Universities face bankruptcy over student shortfall

‘With the number of 18-year-olds falling significantly ... not every university will be able to recruit the number of students they had hoped to’

UNIVERSITIES are overestimating student recruitment and the amount of money that can be made, the watchdog has said, amid mounting concern about bankruptcies.

Higher education institutions need to stop making such “ambitious assumptions” about growth in student numbers over the next four years, according to the Office for Students (OFS).

The regulator has written to all universities to tell them that their forecasts are out of step with reality.

Overall, universities expect a 10 per cent growth in student numbers over the next four years, equivalent to an increase of 171,000 full-time students.

This includes a predicted increase of about 78,000 full-time undergraduates from the UK and European Union, whose tuition fees are fixed at a maximum of £9,250 each year. However, a demographic dip in the British population of 18-year-olds means that there will be five per cent – or 41,000 fewer – students over the period.

Sir Michael Barber, the OFS chairman, said: “Our analysis suggests that the sector has made over-optimistic student recruitment forecasts – both nationally and internationally.

“With the number of 18-year-olds in the population falling significantly between now and 2022, not every university will be able to recruit the number of students they had hoped to. Universities should be wary of relying on over-ambitious recruitment targets, and look at student numbers realistically rather than over-optimistically.”

The warning comes at a time of rising concern about universities’ finances, with a number believed to be on the verge of bankruptcy. Several are relying on short-term bridging loans to stop them going into administration.

Universities under financial pressure could be plunged into extreme difficulty if they fail to recruit sufficient numbers of students as tuition fees are a major source of income.

The OFS has previously said that failing universities will not be bailed out by the taxpayer.

Earlier this month it emerged that the Government was appointing someone to brief ministers on “how insolvency arrangements work”. They will provide education ministers with an “understanding of the financial health” of each university, while “developing and maintaining” an understanding of the risks facing the entire sector, according to the job advertisement.

Amid fears that students at bankrupt universities could be left emptyhanded, the OFS has assembled a register of higher education institutions which, by law, requires them to put in place robust student protection plans.