91探花

As the new academic year gets underway and the dust settles following results day and clearing, we can see some of the challenges and opportunities facing the sector starting to emerge.
After A Level results day in August, Lisa Randall noted that “the distribution of students will be key to financial sustainability”, and the detail behind the application numbers reveals the impact of this distribution. The data for 30 August 2024 includes:

• Higher tariff institutions at 174,800 have exceeded their highest level as at this point in a decade (2021 – 174,240).
• Medium tariff institutions at 158,260 are down from 2023 and broadly in line with the levels across the last four years, though at the lower end of the range, and at their lowest since 2015.
• Lower tariff institutions at 154,830 have fallen from 2023 and have been in general decline over the last decade.

Student recruitment can thus perhaps be described as a game of two halves this year (with a bit in the middle!). Higher tariff providers have generally recruited well and therefore have secured the income necessary to continue to provide degrees very much in line with their standard delivery model focused on undergraduate and postgraduate degrees. It seems clear that the perceptions of value, prestige and status of the higher tariff providers continue to resonate with students and parents.

Nonetheless, given that there has not (yet) been any fee increase, these higher tariff institutions are in a position where delivering as efficiently as possible will maximise the return. 

The lower tariff providers have not had such a strong outcome, and some are now facing very difficult financial positions, with an immediate need to take action to manage the cost base. This is challenging, as under-recruitment never falls neatly on specific courses. Running multiple modules and/or programmes with low student numbers makes it difficult to generate a return, given that costs have a minimum level based on teaching hours, which remains constant regardless of cohort size. Additionally, there is a medium-to longer-term need to consider the sustainability of the existing offering and operating model.

Changes in student composition

There has been a notable change in the composition of the 2024 cohort: 

• Fewer older entrants (continuing a long-term trend)
• A smaller proportion of international students
• A higher percentage of students from disadvantaged backgrounds.

These shifts in student profile, as shown in the , will impact the cost base as well as other key indicators, such as B3 and league table rankings, which influence student and parent perceptions during future recruitment cycles.

Indeed, the growth in the higher tariff institutions is very much in the 18-year-old entrants, increasing by over 13,000.  UK demographic projections indicate that the number of UK 18-year-olds will peak in six years (2030), before entering a general decline until 2050. This suggests that competition for this key cohort will remain strong and become increasingly competitive. If current trends continue, higher tariff providers are likely to capture a larger share of what will be a shrinking pool of entrants.

As a result, it may be that we see a greater divergence in operating models and offers between the higher and medium tariff providers, and the lower tariff providers perhaps increasingly looking to other offers such as apprenticeships as a growth opportunity. The linear delivery model attracts those looking for the ‘university experience’, whereas other models may attract those cohorts where numbers have fallen, including older entrants (who may also be working).

Development of more flexible provision linked to lifelong learning and a different model from the three-year route could attract different entrants in the future, for example, older entrants and those reskilling. There may also be a trend that continues to increase towards virtual and hybrid provision, and we have seen providers already investing in the technology and launching programmes delivered wholly online or in shorter timeframes, such as the two-year model.

The UCAS data on distribution also shows a decline in international students overall, leading to reduced income due to fewer students paying the higher associated fees. While there have been indications of a potential fee increase for home students from the Labour government, it is unlikely to be sufficient enough to offset the impact of inflation since the last increase in 2012.

There are also more students who have declared that they were in receipt of Free School Meals, as well as continued growth in the number of students seeking support for mental health and wellbeing. We continue to see the impact of the Covid pandemic making its way through the system, with the 2024 cohort of 18-year-olds having started the two years towards their GCSEs in summer 2020. Thus, the cost base to secure a successful outcome for each student potentially continues to increase.

So back to the bit in the middle. Let’s not forget the student support, pastoral needs and expectations of students regarding the student experience, while maintaining investment in teaching, learning and outcomes to ensure B3 indicators and League Table aspirations are met.

The UK’s current higher education model has played to the strengths of the operating model that has been largely unchanged for decades. With students making their choices and those trends growing over time and the monies following the student choices, it is timely to reflect on how the land lies. There is cause for optimism in the continued value attached to degrees. However, providers of all types will need to revisit their short, medium and long-term financial planning to build in the trends over time in student behaviour and demographic shifts to ensure that the cost base, operating model and product offer evolve to meet stakeholder expectations while delivering financial sustainability.

For further insights or assistance with any information in this article, please reach out to Louise Tweedie.