Why are UK universities failing? Which are in the most serious positions

28th January 2026

In 2026 the higher education sector in the UK faces the real prospect of a university going into administration. Constantinos Alexiou and George Saridakis from The London School of Economics lay out how UK universities have fallen into these dire straits and suggest what may become of the sector following the crisis.

UK universities are facing unprecedented turbulence. Redundancies, mergers, recruitment freezes, stalled promotions, and pervasive uncertainty are becoming increasingly prevalent across the sector.

Yet, politicians and university leaders have done little to prevent the structural pressures that have accumulated over the years, from reaching a breaking point. Accountability often falls disproportionately on students, academics and administrative staff, while those responsible for underlying problems face limited scrutiny. Was this crisis inevitable, or could leaders have anticipated the storm and acted sooner?

Political headwinds
Political decisions have played a key role in exposing the sector's vulnerabilities. The post-Brexit era disrupted EU research partnerships, funding streams, student enrolments, staff recruitment, and exchange programmes. Universities and staff that relied on EU engagement faced uncertainty, while programmes such as Horizon Europe saw delayed or weakened access, forcing institutions to seek alternative collaborations or none at all.

Declining EU student numbers, driven by higher fees and restrictive immigration rules, removed a stable source of income and diversity. In response, many institutions became reliant on the overseas postgraduate market to sustain finances. At the same time, tighter visa regulations, restrictions on dependants, caps on overseas student numbers and post-study work arrangements (combined with rhetoric framing students as migrants rather than economic contributors) further exposed universities to financial and operational risks.

A broken funding model
High tuition fees, particularly for postgraduate students, have created additional pressure, forcing many to rely on loans or part-time work. While home undergraduate fees have remained relatively flat, the cost of postgraduate study continues to pose financial challenges for students. The government's emphasis on apprenticeships and short vocational programmes has reinforced the perception of higher education as primarily a tool for employability. At the same time, declining enrolments in humanities and other non-STEM subjects undermine the balance and diversity of the curriculum, despite their importance for cultivating reflective and sustainable societies.

Poor and boxed in leadership
Political decisions alone do not tell the whole story. While some university leaders may have anticipated the pressures building in the sector, their room for manoeuvre has often been limited by governance structures, financial constraints, and external policy pressures. Many academic leaders follow managerial paths rather than scholarly ones, and the prevailing governance model encourages vice-chancellors and senior managers to act like corporate executives rather than academic stewards.

Executive pay has soared, staff salaries have stagnated, and precarious contracts have proliferated, reflecting both the pressures and the limited flexibility leaders face in balancing competing priorities. Some leaders may have attempted to manage these pressures proactively, but external constraints, including government policy and market volatility, restricted their options.

Many leaders have pursued entrepreneurial strategies, expanding satellite campuses, investing in property ventures, and prioritising high-demand programmes, often at the expense of disciplines that enrich public life but do not generate immediate financial returns. While some of these initiatives carry higher financial risk, they are frequently seen as necessary to balance the books in the absence of sufficient government support, sometimes requiring cross-subsidy from other areas.

Some leaders may have attempted to manage these pressures proactively, but external constraints, including government policy and market volatility, restricted their options.

This raises important questions about fairness, particularly when higher workloads or financial pressure fall disproportionately on certain academic areas. Administrative structures and professional services expanded rapidly, often outpacing investment in academic staff needed to support these initiatives, but these are now under threat as universities seek to rationalise professional support for academics. Despite their experience, few anticipated the rise of international English-language degree programmes or the technological and competitive shifts transforming global higher education.

Regulatory regimes and goal displacement
Increasingly, universities have become metric-driven, focusing on REF, TEF, KEF, NSS, league tables, internal KPIs, and accreditation. While these tools are intended to measure performance, there is a risk that attention shifts from deeper academic goals toward managing the metrics themselves. Departments may be restructured to maximise research outputs, staff workloads intensified, and resources directed toward areas promising quantifiable returns. However, if metrics become an end in themselves, they lose effectiveness as KPIs. The challenge is to use metrics as a guide rather than a target: developing and sustaining a supportive and productive research and teaching environment should naturally improve REF, TEF, and NSS outcomes. Attempting to "manage the metric" directly can undermine long-term performance and academic integrity.

This focus has profound consequences. Academic freedom and intellectual risk-taking are undermined, teaching is reduced to managing surveys and logistical exercises, and research becomes a strategic calculation designed to boost outputs and impact scores. Universities must maintain these expectations amid financial pressures and limited state support, reinforcing the neoliberal expectation that institutions must navigate market turbulence independently (while having little influence over undergraduate fee levels, student visa rules, or the broader policy framework).

