What the sector’s financial data is and isn’t telling us.
This week, Wonkhe published David Kernohan’s annual analysis of the sector’s financial statements. It makes for sobering reading. Of the 132 providers whose 2024–25 accounts have been examined, 44 reported a deficit. That is a record. Rising employer National Insurance contributions and uncompensated increases to Teachers’ Pension Scheme costs have driven staff expenditure upward across almost every institution type, whilst income growth has not kept pace. There is, as Kernohan observes, no category of provider that appears safe from the squeeze.
None of this will surprise anyone working in university leadership. The financial pressures are well documented and widely felt. But what struck me about this year’s data was not the headline figures themselves. It was the growing familiarity of the picture they paint, and the question that familiarity raises about how the sector – institutions, governing bodies and the regulatory system alike – responds when evidence of the same pressures accumulates year after year.
The gap between what we know and what changes
Consider the trajectory. The Office for Students’ own financial sustainability assessments have been flagging systemic risk for several years. In May 2024, OfS modelling projected that 40 per cent of providers would report a deficit for 2023–24 and that recovery forecasts depended on international recruitment growth that was already looking uncertain. By November 2024, updated modelling suggested 194 English providers could be in deficit for 2025–26, with 108 projected to have fewer than 30 days of net liquidity.
Alongside this, the regulator has been gathering evidence on what financial constraint means for the student experience. OfS-commissioned polling has explored student expectations, the cost of living’s impact on studies, perceptions of contact hours and the adequacy of support services. Jim Dickinson’s recent analysis on Wonkhe traces how this pattern of evidence-gathering stretches back several years, with the regulator documenting concerns about cost-cutting impacts on students whilst substantive protections for the majority of those already enrolled remain, as he puts it, on the horizon.
I want to be careful here. Gathering evidence is not the same as failing to act, and I am conscious that regulating a sector of this size and diversity under financial strain involves trade-offs that are not always visible from outside. The OfS has introduced a new initial condition on treating students fairly, and the work on understanding the student interest through polling and focus groups represents a genuine attempt to ground regulatory priorities in what students actually experience. These are not trivial steps.
But the accumulation itself warrants reflection. When a system generates broadly similar evidence over multiple cycles; that students are experiencing the effects of institutional cost reduction, that financial pressures are intensifying rather than easing, that the gap between what was promised and what is delivered may be widening, at what point does the evidence base become less about informing future action and more about documenting a condition that nobody quite knows how to address?
The governance challenge of recurring signals
This is, I think, fundamentally a governance question. Governing bodies receive financial data, student satisfaction results, regulatory communications and strategic risk assessments. In a healthy year, the task is to synthesise these into a coherent picture and act accordingly. But when the signals recur, when each year’s data confirms what last year’s data suggested – the governance challenge shifts. It becomes less about interpreting new information and more about determining what constitutes an adequate institutional response to a structural rather than cyclical problem.
In my experience, this is where governing bodies can find themselves most stretched. There is a natural and reasonable tendency to treat each reporting cycle as its own event: the deficit is addressed, the recovery plan is presented, the risk register is updated. But if the underlying conditions remain unchanged and the funding environment continues to erode purchasing power whilst cost pressures grow, then the annual governance cycle may be responding to symptoms without engaging with the underlying structural question.
The new C5 condition on treating students fairly, which currently applies only to providers seeking to join the OfS register rather than to those already on it, illustrates a related tension. The regulatory system appears to be developing stronger expectations for new entrants whilst the existing registered providers – where the majority of students study and where the financial pressures are most acute – operate under the earlier framework. This is not an unreasonable regulatory sequencing. But it does raise a question about the pace at which protections reach the students most affected by the current financial environment.
Enhancement requires more than evidence
Quality enhancement is the lens through which I find the current situation most thought-provoking. Enhancement: the deliberate, evidence-informed improvement of the conditions for learning depends on institutions having both the evidence and the capacity to act on it. The evidence base has arguably never been richer. Between OfS data, HESA returns, NSS results and the sector’s own financial statements, we know a great deal about the pressures institutions face and their likely impact on students.
What concerns me is whether the capacity to act on that evidence is narrowing precisely as the evidence base grows. When an institution in deficit is simultaneously managing staff reductions, programme rationalisation and increased regulatory reporting, the bandwidth for the kind of reflective, improvement-oriented work that enhancement demands becomes scarce. The risk is that evidence accumulates as a record of what happened rather than as a catalyst for what changes. Governing bodies note the data. Boards receive the reports. The cycle continues.
I do not think this is a failure of any single part of the system. It may be something more difficult to address: a consequence of a regulatory and funding architecture that generates excellent diagnostic information but does not always create the conditions in which institutions can respond to it meaningfully. The audited accounts are backward-looking by design. The regulatory cycle operates on its own timetable. And the financial pressures that the data describes are, for many providers, not problems that can be solved at institutional level alone.
The question worth asking
Kernohan’s analysis suggests that 2025–26 is unlikely to bring relief, even with the welcome fee cap increases now in effect. If that proves correct, the sector will have moved through several consecutive years in which the evidence pointed consistently in the same direction. At some stage, the accumulation of evidence itself becomes the story.
Perhaps the question is not whether the regulatory system is gathering the right evidence. It largely appears to be. Instead, is it more whether the feedback loop between evidence, regulatory response and institutional capacity for change is designed for the conditions the sector now faces. That is a question for providers, governing bodies and the regulator. It is also, I suspect, a question that none of them can answer alone.