Knowledge & Insight

Higher Education sector - four main challenges

Wed 5 July 2017

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The UK’s higher education sector has enjoyed rapid growth over the past decade, increasing revenues and attracting record numbers of students. Yet more recently, financial forecasts submitted by institutions have begun to reveal some weakness, together with a growing disparity between the lowest and highest performers. And this is widely considered to reflect the combination of challenges currently faced by operators in the sector.


The level of applications from EU citizens for UK courses has fallen since the UK referendum on Brexit. And whatever the nature of our relationship with Europe post-Brexit, it seems likely that in the short-term at least, increased uncertainty will be sufficient to dampen demand for UK places from EU nationals. However, the Brexit referendum also resulted in a weakened Pound, making UK places more competitive vis-a-vis high-quality institutions in other countries around the world, potentially boosting demand from non-EU students. So the net effect remains largely unclear.

The other “Brexit issue” relates to academic and technical staff employed across the UK’s learning institutions, and many universities and colleges have already begun to assess the likely impact that either a soft or a hard Brexit may have on their staff. The impact on research funding and international collaboration with other European institutions also remains unclear.

The need to provide “customer value”

The government’s introduction of Longitudinal Education Outcomes (LEO) data provides a direct and transparent link between a student’s choice of institution and course, and their likely employment and earning outcomes. So all colleges and universities now have to provide not only a quality learning experience – they must also demonstrate to potential students – or “customers” – that there is genuine value in their product. And whilst this may have a positive impact on revenue for high-performing programs, those that fail to offer commercial value to students may quickly see a sharp decline in numbers.

Pressure on profits

With a cap on tuition fees, rising inflationary costs have put profit margins under increased pressure - yet institutions have remarkably little flexibility to respond. In an increasingly competitive marketplace, all institutions must offer state-of-the-art facilities if they are to remain attractive to globally mobile students, which means the burden of cost-cutting tends to fall disproportionately onto staff. The result is that a growing proportion of academic staff are now on part-time contracts, which may serve as a short-term solution, but makes employment in education less attractive to high-quality candidates. And in the medium- to long-term, this cannot be healthy for the state of the sector.

Heightened competition

As the burden of student debt grows, more young people appear to be reviewing their options carefully, with many considering alternative, less-expensive routes to a good career. Launched in September 2015, Degree Apprenticeships offer not only a debt-free route to a degree qualification, they also offer young people the chance to earn as they learn. And because courses are designed in partnership with employers, the career prospects for Degree Apprenticeship graduates look very attractive.

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