”
A domino effect?
The problems, however, will not end at the edges of the Russell Group. In our scenario, the 24 Russell Group universities are expected to run up about half of the losses in fees – just over £1bn. But our thought experiment assumes that they will be supported by a very controversial government crisis policy: the continued market in university places. A policy that may allow them to offload some of their problems onto other universities.
One of the highest profile domestic policy arguments of recent years was the UK coalition government’s decision to raise from £3,250 per year to £9,000 the maximum tuition fee that English universities could charge to UK and EU undergraduates. At the same time, direct subsidies from the government to the universities were cut.
This spared universities austerity as the average “unit of resource” per student shot up. But the policy also tied the income of universities more closely to student recruitment. There were stronger incentives for institutions to expand.
And there was, in the years after, an even more important change: a gradual removal of the so-called “number control” system. These regulations had specified the maximum numbers of students that each university was allowed to recruit. The number controls had protected the Treasury from the potential cost of a surge of student numbers, but also stabilised institutions because they prevented would-be competitors from growing.
The root ambition of removing the controls in England was to fire up competition, to encourage universities to fight for more students. Some really did. Coventry has expanded to a satellite campus in Scarborough on the Yorkshire coast and into London. UCL has grown, too – in part by absorbing other institutions.
Conversely, a large number of universities have dramatically shrunk. In some cases, this was part of a deliberate strategy. London Metropolitan University, a university which was a byword for financial problems in the sector, deliberately slashed its courses in an attempt to become a compact, viable university. In other cases, however, the fall was just a grinding loss of ground.
In the background, universities were also watching the demography. The number of British 18-year-olds is about to start picking up as the mid-2000s baby boom reaches university age. The combination of potential growth ahead, no number controls and a reduction in central government grants to cover infrastructure costs also led institutions to start to borrow more to position themselves for the future.
Between 2012 and 2019, institutions went from having long-term debt equivalent to 22 per cent of income to 33 per cent as they competed for students and positioned themselves for future growth.
Scottish universities were not subject to the same market regime as English universities – they are more shielded from what may happen in England because they get a higher share of income from the taxpayer directly: Scottish students pay no tuition fees and there is a cap on Scottish student numbers at Scottish universities.
But those institutions are competing for research grants and for students from outside Scotland. Indeed, they are very reliant on students from outside Scotland. So Scottish universities – who lacked the financial leg up that £9,000 fees gave their counterparts in other parts of the UK – are now more indebted, on average, than the rest of the UK as they have had to race to keep up.
That was the context for this crisis: a precarious sector. Grady says: “You’ve seen an absolute explosion of the misuse of fixed-term contracts, zero-hour contracts for people who are delivering the bread and butter of teaching. About 50 per cent of all teaching-only or teaching-dominant stuff are on some type of fixed term contract. And 40 per cent of them are on kind of hourly contracts.”
As this crisis emerged, one of the first fears was that more prestigious universities might try to fill empty seats by raiding the normal recruitment flows of other institutions – something that would have been impossible during the number controlled period.
In late March, Sir Chris, the vice-chancellor of Sheffield Hallam, called for a suspension of “the market in admissions which …left as it is, will generate serious institutional instability.” Baroness Amos, director of SOAS, a humanities university in central London, said: “We were saying to government: ‘look, you don’t want chaos in September.’”
Institutions more confident of their power lobbied the other way around: in an internal email between Russell Group vice-chancellors, one wrote: “We are dealing with enough disruption. We really don’t need more unnecessary perturbation… If [student number controls] were introduced, this government would relish the future control that it gives them over the sector and the total costs for HE as we hit a demographic upturn.” “
The net result, however, has been something with which neither side is wholly happy. The government has introduced number controls, conceding the point that the Russell Group vice-chancellor feared. Number control is back. It may not go away again.
But, for this year, institutions are allowed to recruit up to 5 per cent more home and EU students than they had planned for the year. But that “cap”, as it is known, is quite high. It will allow a lot of institutions to expand a long way.
Assume for now that universities’ plans for the year ahead were much as for last year. (In truth, they usually plan for expansion so the number will be higher.) In that case, those 24 Russell Group universities would be able to recruit 5,000 further students.
