Nearly half of English unis face deficits as levy looms large
The OfS’s latest financial sustainability report, published today, modelled the impact of the most recent autumn 2025 recruitment data – which suggested the sector could face a total net reduction in annual tuition fee income of GBP £437.8 million in 2025/26 compared with sector forecasts.
It suggested that unless action is taken, 124 providers – around 45% of the sector – could report a deficit. This is significantly more than the 96 universities that already predict a deficit for this academic year.
Meanwhile, the modelling suggests that 45 providers could have less than 30 days’ liquidity in 2025/26, compared with 41 that are already forecasting low liquidity.
The OfS said the modelling did not take into account the upcoming levy on international student fees, which is widely expected to have a significant effect on overseas recruitment if institutions pass the tax onto students through increased fees.
But although the report paints a bleak picture for the English sector, the OfS predicted a slight improvement in the number of institutions reporting a deficit next year – which it suggested could improve to 41% in 2026/27 following the announcement that domestic tuition fees will start to increase with inflation.
And the report offered another glimmer of hope for stakeholders, showing that international recruitment has returned to year-on-year growth after a sharp decline in visa applications in 2024.
The drop in applications last year has largely been attributed to the UK’s ban on dependants for the vast majority of international students, and while CAS issuances are up 6.4% in the period before the September intake, the OfS noted that the number of visas issued are still far below 2023 levels.
OfS director of regulation Philippa Pickford said that the uptick in student recruitment was positive – although warned that the higher education sector continues to face multiple challenges.
“Nobody should be under any illusion that the challenges that have gripped the sector in recent years have evaporated. The tough decisions many institutions have taken have certainly made a difference but we still predict that significant numbers of universities will face deficits by the end of 2025/26,” she said.
While Pickford said that the OfS did not expect multiple universities to close in the short term, she warned that some would have to “take radical action” – such as considering different structures or business models.
“Our view is that there continues to be significant volatility in student recruitment, and that the growth seen this year may not continue in subsequent years,” the OfS warned in its report. But it added that many institutions were “planning more prudently” and being realistic about recruitment challenges when making their financial plans.
The tough decisions many institutions have taken have certainly made a difference but we still predict that significant numbers of universities will face deficits by the end of 2025/26
Philippa Pickford, OfS
The report noted that international student recruitment varied a lot between different providers. While most types of providers saw an increase in international students, larger research-intensive universities saw a 7% decrease in CAS issued to postgraduate international students – driven in part by an 11.6% decline in CAS issued to Chinese students.
Russell Group director of policy, Hollie Chandler, noted that the OfS’s modelling shows the fee uplift for domestic would only make a small dent in the proportion of institutions in deficit next year – and that this did not even account for the international fee levy, which she wanted would likely pull more providers into the red.
“Institutions are working hard to mitigate financial pressures through efficiencies and collaboration, but they continue to face rising costs and a challenging international recruitment environment. It’s important the government supports these efforts by rethinking the international student levy that would force more universities into deficit and seriously hamper their ability to invest in students, research and communities.”
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