New Choices: revisiting strategic futures for English higher education
This blog was kindly authored by Professor Sir Chris Husbands, Director of Higher Futures and a HEPI Trustee. He was previously the Vice-Chancellor of Sheffield Hallam University. He is the author of Four Futures (Debate Paper 37) and New Choices (Debate Paper 48).
Two years ago, my HEPI pamphlet Four Futures sketched four possible scenarios for the future of English higher education. It was meant as a thinking tool, not a prophecy, and it stimulated debate and discussion across the sector. New Choices is a HEPI essay which revisits the 2024 analysis against a backdrop of accelerating financial pain, institutional restructuring, changing student expectations and a technology shock which may be systemic. Institutional growth alone is no longer a viable response to the multiplying questions facing higher education, even if growth and optimism bias seem baked into organisational planning. The sector, and individual institutions, need to make some fundamental choices.
The numbers are brutal
The immediate challenge is financial, and everything else flows from it. The Office for Students now projects 45% of providers in deficit for 2025/6, with 45 institutions holding fewer than 30 days of liquidity. Severance costs rose 71% year-on-year to £303 million. The Government’s decision to raise the undergraduate fee cap to £9,790 barely moved the needle. The extra £390 million it generated for the sector was almost entirely swallowed by the £372 million rise in employer National Insurance contributions, producing a net gain of roughly £18 million, which is a rounding error against a structural crisis. International recruitment, which has for so long been the sector’s long-standing shock absorber, is now itself a source of shock. Visa applications fell 31% in a single year after the Graduate Route was trimmed and the prospect of a £925-per-student levy was confirmed. Meanwhile, research cost recovery has slid from 76% to 67%, and UKRI policy shifts have led to disruptive change in the research funding environment. All this means that the three pillars propping up the 2010s university business model – domestic fees, international fees, research income – are each under severe stress.
Four Futures, Revisited
In 2024, Four Futures set out ‘ideal-type’ scenarios for the long term shape of the sector:
- Evolution of the Present – relentless squeeze, closures, decline.
- Delivering the 2010 Vision – full funding of the sector.
- Place-Based Tertiary System – regional collaboration and credit transfer.
- A Differentiated System – research concentration and sharper institutional differentiation.
From the perspective of 2026, scenario 2 – full funding – is even more implausible than it was two years ago. Scenario 1 is winning by default, arriving faster than expected as institutions respond to deepening short-term challenges with, in many cases, repeated restructuring. Elements of Scenario 4 are happening by stealth, through research funding concentration, without any of the transitional support that would make for coherent policy. Scenario 3 remains a policy aspiration, but the infrastructure to deliver it barely exists; for example, the Lifelong Learning Entitlement has landed with just 12% public awareness. The conclusion is uncomfortable: the sector is currently backed into a hybrid future nobody designed or intended, and which is less stable than any single scenario would have been.
It’s not just the money
Three other change drivers are now accumulating on top of the financial crunch, and each poses sharp underlying challenges for the sector.
- AI has stopped being a curiosity and become ‘the pre-eminent leadership challenge.’ The overwhelming majority of students make use of AI, but only a third feel their institution provides a framework to support AI use. Moreover, the pace of technology development is vastly outstripping institutional abilities to develop coherent responses.
- Student experience has quietly transformed, and especially under the combined impacts of the cost-of-living crisis and the long tail of the pandemic. A typical student living away from home needs roughly £244 a week just to get by, and two-thirds now work part-time to cover the gap. More students are choosing to study from home rather than live away. Layer on rising mental health pressures – over a third of UK students report moderate-to-severe depression or anxiety symptoms – and the ‘full-time residential student’ starts to look like a description of a shrinking minority. In the decade after 2029, the number of eighteen-year-olds in the population will fall by almost a fifth.
- Public trust in universities seems to be fraying too, though perhaps to a lesser extent than in some other countries. Even so, whereas in 2005, just 14% of Britons thought a degree wasn’t worth the time and money, the figure is now 34%. Nearly half believe there are too many low-quality degrees; seven in ten would rather see more vocational routes. This scepticism is shaping political rhetoric from every direction.
So what happens next?
Using this analysis, New Choices sketches what a genuinely differentiated sector might look like as the probable outcome of institutions responding rationally to what seems to be an impossible funding landscape. It envisages scope for four types of institutions. Global players will be few in number, undertaking world-class research, and competing internationally. Large regional universities will be anchors for their cities, blending flexible teaching with focused, growth-aligned research. Local universities will be leaner institutions, more networked, increasingly comfortable working alongside for-profit partners. Finally, specialist institutions will be small, sharply focused organisations, built around a discipline or a distinctive pedagogy. This isn’t a tidy policy design for the sector, but what is likely to happen when institutions are left to sort themselves out under financial duress, without government articulating more clearly what it wants the sector to look like.
