A significant share of universities in England are projected to fall into deficit over the next two years, despite government plans to link domestic tuition fees to inflation, according to new figures from the Office for Students (OfS).
41% of Universities Expected to Record Deficits in 2026–27
The OfS analysis shows that 114 out of 276 higher education institutions — roughly 41% — are on track to post financial losses in the 2026–27 academic year.
This marks a sharp rise from forecasts earlier this year, when sector projections suggested only 64 institutions would be in deficit.
The regulator also noted that almost 45% of providers are already expected to report a deficit in the current year, driven by a combination of:
- long-running funding pressures,
- rising operating costs, and
- instability in student recruitment, particularly among international students.
Inflation-Linked Fee Rises Not Enough to Stabilize Finances
The government recently committed to permanently linking tuition fees for UK undergraduates to inflation. While the OfS said this measure would help universities compensate for lower-than-expected enrolments, it warned the increases were insufficient to resolve the sector’s wider financial challenges.
The regulator urged university leaders to reassess their financial projections, warning that some institutions continue to rely on overly optimistic expectations of growth.
Impact of the Proposed International Student Levy
The analysis does not include the government’s proposed 6% levy on fees paid by international students — a policy aimed at expanding maintenance grants for disadvantaged domestic students.
If introduced in 2027 or 2028, the levy could remove £760m–£780m per year from universities’ income — nearly double the estimated financial boost from inflation-linked fee increases, which would add up to £439m annually.
Sector leaders say this would put additional strain on universities that depend heavily on international tuition revenue.
Liquidity Issues Rising Across the Sector
The OfS report highlighted growing concerns about short-term cash reserves:
- 71 universities are forecast to have less than 30 days of liquidity by 2026–27 — up from 39 institutions previously reported.
The regulator warned that liquidity was tightly linked to student recruitment trends, which remain uncertain despite a modest recent uptick.
Smaller and Specialist Universities Most Exposed
The report notes that large, research-intensive universities have increased their intake of domestic undergraduates to compensate for weaker recruitment from key international markets.
This has intensified competition for UK students, leaving smaller and specialist institutions facing difficult financial conditions.
Sector Response
Nick Hillman, director of the Higher Education Policy Institute, warned that the financial pressure of redundancies, restructuring costs, and the international student levy could continue to push the sector into deeper instability.
Universities UK, the main sector lobbying group, said the proposed levy on international students would “hold back” universities’ ability to contribute to economic growth.
A spokesperson for the Department for Education said the government had inherited a university system facing long-term challenges due to frozen tuition fees, adding that recent reforms were designed to put institutions “on a more secure footing”.
