¡°Overreliance on overseas fees remains a vulnerability¡± for English universities, particularly when it comes to Chinese students, while Brexit has opened a European Union student recruitment gap between institutions according to their prestige, says the regulator¡¯s report on sector finances.

The Office for Students¡¯ looks at institutions¡¯ data from 2019-20 and 2020-21, plus forecasts to 2024-25.

¡°The overall aggregate financial position of universities, colleges and other registered higher education providers remains sound, at this time,¡± according to the report, ¡°despite the many operational and financial challenges arising from the coronavirus pandemic and increasing costs for providers and students.¡±

Net operating cashflow ¡°is forecast by most providers to reduce in the short term, before recovering in the longer term¡±.

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But there are words of caution from the OfS on overseas fee income.

¡°The current financial health of the sector is underpinned by overseas fee income and overreliance on overseas fees remains a vulnerability,¡± says the report. ¡°This is amplified by expectations of further growth at a time where there is a forecast decline in overall financial performance.¡±

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It goes on to warn: ¡°The sector, and some providers in particular, continue to be reliant on recruitment of students from China. Any event that reduces the flow of such students to the UK is likely to have a significant impact.

¡°The number of Chinese students studying at English higher education providers showed no growth in 2020-21, whereas the number of Indian students studying at English providers was almost 50 per cent higher than the previous year.¡±

On EU students there was a forecast 40.2 per cent decline in student numbers between 2020-21 and 2024-25, but a decline in fee income of 8.5 per cent ¨C Brexit means that EU students can now be charged the same higher fees as non-EU students and have no access to the student loans system.

¡°At a tariff-group level, medium and low-tariff providers are forecasting an overall decline in EU-domiciled tuition fees from 2021-22 to 2024-25,¡± says the OfS.

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¡°High-tariff and specialist providers are forecasting increases in EU-domiciled fees during this time despite a decrease in student FTE, implying the assumption that these students are willing to pay higher fees at these groups of providers.¡±

In general, institutions¡¯ post-pandemic forecasts are rosy.

¡°Total higher education course fees and educational contracts are forecast to increase annually across all peer groups,¡± says the OfS. ¡°This might indicate the sector assumes no further significant impacts from the global pandemic on student numbers and demand for English higher education.¡±

But ¡°there remains considerable variability in the financial strength of individual providers,¡± the OfS cautions. ¡°Even within each peer group there is a wide spread of financial performance.¡±

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There is uncertainty in terms of the future trajectory of inflation and interest rates, which will?affect institutions¡¯ finances, the regulator notes.

And it adds: ¡°The rising cost of living could have consequences for student recruitment and retention. Potential applicants, current students and their families could take the view that that attending higher education is less affordable. Such scenarios are most likely to have an impact on those providers offering higher education to students from disadvantaged backgrounds and underrepresented groups¡­We will continue to monitor this.¡±

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john.morgan@timeshighereducation.com