13 UK universities could collapse due to fee loss from international students

Prashasti Awasthi | | Updated on: Jul 06, 2020

Around 13 universities based in the United Kingdom are on the verge of insolvency due to coronavirus crisis. This can be averted if they receive a government bailout, a study cited in the BBC report suggests.

According to the Institute for Fiscal Studies, high-ranking universities with large numbers of international students face the largest immediate drop in income.

The research study found out that universities across the UK will see a loss of 80 per cent of fees from international students covered by the government, alongside £280 million in extra research funding.

I would not be surprised if there will be a 50 per cent drop in Indian studetns this September,” said Amit Tiwari, President of Indian National Students’ Association UK as cited in the Times of India report.

He further told TOI that the Indian students pay three time more than the UK students. Hence, massive loss may have to be borne by these universities.

Last year, 37,540 Indian students joined British universities. However, according to survey by the National Indian Students and Alumni Union UK, 64 per cent of those who have applied remain dubious on whether they would like to enrol this year.

According to the alumni union chairperson Sanam Arora, around 55 per cent would accept their places in the universities if courses were initially online and then offline with a discount in fees.

This threat becomes more pronounced for the least prestigious universities, says the IFS. A targeted government bailout of the universities most at risk is the most cost-effective plan, it says.

The analysis further suggests that Covid-19 ramifications “pose a significant financial threat” across UK higher education, with most institutions left with reduced net assets.

The experts say that the total loss is yet to be ascertained. It could be anywhere between £3 billion and £19 billion, or between 7.5 per cent and almost half the sector's annual income.

The researchers’ central estimate is an £11 billion loss, amounting to a quarter of the sector's annual income.

Lockdown related losses include fewer international student enrolments; less income from student accommodation, conferences and catering; and losses on long-term investments.

Additionally, universities that are running pension scheme deficits will witness deficits widen due to the pandemic as investments stagnate.

Researchers warn that it is highly unlikely that the universities will be able to alleviate the losses through cost savings.

Some universities went into the crisis with far stronger finances than others, they added.

“Our analysis shows it is not the universities with the greatest losses, but the institutions in the weakest financial positions before the crisis, that are at the greatest risk of insolvency,” they maintained.

The researchers speculated that 13 universities, out of the UK’s 165 higher education institutions, would end up with negative reserves “and thus may not be viable in the long run without a government bailout or debt restructuring”.

The analysis suggested a targeted bailout aimed at “keeping these institutions afloat could cost just £140 million.”

IFS research economist Elaine Drayton said a targeted bailout would be by far the cheapest option, as per the BBC report.

Published on July 06, 2020

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