Exclusive:Scottish universities voice fears after being dealt £100m blow as scale of student black hole revealed

Scottish universities have been dealt a £100 million budget blow due to plummeting applications from international students - and the sector fears next year will be even worse.

Universities Scotland, the higher education umbrella body, has revealed the number of students from overseas enrolling in taught postgraduate courses is down by more than 20 per cent in the 2023/24 academic year.

“Based on these figures, we estimate that collectively, institutions’ income will be well over £100m less than forecast in 2023/24,” it said.

The downward trend, which is being blamed on new UK government immigration rules and rhetoric, is expected to intensify next year to a mean decline of 27 per cent year-to-year, which equates to almost 92,000 fewer applications.

Universities Scotland said “the impact is widespread” this year, with 12 institutions reporting lower intakes than forecast. Next year, 14 of 15 responding institutions were seeing a fall.

The biggest decline of all Scotland’s universities was of 79 per cent.

While undergraduate enrolments of fee-paying international students are not as badly affected, there is no sign of the growth needed by the sector to plug the budget gap caused by Scottish Government funding cuts.

Universities Scotland said in a statement: “There are multiple factors behind the decline in international demand, but the commonality is that they are all beyond universities’ control.

“Very significantly, there has been major change to immigration policy led by the UK government, and prolonged speculation of further change to the graduate route visa over 2023/24, which has impacted massively on the UK’s attractiveness as a study destination.

“The removal of the dependents visa for postgraduate taught students from January 1 started to have an impact on student behaviour months ahead of its implementation. In the six months between November 2023 and April 2024, applicants for study visas fell by 26 per cent.”

The evidence has been submitted to Holyrood’s education committee ahead of a hearing next week.

The decline has left Scotland’s universities in a “far more precarious financial position” than a year ago, particularly because fees from international students have long been used “cross-subsidise” places for Scottish students.

This is because Scottish Government funding to cover “free tuition” for Scots has fallen by around 20 per cent in real terms over the past decade, or almost £1,900 per student.

“Even over the medium-term, the trajectory of public funding in universities is unsustainable,” Universities Scotland said. The body said modelling showed the “real challenge” for universities was not the 2025/26 financial year, but the three-to-five-year period after then.

“Universities’ funding environment has been difficult for some time, but it feels materially different and far more precarious for most in 2024, with very difficult choices ahead for many institutions, if this trajectory continues,” the evidence stated.

Following a controversy earlier this year over the removal of more than 1,200 extra places for Scottish undergraduates created during the pandemic, the umbrella body emphasised this change had been expected, and that it was “not a top priority” to focus on the number of places for Scots, which remain at near record levels, but the funding per student.

“It is the price per student place and investment in research which has seen a decade-long under-investment, and which is limiting universities’ contribution to Scotland,” the evidence said.

Earlier this year it was projected that ten of 19 higher education institutions in Scotland would be in deficit in 2023/24, up from six the year before.

The Scotsman revealed last month that Aberdeen University, the fifth oldest in the UK, faced significant doubts over its future earlier this year.

Scottish business leaders recently expressed concern over the impact on the international standing of the nation’s universities as a result of the budget squeeze and decline in international students.

In March, the outgoing head of Universities Scotland warned the sector would face more course closures and job losses unless action was taken to find a sustainable way to fund higher education. Alastair Sim, who stepped down as director after 15 years in post, said it was time for Scotland to have a “serious conversation” about the best way to support universities, or risk their “severe degradation”. It comes as voluntary redundancy schemes cut hundreds of jobs at Aberdeen and Robert Gordon universities, while a major row has erupted at the University of the Highlands and Islands (UHI) over restructuring plans. Earlier this year, Education Secretary Jenny Gilruth admitted the SNP's free tuition policy for Scottish undergraduates creates challenges for universities. Giving evidence to a Holyrood committee, she said: "I think that’s a good policy, it’s a policy I will stand by, but it does create challenges for our universities, I recognise that.” Ms Gilruth added that universities were “experts” in working independently of government to raise finance, and that she had a “lot of faith” in the sector’s ability to respond to the challenges.

A UK government spokesperson had previously said: “We are fully focused on striking the right balance between acting decisively to tackle net migration and attracting the brightest students to our universities, recognising the significant contribution they make to the UK.”

A Scottish Government spokesperson had previously said: “Our universities play a pivotal role in Scotland’s economy and society – and despite facing the most challenging budget since devolution, the Scottish Government will continue to invest over £1 billion on teaching and research, including an increase in funding for research and innovation.

“This will ensure our universities continue to play a pivotal role in Scotland’s economic growth. We are seeing record numbers of young people aged 19 and under securing a university place, including record numbers of students from our poorest communities as a result of Scottish Government investment in our universities – and ministers are determined to ensure the sector continues to thrive.”