Almost half of English higher education institutions still face a financial deficit this year despite the uplift in tuition fees, the regulator has warned.

New modelling by the Office for Students (OfS) published on 20 November shows 124 providers, about 45 per cent of the sector, may report a deficit in 2025-26 after a turbulent period for domestic and international student recruitment. The figure is higher than the 34 per cent of providers that forecast a deficit in their financial returns in May.

The OfS suggests that universities have continued to be “overly optimistic” in their forecasts, with acceptances of UK undergraduate students through Ucas growing 3.1 per cent in 2025 compared with last year – below the sector’s forecast growth of 4.1 per cent.

The data also confirms that research intensive universities have tended to scoop up more students to the detriment of other providers, with these typically higher-tariff institutions seeing UK undergraduate recruitment rise 9.9 per cent, while lower-tariff institutions experienced “weaker than expected recruitment”.

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It added that many experienced declines in Ucas acceptances “despite predicting growth”.

The picture is more mixed for international students, with larger research-intensive universities experiencing a 7 per cent decrease in the number of Confirmation of Acceptance for Studies (CAS) issued to postgraduate international students. According to the OfS, this is partly driven by a decline in the number of students coming from China.

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“Conversely, all other provider groups have seen growth in international students,” a report from the regulator says.

As a whole, the figures mean that the sector could see a total net reduction in annual tuition fee income of £437.8 million in 2025-26 compared with forecasts. Without mitigating action, this will push many into deficits, the regulator warned.

The modelling also shows that 45 providers could have less than 30 days’ liquidity in 2025-26, compared with 41 providers that have forecast low liquidity.

The OfS warned that there continues to be “significant volatility” in student recruitment, and that “the growth seen this year may not continue in subsequent years”.

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“As even the growth seen this year is below provider forecasts, there is no doubt that the financial outlook for the sector remains challenging.”

Although the modelling includes the 2025 tuition fee uplift, it does not account for the proposed international student levy, the details of which are set to be revealed in next week’s autumn budget and could cost the sector millions of pounds.

Philippa Pickford, director of regulation at the OfS, said the regulator did not expect “multiple universities to close in the short term” but warned that some institutions “need to take radical action, which might include considering different structures or business models”.

Some universities have begun the process of consolidating with other institutions to shore up their finances. Most notably, the Universities of Greenwich and Kent have announced their intention to merge.��

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“Universities now have welcome clarity over tuition fee levels in future years, and we also know that many institutions are continuing to take significant steps to cut costs, work collaboratively with partners and seek opportunities for realistic growth,” said Pickford.

However, she continued, “Some universities continue to base their forecasts on unrealistic expectations of growth, while others are taking short-term measures rather than tackling transformational changes needed to right-size their businesses.”

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helen.packer@timeshighereducation.com