Every university in Scotland could fail within the next five years without radical action, according to one stark warning.
In the wake of the catastrophic failures at the University of Dundee, which is £35 million in deficit and facing hundreds of job losses, experts in the higher education sector are calling for immediate cross-party support to ensure a sustainable future for Scotland’s academic institutions.
An over-reliance on international students and chronic government under-funding have, according to experts, left the industry in a parlous state.
They claim Dundee’s demise should serve as an urgent wake-up call to politicians.
However, there are fears the impending Holyrood election in 2026 is going to create a squeamishness around radical, and potentially unpopular, action.
“Because of those universities that have been successful in making money from international students, we’ve just buried our heads in the sand and thought, ‘This is fine’,” said Miles Briggs, a Tory MSP who sits on the education committee.
“This problem needs to be resolved now because in the next five years every institution could fail.
“Not many have broad shoulders because of assets – some have nothing.
“Their principals are actively telling me they can only carry on like this for a couple of more years, but there won’t be any coming back from where they end up, unless there’s huge government bailouts, which there will not be.”
Mr Briggs also expressed concerns that the election will push the issue down the road to avoid unpopular or tough decisions being made pre-election.
“It’s deeply worrying – this is people’s jobs, it’s the quality of our education sector, it’s about driving economic growth – and I don’t think any of the other parties really want to engage on it because it involves putting some pretty difficult solutions to the voters ahead of an election.
“But I think we will face a major crisis in the next parliament and I would be really worried what the university sector in Scotland looks like in five years’ time.
“I think it will be a complete shadow of itself and that will bring huge job losses.”
There have been warnings in the sector for the past 10 years, sparked by an Audit Scotland report that lays out the challenges of university revenue streams.
Institutions have been criticised as focusing too much on a growth agenda, with the suggestion greed is partly at fault for their current financial problems.
University insiders, however, point to encouragement stemming as far back as former SNP education secretary Mike Russell, whose position was described by one as “go forth and multiply”.
They were, they say, encouraged to pursue a growth agenda by aggressively recruiting overseas.
Now, international student numbers have fallen by double digits two years in a row.
Student numbers will be finalised in the coming weeks. One source described the sector as “holding its breath” ahead of the impending finalisation of numbers.
“Early indications are that the international recruitment figures for this year look very, very challenging, and will be extremely challenging for a number of universities,” said Michael Marra, Labour MSP for North East Scotland.
“We’re not going to know the full impact of that for some weeks to come, but it’s a very challenging situation that they find themselves in.
“This is not a case of universities having to get the same number [of international students] to meet the bills, but they need more and no one is answering the question of where they come from.”
Mr Marra said the mismanagement at Dundee University had been “massive, egregious and reprehensible” but, he added, there were still unanswered questions around the organisation’s approach to growth.
He said: “I tried to elicit some form of evidence on this in committee, about why they took the approach they did, to bet the house on a rapid growth model.
“The reality is that all of Scotland’s universities are trapped in a cycle where they have to grow the number year on year on year in order to meet their costs, because there has been no increase in funding from the government.
“So that leaves them in a situation where these universities are doing increasingly precarious and dangerous things.”
The MSP said this was “no excuse” for losing control of a university’s accounts, but he pointed out that “every university in Scotland is wrapped into a version of that question”.
Glasgow Caledonian University announced recently it had halted recruitment of international students for the autumn intake, believed to be because of nervousness around compliance metrics.
Universities are responsible for sponsoring overseas student visas and now have only a tight allowed margin of error in compliance.
If students apply and do not turn up, or they drop out of the course, or if they apply for asylum, the university faces penalties.
The tightening of these metrics is another factor dissuading universities from overseas recruitment.
The impact of changes to the number of dependents students may bring with them has also had an impact.
The immigration crackdown affected female students more than male because fathers, one source said, are more likely to travel overseas for a year without their children than mothers are.
One course at University of the West of Scotland saw its international student cohort drop from 36 to zero.
The university’s model is designed to be deliberately diverse without over-reliance on one nation.
St Andrews and Edinburgh and Glasgow have not experienced the same fall in international student numbers as they are reliant on North America and China whereas Dundee, Napier and Heriot Watt have recruited from Pakistan, Nigeria and India.
The latter universities have been affected by the Nigerian currency market devaluation and changes to UK immigration policy.
A spokesman for UWS said: “UWS is not immune to the funding issues facing the sector, which needs and deserves a funding solution that works for universities, Scottish Government and most importantly, students.”
He added that the university “calls for the development of a sustainable, long-term funding model that benefits learners and wider society alike”.
While international student recruitment has become an increasingly prominent issue, some in the sector say the warnings signs have been ignored.
The fact Covid occurred in March 2020 was fortunate for the sector as it allowed recruitment to reopen in September.
“There was a sense from the Scottish Government,” a source said, “That this was a bullet dodged.
