UK universities are one of our greatest national assets.
They educate the future workforce, conduct world-leading research, and serve as anchors in their regions — powering businesses, driving innovation, and supporting local growth.
At a time when the UK faces major economic and societal transitions, their role is more important than ever. But today, their financial stability is under growing strain.
This blog draws on key points from NCUB’s submission to the House of Commons Education Committee’s call for evidence on international students in higher education and funding. It sets out why current policies risk destabilising the sector, how that instability threatens businesses and local economies, and what steps Government must take to secure a brighter future.
Universities are under pressure
For over a decade, universities have been asked to do more with less. Domestic tuition fees were frozen since 2012, meaning in England, today’s £9,250 fee is worth just £5,924 in 2012/13 prices — and similar erosion has been seen across the devolved nations.
On the research side, public funding is not designed to cover the full cost of delivery. In 2022/23, universities received only around 69% of what they spent on public R&D. Combined, these funding shortfalls mean universities must find other ways to plug their income gaps – leading them to less reliable income streams, most notably international student fees.
International students are not just learners — they bring more than £30 billion a year to the UK economy, support local services and jobs, and help to build global research and business partnerships. Yet recent policy changes are making the UK a less attractive destination.
- Restrictions on dependents for undergraduates and master’s students have led to a 15% fall in tuition paying international students.
- The shortening of the Graduate Visa is expected to reduce numbers by a further 12,000 students.
- A proposed 6% levy on international student income would directly remove resources from universities at a time when they need them most.
Inequality between institutions is growing
It’s important to understand that these pressures don’t fall evenly across the sector.
Some universities are major research contributors, carrying significant research deficits but lacking the scale of the largest institutions to offset losses through international recruitment or substantial endowments. Crucially, many of these institutions are located in regions most in need of economic growth and are central to delivering the UK’s Industrial Strategy.
Meanwhile, some universities benefit from stronger local funding streams or devolved government support, giving them more resilience. The result is a growing stratification of the sector, with inequalities in skills pipelines, research capacity, and local growth deepening across the UK.
Challenges spark concern for businesses
Universities are not just centres of learning; they are critical partners for business. They train the talent that fills our workforce, provide the facilities and expertise that drive our R&D, and anchor the local ecosystems in which businesses thrive.
When universities struggle, businesses feel the impact.
NCUB’s State of the Relationship report shows troubling signs:
- The number of university interactions with businesses fell 5% between 2021/22 and 2022/23.
- Knowledge exchange income with business fell by 0.6% in the same period.
- Business funding for university R&D is down 12% against pre-pandemic levels.
These are not just statistics — they represent fewer opportunities for businesses to innovate, fewer industry-sponsored PhDs, and slower flows of knowledge and technology into the economy. For SMEs in particular, losing a university partner could mean losing access to facilities and expertise they cannot find elsewhere.
The risk of a negative cycle
As international student numbers decline, universities may be forced to raise costs for those who remain or cut provision. This risks triggering a vicious cycle: higher costs make UK study less attractive, which reduces applications further, leaving even fewer resources for research, knowledge exchange, and business collaboration.
Already, nearly half of universities have closed courses, often in high-cost STEM subjects that are vital to the UK’s industrial and skills priorities. The loss of these pathways not only affects students but also businesses that rely on them to train the next generation of workers.
What needs to happen
This is a pivotal moment to reverse the pressures and unlock the full potential of UK universities for the benefit of the nation. NCUB is calling on Government to:
- Scrap the proposed 6% levy on international student tuition income.
- Reform international student policy, removing students from net migration targets and recognising their contribution to the UK’s knowledge economy.
- Embed universities into regional economic strategies, ensuring provision reflects local skills needs, particularly in STEM and growth sectors.
- Protect university–business collaboration, safeguarding funding streams like the Higher Education Innovation Fund (HEIF), addressing the gaps left by the loss of European Structural Investment Fundings, and supporting business-led R&D,
- Reintroduce targeted public funding for high-cost, high-priority courses in areas such as advanced manufacturing, digital, and health.
- Ensure cross-departmental leadership, with DfE, DSIT, DBT, and HMT working together on a national Higher Education Strategy.
The opportunity ahead
With the right strategy, we can build on the global reputation of UK universities and ensure they remain stable, strong, and able to lead the UK into its next chapter of growth.
Treating universities as core economic and civic infrastructure is not optional — it’s essential. They are the engines of skills, research, and innovation that underpin UK competitiveness. With bold action now, universities can continue to deliver the talent, discoveries, and collaborations that will power our economy and society for decades to come.
Get involved
At NCUB, we’re continuing to track the impact of financial pressures on universities and their collaboration with business through our State of the Relationship report and new research projects. Through our Stronger Foundations project, we aim to articulate the impact of these pressures on day-to-day decision making – emphasizing the repercussions for university-businesses collaboration and, ultimately, the broader economy.
If you’re a business, policymaker, or university leader who wants to understand more — or share your perspective — we’d love to hear from you. Together, we can help ensure UK universities remain strong, innovative, and central to the nation’s growth.
Contact us at policy@ncub.co.uk to learn more or to get involved.
Director of Policy, Analysis and External Affairs, NCUB
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