COVID-19 crisis has opened ‘Pandora’s box’ for UK research funding system

UK university leaders on Wednesday warned MPs that the sector’s high tuition fee model needs an urgent re-think, following the huge loss of revenues caused by the COVID-19 pandemic.

“This pandemic has highlighted a long standing issue,” Nancy Rothwell, chair of the Russell Group of research-led universities, and vice chancellor of Manchester University, told the Science and Technology Committee.

“Our research is only funded to 72 per cent of the full cost. That’s been okay, so long as we’ve had international fees, residency [fees], commercial activities coming in. But the pandemic has opened up the Pandora’s box that we’ve all managed to keep the lid on for a while,” said Rothwell.

International students are a “very significant cross-subsidy” for research in the UK, the committee heard.

With both domestic student tuition fees and research funding below many universities’ operating costs, overseas student fees are a vital money-maker.

“They’re worth £2 billion a year to research activities,” said Julia Buckingham, president and chair of the Universities UK lobby group.

The UK, which operates a commercially-oriented university system like in the US, Australia and Canada, has become increasingly dependent on often-exorbitant tuition fees from international students. As a result, its universities are particularly vulnerable during the crisis compared with continental European universities.

Buckingham said it is still uncertain how many foreign students will come to the UK for the new academic year.  

“Application and acceptance numbers look rather better than expected,” she said. “But the proof of the pudding is in the eating. Until we get to the point of enrolment, we won’t be able to say anything concrete.”

Universities won’t have a clearer view on intake until foreign students, “not only arrive, but they pay,” said Rothwell.

The “very last date possible” for payments is 31 October.  However, “That’s not quite the time we can all breathe a sigh of relief. Imagine then there’s another spike in infections, and international students go home, and don’t make their payment for the second semester,” Rothwell said.

Contrary to expectations, UK universities are seeing “no downturn in demand from China – quite the opposite. I have a greater worry about demand from other regions in the world,” Rothwell said.

With countries going in and out of lockdowns, there are backlogs in visa offices around the world, meaning some students may not have their paperwork processed in time to travel to the UK.

After a government U-turn on how secondary school students were graded this year, thousands of extra students suddenly had the marks to fill university places. But while they can now accept more students than they had originally planned to, universities may not see any additional boost to their bottom lines. “We break even or make a loss on [domestic] students,” said Rothwell. 

Anton Muscatelli, principal of Glasgow University, estimated universities could still see 40-50 per cent losses this year from a fall in foreign students. “And if there’s a further closure of labs, it will cost several hundred million pounds more,” he said.

There also has been many student deferrals until January, said Buckingham. “It’s a moving feast. For the moment, the signs are more positive than we had hoped. But I’m not confident until the students physically show up,” she said.

Long-term cost

As for the quality of the university life, Buckingham said, “It will be different type of experience,” rejecting the suggestion that fees should be lowered to reflect what is expected to be a more limited offer to students. “The cost to us will be greater because of COVID,” she said.

Most of Glasgow University’s teaching this year will be online, confirmed Muscatelli. “There will be some face-to-face instruction in labs too.”

Muscatelli said it has turned out to be very important that the government pledged to ramp up R&D funding, with a fixed amount of £22 billion per year after 2024 or 2025. “It was very helpful to have an absolute sum, rather than a percentage increase, given the volatility of GDP after the pandemic,” he said.  

UK universities are also dealing with uncertainty over EU research money and falling demand from European students after Brexit. “It’s coming down to the wire” on talks in Brussels, said Rothwell.

Muscatelli warned that contingency plans would have to be drawn up “in the next few months” if it becomes clear that the UK will not be part of the EU’s next big research programme, Horizon Europe.

Whatever the outcome in Brussels, UK universities will be counting the cost of the pandemic for a long time, said Rothwell.

“We will hope it’s a short term health problem, but it will be a long term economic problem. Like many sectors, we’re feeling hit on every side. We’re all deferring capital projects, we’re deferring maintenance projects. These are all things that will come back and bite us,” she said.