Revenue pressures are here to stay, so now it's time for universities to address their cost base

The UK higher education sector is facing a storm of unprecedented revenue pressures that show no sign of relenting.

The challenging economic and political conditions in the years following the pandemic have created a much tougher operating environment for universities.

Falling international enrolments and the domestic fee cap are eroding a once-stable operating environment. Combined with increasing cost pressures and greater competition, the sector is facing headwinds that are threatening the viability of a significant proportion of UK universities.

We believe that all universities will need to rethink their delivery model and move to a lower cost base. While the timescales may vary between institutions, change will be essential.

In this article, we draw on our experience working with higher education institutions to explain how universities can assess their current financial standing and take practical steps to prune their costs.

In our experience, looking to a selection of ratios and trends is a useful way to rapidly assess financial health and sustainability. Here are some key ratios:

Comparative benchmarking data from a reliable source, such as NousCubane, can be valuable for helping universities understand how they compare to counterpart universities and identify opportunities for savings.

Once you know that you need to act, many levers can be pulled to deliver efficiencies and savings in the short and long term.

Many universities will recognise the need for reform but struggle to understand how to sequence and implement the levers. This is often due to limited bandwidth and anticipated change resistance from the organisation. While this is understandable given the scale of the task, the enormity of the looming challenge makes change unavoidable. This will require hard decisions and strong leadership.

From our experience, major change should be segmented into three time horizons:

The best time to fix a leak in the roof is while the sun is shining. And our view of the current operating context is that storm clouds are beginning to appear, for some they are already overhead.

We anticipate the next few years will be particularly challenging for the UK higher education sector, meaning it is essential to start understanding your levels of financial health and identifying the opportunities that will help to bridge the gap.

Delays in getting started identifying opportunities and conducting implementation planning only means you will have less time to react (and fewer options) when the storm sets in.

Get in touch to explore how we can support your university to reduce its cost base.

Connect with Julie Mercer and James Langlands on LinkedIn.

Prepared with input from Oliver Jawara.