Falling overseas fee income ‘could have effect on UK research’

Forecasts predicting a slowdown in the growth in international student recruitment after an initial bounceback from the pandemic could result in an indirect hit to UK universities’ research funding, it has been suggested.

Figures published by the Office for Students, England’s higher education regulator, earlier this year showed that institutions were expecting such income, largely from non-European Union overseas students, to grow by more than 10 per cent in the coming academic year, after some saw a fall in revenue in 2020-21 as the pandemic hit recruitment.

But forecasts for later academic years suggest that institutions are planning for a tailing-off in this annual income growth to below 10 per cent by 2024-25.

Andrew Connolly, chief financial officer at the University of Exeter, told Times Higher Education that many institutions had “prudently downgraded” their projections on international fee income – a major source of overall revenue for institutions – in this way but this in turn could lead to falls in research money.

This was because overall income forecasts are used to calculate the “margin for sustainability and investment” (MSI) used in the sector’s Transparent Approach to Costing (Trac) initiative, which assesses how much money universities require to cover the full costs of their activities, including hidden costs such as maintaining research facilities.

A lower MSI would mean researchers costing up grant applications at a lower value or “price”, essentially meaning funding from subsequent successful awards will also fall.

“At Exeter, this price fall is 7 per cent − and this will impact on the funding of our future research awards and therefore future income over the next five years. This will mean our research cost recovery will fall – as a direct result of a mathematical outcome of Trac,” Mr Connolly said.

The latest Trac data showed that universities were already only recovering about 70 per cent of the full costs of research in 2019-20, and such an effect could add to other pressures hitting cost recovery, such as growing losses on teaching UK undergraduates.

James Tooze, a policy officer at the Campaign for Science and Engineering, said Trac showed how structural reform on research funding had to accompany the government’s pledge to significantly increase public science investment to £22 billion by 2024.

He said one way to do this might be to focus more investment on quality-related research funding − public money that universities receive every year irrespective of how many grants they win.

Sarah Randall-Paley, director of finance at Lancaster University and chair of the British Universities Finance Directors Group, added that the findings of a 2019 report on financial sustainability in UK higher education, which revealed the extent of cross-subsidies between teaching and research, were “still valid”.

This included the finding that “supporting government targets for growing R&D can only be delivered by permitting cross-flows” from sources such as international student income “or by increasing funding for research”.

simon.baker@timeshighereducation.com