“But instead of making the choice to invest in Kevlar and bulletproof vests, they just kept walking.”
Another said it was “remarkable” that it took so long for a situation like that at Dundee to occur.
“To have a model that has baked into the idea that you need cross-subsidy from international students to cover both your research and your Scottish domicile undergraduates when you don’t have the levers to control immigration is bold, would be the polite way of putting it.”
Asked about Labour’s immigration policies and the restrictions on dependency visas, Mr Marra said: “That has clearly had a big impact in terms of student recruitment and that’s been a very significant shift but that certainly doesn’t mean the system wasn’t being abused, and it was.”
“Teaching people from all kinds of different backgrounds globally is a benefit, not just to the teaching, but actually to the Scottish students as well,” he added.
“It enriches all of our lives but the idea that we should set immigration policy purely on that basis, I think, is for the birds.”
Mary Senior, Scotland Official of the Universities and Colleges Union (UCU) said the tuition fee structure has given the sector a dependence on the Scottish Government, which has under-invested in the sector while the budget for teaching has plateaued.
UCU firmly supports free tuition for Scottish domiciled students but says the Scottish Government has not effectively funded the policy.
Staff are being the “shock absorbers for the crisis that all too many universities are facing”, not just voluntary and compulsory redundancies but the increasing number of precarious contracts and tutors being given less work.
Insiders are concerned that the intense focus on Dundee University has tilted the focus towards that university’s failures of financial management and governance and away from government responsibility.
The Gillies report recommended 18 lessons for the sector and and Universities Scotland is expected to produce a response to those in the next month.
Over the past 10 years Dundee University had almost never hit financial surplus – an institution that was sector-leading in teaching, research and innovation had not been financially sustainable in a decade.
Professor Ian Gillespie, the former principal of Dundee University, told the Holyrood education committee that there had been only one point in the past decade where the university came close to breaking even and that was thanks to an increase in international students.
This, insiders say, points to fundamental problems in the way the sector is funded.
“Without laying it on really thick, no university is immune from this, no matter how old they are or what their student demographic is or or even really what their reserves level is, because we’ve seen in the space of a year, the reserves level absolutely fall, falls through the floor,” one said.
Claire McPherson, director of Universities Scotland, said the new leadership team at Dundee has responded swiftly to the university’s failures.
“However, it is just as important that Scotland acts to decisively address the wider financial environment contributing to Dundee’s problems, which holds as true for the rest of the higher education sector,” she added.
It is possible to be both globally successful in teaching, research and innovation and also be chronically underfunded and therefore unsustainable.
“That angle has received far less scrutiny so far, but it demands Scotland’s urgent attention.”
From 2030 there will be a significant fall in the number of school leavers, which will require a shift in focus of what universities offer and who they offer it to.
Yet funding is currently predicated on full time students with little flexibility for upskilling or part time study.
The last review of higher education was under Alex Salmond’s government in 2010 and, as a result, the sector was given a three-year bumper spending settlement.
This, however, was not renewed.
Currently, half of the sector is in a deficit position while close to half the sector has announced voluntary severance schemes and there are more expected in the next month.
Among the potential solutions mooted are a shift to three year degrees rather than four; an examination of what skills are needed in Scotland’s economy and whether college or university should be delivering them; a look at means testing for domiciled Scots; and mergers between institutions.
While there is general agreement that radical change is needed rapidly, there is little consensus about what that radical change might look like.
There is no sense of shift from the Scottish Government on free university places given the pledge is an intrinsic part of SNP ideology, nor any appetite from any quarter.
There is, though, a universal urgency that Scotland’s institutions need to be protected from impending shocks.
“I work in the sector because we are truly transforming lives and if we cling to that, if we cling to the very idea that we are the places that can and do transform lives through exceptional learning and teaching with research on top of that, we will always be required in the world,” one source said.
“But when you think of what Scotland is truly world class at, we have whisky, we create golf courses and we were once a gold medalist at education but now we’re bronze and just by the skin of our teeth.”
Higher Education Minister Graeme Dey said: “The sector is aware we are open to exploring the future funding model of universities, but we are clear that this government will not reintroduce tuition fees. Access to higher education must be based on the ability to learn, not the ability to pay. This would remain the case in an independent Scotland, where we would also continue to welcome students from the EU.
“The Scottish Government recognises the vital role universities play in Scotland’s economy and wider society, which is why we are investing over £1.1 billion in the sector this year alone.
“However, Scotland’s universities are facing a broad range of pressures. This includes the UK Government’s policies on migration, which is having an adverse impact on international student numbers. Additionally, universities are facing extra costs of £48 million due to the UK Government’s decision to increase employer National Insurance contributions, which UK Ministers have not provided support for.
“Regarding the University of Dundee, the clear focus of Ministers is to protect the interests of staff and students and see the university continue to operate and thrive into the future. The Scottish Government will continue to do all we can to support this.”
