The latest sector-wide financial sustainability assessment from the Office for Students

As the higher education sector in England gets deeper into the metaphorical financial woods, the frequency of OfS updates on the sector’s financial position increases apace.

Today’s financial sustainability bulletin constitutes an update to the regulator’s formal annual assessment of sector financial sustainability published in May 2025. The update takes account of the latest recruitment data and any policy changes that could affect the sector’s financial outlook that would not have been taken into account at the point that providers submitted their financial returns to OfS ahead of the May report.

Recruitment headlines

At sector level, UK and international recruitment trends for autumn 2025 entry have shown growth by 3.1 per cent and 6.3 per cent respectively. But this is still lower than the aggregate sector forecasts of 4.1 per cent and 8.6 per cent, which OfS estimates could result in a total sector wide net loss of £437.8m lower than forecast tuition fee income. “Optimism bias” in financial forecasting might have been dialled back in recent years following stiff warnings from OfS, but these figures suggest it’s still very much a factor.

Growth has also been uneven across the sector, with large research intensive institutions increasing UK undergraduate numbers at a startling 9.9 per cent in 2025 (despite apparently collectively forecasting a modest decline of 1.7 per cent), and pretty much everyone else coming in lower than forecast or taking a hit. Medium-sized institutions win a hat tip for producing the most accurate prediction in UK undergraduate growth – actual growth of 2.3 per cent compared to projected growth of 2.7 per cent.

The picture shifts slightly when it comes to international recruitment, where larger research-intensives have issued 3.3 per cent fewer Confirmations of Acceptance of Studies (CAS) against a forecasted 6.6 per cent increase, largely driven by reduction in visas issued to students from China. Smaller and specialist institutions by contrast seem to have enjoyed growth well beyond forecast. The individual institutional picture will, of course, vary even more – and it’s worth adding that the data is not perfect, as not every student applies through UCAS.

Modelling the impact

OfS has factored in all of the recruitment data it has, and added in new policy announcements, including estimation of the impact of the indexation of undergraduate tuition fees, and increases to employers National Insurance contributions, but not the international levy because nobody knows when that is happening or how it will be calculated. It has then applied its model to providers’ financial outlook.

The headline makes for sombre reading – across all categories of provider OfS is predicting that if no action were taken, the numbers of providers operating in deficit in 2025–26 would rise from 96 to 124, representing on increase from 35 per cent of the sector to 45 per cent.

Contrary to the impression given by UK undergraduate recruitment headlines, the negative impact isn’t concentrated in any one part of the sector. OfS modelling suggests that ten larger research-intensive institutions could tip into deficit in 2025–26, up from five that were already forecasting themselves to be in that position. The only category of provider where OfS estimates indicate fewer providers in deficit than forecast is large teaching-intensives.

The 30 days net liquidity is the number you need to keep an eye on because running out of cash would be much more of a problem than running a deficit for institutional survival. OfS modelling suggests that the numbers reporting net liquidity of under 30 days could rise from 41 to 45 in 2025–26, with overall numbers concentrated in the smaller and specialist/specialist creative groups.

What it all means

Before everyone presses the panic button, it’s really important to be aware, as OfS points out, that providers will be well aware of their own recruitment data and the impact on their bottom line, and will have taken what action they can to reduce in-year costs, though nobody should underestimate the ongoing toll those actions will have taken on staff and students.

Longer term, as always, the outlook appears sunnier, but that’s based on some ongoing optimism in financial forecasting. If, as seems to keep happening, some of that optimism turns out to be misplaced, then the financial struggles of the sector are far from over.

Against this backdrop, the question remains less about who might collapse in a heap and more about how to manage longer term strategic change to adapt providers’ business models to the environment that higher education providers are operating in. Though government has announced that it wants providers to coordinate, specialise and collaborate, while the sector continues to battle heavy financial weather those aspirations will be difficult to realise, however desirable they might be in principle.