The 'perfect storm' to hit Scottish university finances as international roll drop revealed

A number of universities have announced redundancies in recent weeks

Scottish university finances are facing a “perfect storm” amid higher costs and reduced income from international students, the Institute for Fiscal Studies (IFS) says.

New commentary from the respected think tank highlights that per-student funding for teaching Scottish students is 22 per cent lower in real terms than in 2013/14.

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While universities have used increased income from international students to make up for this in recent years, changes to visa rules have meant there are fewer overseas postgraduate students.

A general view of the University of Edinburgh Old College, Edinburgh. Picture: PAA general view of the University of Edinburgh Old College, Edinburgh. Picture: PA
A general view of the University of Edinburgh Old College, Edinburgh. Picture: PA | PA

The recent change to employers’ national insurance contributions will also push up costs for universities, though this is expected to be offset by slower wage growth.

Earlier this week Edinburgh University became the latest institution to announce it is cutting back on staff to balance its books, following a similar move by Dundee University and Robert Gordon University in Aberdeen.

The report said that university finances appeared to be in “reasonable financial health” in the year to July 2023 - but warned experts were concerned that things had “worsened further since”.

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It pointed out that the tuition fee for home fee students remained flat in cash terms in 2024/25 at £1,820: the fifteenth year in a row that it had been at that same cash level.

It also said that the level of direct public funding had dropped in real terms.

Its said: “Overall, this means Scottish universities will receive direct public funding of around £7,530 per student for teaching Scottish undergraduates in 2024/25,” it said. “This represents another real-terms decline in per-student resources. [Using] an economy-wide measure of inflation, they will receive 22 per cent less per student this academic year than in 2013–14.”

Kate Ogden, senior research economist at the IFS, said: “A fall in the number of international postgraduate students, together with rising staff costs as a result of upcoming increases in employers’ National Insurance, represents something of a perfect storm for Scottish universities’ finances.

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“Universities in England will be grappling with the same challenges. But after a long-running freeze in fees, they will be allowed to increase tuition fees by 3.1 per cent in the coming year, which will provide some help in addressing financial challenges.”

She added: “With tuition free for Scottish students in Scotland, if the Scottish Government wants to provide more funding to universities it will need to look to its own Budget.

“Despite a much-improved funding outlook for the coming year following the UK Budget, this could still prove challenging given the number of competing priorities facing the Scottish Finance Secretary Shona Robison.”

The report also identified specific Scottish universities which would be more financially exposed to a drop in international student numbers.

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In 2022/23, fee income from full-time, non-EU postgraduate taught students accounted for more than a quarter of teaching resources at several universities, and for 40 per cent at the University of Glasgow. Meanwhile, Robert Gordon University, Edinburgh Napier University and Glasgow Caledonian University all had a higher than average share of students from the three countries most likely to see a decline in numbers due to changes in visa rules: India, Bangladesh and Nigeria.

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