If, in addition, EU student numbers fall back by 10 per cent that would open a further 7,500 spaces that the Russell Group, like other universities, would be allowed to fill domestically. This is space that Russell Group vice-chancellors expect one another to use.
In working through our scenario, I assume that they – and all other institutions – will try to use those 12,500 places, largely successfully. Even if the Russell Group universities have not planned for expansion, they can transfer about £100m of fee losses to the rest of the sector.
A new so-called “Clearing Plus” process is intended to turbo-charge competition. From early July, students without an offer from a university will be presented with a list of potentially matching courses with places. This could help the bigger, more prestigious institutions to grow.
But there are some grounds for scepticism about my assumption that the Russell Group and other better known institutions will find it easy to pull in students. First, some grander universities may end up fighting for one another’s students, not for students from outside. Some high-prestige institutions could suffer big losses.
Second, being an old name with a lot of labs is not the only thing. Southampton, inside the Russell Group, has shrunk (against its will) while Coventry, Anglia Ruskin, De Montfort and Sussex have all been big growers.
If working out who might gain from the market is hard, working out who might lose is a fool’s errand. Is Coventry more vulnerable because it has grown a particular emphasis in business, law and social studies –cheaper-to-run courses available in a lot of places. Or is it, above all, an effective recruiter in these subjects?
Students who have made choices may be reluctant to shift. A poll commissioned by London Economics, a consultancy with a deep education expertise, found that only around a quarter of students say they would consider switching their choices after receiving an offer.
Some less fashionable institutions may also prove more resilient than they look: Sir David, the vice-chancellor at Sunderland, says he estimates 85 per cent of his domestic students commute from their family homes – and they have a lot of mature students. These are not students who could easily be spirited away.
Size is a complicated thing in this process, too. On the face of it, the “Cathedrals Group” looks troubled – it is a flotilla of little universities (some of which have persistent money trouble). But they have advantages, too. Some of the small institutions are also serving specific groups who do not want to go to a bigger place. Newman, a Catholic university in Birmingham, has a following among local Muslim families. Peter Neil, the vice-chancellor of Bishop Grosseteste University in Lincoln, who chairs the group, said: “A huge institution based in a city is not the right choice for a number of learners… it’s horses for courses.”
Subject mix will matter, too. The Cathedrals Group – which started as church school teacher training colleges – trains around one in five teachers in England. That will be a source of resilience, as will other public service training courses which often are subject to number controls. Neil said: “We are hopeful that the focus following this on key workers in society will highlight the strengths of a number of our institutions – not just teachers, but a number provide nurses, health care workers, social workers, and these are going to be key to rebuilding communities.”
Indeed, vice-chancellors and Whitehall talk about a “soggy middle”. The 1994 Group, a (now-disbanded) grouping of mid-sized universities contains a number of institutions with some serious issues – partly because of their size. These institutions, with annual incomes in the region of £100m to £300m, are too large to specialise: they compete with everyone. But they are also not well diversified. Their prospective students will be targeted by bigger names and newer ones.
In our thought experiment, Loughborough, Essex and Royal Holloway would lose 10 per cent of their income from rents, catering and conference cancellations alone. There is a chance that institutions will need to be joined to others to save costs, courses, research and to convince lenders (including the Treasury) that they are sustainable. I heard three different vice-chancellors propose three different merger partners for Sussex – ranging from back-office functions to full-blown marriage.
SOAS is one of the institutions that sector leaders worry about because it is fighting its way back from the brink already. Clustered next to UCL, it has been selling property, cutting back and driving forwards with recruitment. It found rather unexpected success last year when it recruited 300 students onto a foundation year – a pre-undergraduate course to prepare students for student life. But it is small and half of its student body is international.
What comes next
This worry is the context in which vice-chancellors are planning for the autumn term. Cambridge has announced it will take lectures online for a year, Bolton has promised a Covid-secure campus with temperature checks, compulsory masks and bikes to save students from using public transport. But there is some scepticism about how far it is possible to reopen.
Grady said that decisions so far reflect how universities “think they fit within the sector and what they think they need to promise to students so that students don’t defer or don’t cancel”.
Some of the logistical challenges are formidable. Is there the space? At Queen’s Belfast, one lecture theatre which held 253 students has been cut back to 42. A seminar room for 60 now holds 12. Lots of institutions do not have rooms large enough to cope.