The uncomfortable ask
Against this background, the paper looks at the choices the government and institutions need to make to navigate the strategic landscape. Government needs to stop hiding behind ‘institutional autonomy’ as an excuse for having no plan – on teaching funding, on the Lifelong Learning Entitlement, on the international student contradiction at the heart of its immigration policy, and on whether research concentration is a deliberate choice or an accident. And crucially, it needs to build an orderly framework for mergers and exits before a crisis forces an ugly, expensive one. Institutions, meanwhile, need to stop thinking about restructuring as a route to preserve their conventional models, and ask harder questions about their operating model, their place in a more differentiated sector, and their relationship to the towns and regions around them. Preserving the strengths of a coherent sector will demand imagination and new thinking: what the sector needs now is government activism and institutional courage in equal measure. Everything else – the AI strategy, the student experience redesign, the civic engagement plan – is downstream of that. Two years ago, the choices were painful in every direction. Today, not choosing has become the most expensive option of all. The question now is not whether the sector changes, but how.
Comments
Dr John Milliken says:
This is an important and timely analysis. The central conclusion—that failure to choose is itself producing a costly and unstable future—is difficult to dispute.
The proposed differentiation between global, regional, local and specialist institutions offers a more credible direction than the continued assumption that every university can sustain broadly the same model through further growth, periodic restructuring and increasingly intense competition. Yet differentiation alone will not create a coherent system. It may simply produce a new institutional hierarchy unless accompanied by equally deliberate mechanisms of integration.
The strategic question is therefore not only what types of universities England requires, but how students, qualifications, credit, knowledge and professional capability will move between schools, further education, universities, employers and professional bodies. A place-based tertiary system cannot be created merely by encouraging institutions to collaborate. It requires durable infrastructure: recognised transfer arrangements, shared planning, compatible credit, clearer progression routes and governance capable of reconciling institutional autonomy with regional and national priorities.
Further education must also be treated as a central partner rather than as a feeder sector beneath higher education. Large regional universities combining applied research, professional formation, flexible provision and close employer relationships begin to resemble, in modern form, some of the valuable functions once performed by the polytechnics. The abolition of the binary divide in 1992 recognised institutional achievement, but it also weakened a distinctive bridge between technical education, professional preparation and advanced study. The future may require England to recover and modernise some of what was lost.
New Choices convincingly demonstrates why the existing settlement cannot continue. The next stage is to move from a typology of institutions to an architecture of relationships. Without that architecture, differentiation risks becoming fragmentation by another name. With it, England could begin to construct a genuinely lifelong, permeable and place-responsive education system.
Reply
Jonathan Alltimes says:
“The immediate challenge is financial, and everything else flows from it.”
The blog yet again is expecting the government to resource the transitions, for that is what a plan assumes, but that is not going to occur. It is not going to occur as the government has no fiscal capacity to fund these transitions. The requirement for more defence expenditure and another wave of inflation has put an end to that, even if Trident were cancelled. Another Comprehensive Spending Review will trim departmental budgets, but for ministerial priorities other than higher education, the signals are clear. I have no doubt there will be other unforeseen events causing government finances to go awry.
The response of higher education is mostly rational, but nearly all universities need to get out of State funding for research, as it is financially unsustainable and does not matter for undergraduate teaching, that is the first phase of the plan (Getting out of research and into absorbing administrative tasks is the first response). We need to concentrate research funds in sector-specific research institutes, preferably outside of the universities, that is the second phase of the plan. UKRI is not moving in the direction of phase two, it continues to support distributing grants around the universities based on the quality of grant applications for programmes of expenditure. Its effects on economic objectives over the last 30 years has not moved the dial because there have been no transmission mechanisms from private sector investment at scale outside of the universities.
The OfS and DfE have no administrative capacity for brokering scores of mergers. Geographic consolidation sort of makes sense, if local recruitment of students is the norm. A few, possibly some providers could raise international student fees.
If everything flows from the financial, has the report characterised institutions into real classes? The report identifies immediate liquidity as the first way of dividing the institutions, but the analysis of likely scenarios does not follow the logic of the basic division of those institutions which are likely to be able to pass the acid test over the next recruitment cycle and those which are not. Which institutions are likely to be going concerns next year or not?
For the purpose of sustaining an institution, is there a better way of reclassifying institutions other than immediate financial liquidity?
Institutions will need to calculate if mergers are more cost effective than individual actions. The planning horizon is the next few months for a decision, including an appraisal of assets.
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