Indeed, universities have tended to be thrifty with space. One academic described leading a seminar at a room where “we sit so close together, I accidentally gave a student a nosebleed by head-butting her”. One academic at St Andrews teasingly interrupted me: “I will not be teaching outdoors in the winter on a campus in Scotland that faces the North Sea, if that’s your next question.”
Even if there are larger rooms, can you have the same learning experience if participants are spread across an area the size of a tennis court? Academics may be asked to turn seminars into smaller group sessions, and then teach them repeatedly. A socially-distant campus could be extremely labour intensive. The inevitable answer may be continuing distanced learning.
But what of courses which are harder to run remotely? Sir David, vice-chancellor at Sunderland, said: “If you’re doing a practical course, with placements and all of that, whether that’s teaching or pharmacy, you want to know that you’re going to get face to face experience.” In London, UCL is currently piloting how lab teaching could work.
The worst case scenario is an aggressive second wave of the virus in the autumn: “We don’t want to bring people over [from abroad], give them some online seminars then send them back,” the vice-chancellor of one large Russell Group university told me. Institutions want to be resilient to that.
At this point, we do not know the size of the student number shock, nor which institutions will suffer in a market-driven shake-out. We will not know until the summer. But we do know the politics.
Within government, there is great concern about allowing the research base to wither. The Russell Group is appealing for the government to, in effect, double a major grant stream which is intended to support research capacity (a grant known as ‘QR’) and to pay the full cost of public research work – a request probably a little shy of £2bn. It would be a blunderbuss bail-out, not a targeted one. But might fit the government’s priorities of supporting research.
Conversely, we know that there are institutions about which the government is deeply ambivalent – some vice-chancellors say ‘hostile’. They are concerned about course quality. Baroness Wolf, now a Downing Street adviser, was an author of the Augar Review, published last year, which raised serious concerns about some courses at some teaching-led institutions.
A key part of the evidence base for this concern is a study which identified 12 institutions where 29 year-old men earned less than if they had not gone to university (there are only two institutions where this is true for women). Officials also talk about around 23 universities where they have concerns about career progression.
But these statistics contain hidden depths: for example, Anna Vignoles, a professor at Cambridge and one of the authors, warns: “If you assume, graduates are mobile – and in the heads of many ministers, they are – then it’s very relevant to compare graduate outcomes across the country. But if you are an institution recruiting your students in Northern Ireland and they will only stay in the Northern Ireland labour market, then what is the relevant comparison in terms of their earnings?”
The national politics are less nuanced: if institutions in this bracket, such as Bolton, West London or Wolverhampton, get into trouble, they may get short shrift from the Treasury. Gavin Williamson, the education secretary, has announced “a restructuring regime, through which we will review providers’ circumstances and assess the need for restructuring. Where action is required, this will come with attached conditions.” This is not an unfamiliar refrain: officials and ministers have been promising that they would not bail out universities for years.
It is suspected across the sector that the government could use this crisis to turn some providers away from three-year honours degrees and towards lower-cost intermediate qualifications and more technical education. This might not involve removing the word “university” from the name. But they could be steered to middle-tier technical training – a gap in UK educational provision which policymakers have limply been trying to address for a century.
Do not underestimate the cost of submerging a university into a technical college. They will contain thousands of students with portions of a degree. And even the smallest institutions are also big employers. They are often key supports of local economies and deeply enmeshed within them.
Take Bolton: a local economic assessment by Bolton council lists the university as a top local employer. Half of its graduates stay in the local area. The council notes that investment from the university is also very important in regeneration, and it runs a UTC on its campus – a technical training school for 14-to-19 year-olds. Universities also have political constituencies. Particularly since 2019, a large number of Tory MPs have seats near some of these institutions in the north of England and midlands.
Things could go very badly wrong for UK universities in the next six months. Students could stay away en masse. Or they might turn up in the autumn to meet a second wave of the disease in a country that has not coped well so far with the pandemic. It is possible that we end up with a situation with a lot more state control of the sector – one that contains fewer institutions.
Or maybe students who have spent months locked down with family will decide there’s nothing for them at home and pay up anyway.
Illustration by Natsko Seki
Photographs by Getty Images