The emergence of a new kind of university
The cumulative impact is clear. Research time diminishes, funding for scholarly activities is constrained, programme restructuring seeks to differentiate institutional offerings, and bureaucracy increasingly turns academics into administrators. Following the government's recent post-16 education and skills white paper, a growing formal division between research and teaching staff has also raised concerns about potential differences in terms and conditions and financial support, and how these might impact the wider academic environment. These tensions are not unique to a single institution.

To speak of the "demise" of the UK university is not to suggest its disappearance, but its transformation into something increasingly unrecognisable.

Students face rising fees, reduced support, and austere campus environments. Staff experience burnout, job insecurity, and managerialism that undermines their professional agency. Communities witness universities retreating from public service toward corporate partnerships and property ventures, while policymakers frequently attribute problems to institutional mismanagement, ignoring the broader political and economic frameworks responsible for the crisis.

To speak of the "demise" of the UK university is not to suggest its disappearance, but its transformation into something increasingly unrecognisable. The sector has become a hybrid institution caught between public expectations and market imperatives, governed by leaders rewarded for financial agility, rather than intellectual integrity. An institution with a growing reliance on international student fees to meet budget requirements, increasing competition between universities domestically and internationally, and under constant pressure from short-term political and financial cycles that limit strategic planning.

Recovery will require a fundamental rethinking of governance and funding. Universities must reaffirm their public mission, embrace accountability, not only to metrics, but to societal purpose and as sources of enlightenment, and receive the policy stability necessary for long-term planning. This is not unimaginable. In the UK the 1963 Robbins Report transformed the sector. In Germany, targeted support through the Excellence Initiative for selected universities, and in the Nordic region, Finland's multi-year funding and governance reforms, have set out strategies aiming to strengthen research and teaching capacity alongside supporting broader societal roles.

Without such changes, the sector's crisis will deepen. Its consequences will be borne primarily by academic and administrative staff, students, and society and not by senior leadership or political decision-makers.

This post draws on the authors’ article, A Review of the Performance Metrics and Entrepreneurial Practices of Economics and Business Departments in UK Universities: A ‘Gresham’s Law’ Threat?, published in Journal of Entrepreneurship and Innovation in Emerging Economies.

Source
For links to more information go to https://blogs.lse.ac.uk/impactofsocialsciences/2026/01/19/why-are-uk-universities-failing/

Universities Facing Financial Problems
An overview of which UK and Scottish universities are currently under significant financial stress, and which ones have been reported as being closer to insolvency or at risk of major distress.

University of Dundee — Most serious risk in Scotland

The University of Dundee has been repeatedly highlighted as facing severe financial difficulties, with some reports saying it was on the verge of insolvency without external support. The institution revealed a large deficit and admitted it had previously underestimated its financial position — so serious that without rescue funds it could have run out of money by mid-2025.

Dundee has implemented major cost-cutting including job cuts (hundreds of posts) and is developing a recovery plan to regain financial sustainability.

The Scottish Government and Scottish Funding Council have provided emergency funding to help avert collapse, indicating how close the university came to failure.

This is the most concrete example in Scotland of a university entering crisis territory where insolvency was discussed in political and media forums.

University of Aberdeen — persistent deficit and cuts

The University of Aberdeen is another Scottish institution in significant financial difficulty:

Aberdeen has reported ongoing deficits (in the millions of pounds) and has introduced voluntary severance schemes and recruitment freezes to reduce staff costs.

Leadership has warned that balancing income and expenditure by 2028 will be very challenging, indicating long-term fiscal stress.

So while not at the brink of insolvency like Dundee, Aberdeen remains under sustained financial pressure and could face more drastic measures if conditions worsen.

University of Edinburgh — major deficit but large reserves

The University of Edinburgh has also been publicly reported to be running a very large deficit — in the order of hundreds of millions of pounds:

It forecast a £140m shortfall, which would be one of the largest in the UK sector, leading to staff cuts and restructuring.

However, Edinburgh’s position is complicated by its very large endowment and cash reserves, which some argue give it more resilience than smaller institutions.

In other words, Edinburgh is unquestionably under fiscal strain, but there is less consensus that it is at imminent risk of insolvency compared to Dundee.

Wider UK context — other universities in deep trouble

Beyond Scotland, a number of UK universities are running significant deficits and have been reported in analyses of sector finances:

A recent analysis listing universities in the worst financial shape included institutions such as Coventry University, Middlesex University, Sheffield Hallam University, University of the West of Scotland, and several others across England and Wales with deficits ranging from several million to tens of millions.

These figures reflect deficits recorded in financial reports, but (importantly) deficits do not automatically mean insolvency. Many universities plan to close gaps through restructuring, mergers, cost-cutting, or reserve use.

Sector-wide financial context

Several official and analytical reports underline that the higher education sector as a whole is under significant strain:

In Scotland, data from the Scottish Funding Council show that around 10-11 universities reported operating deficits in 2025-26, and net liquidity (cash cushion) has fallen sharply; the sector is described as operating in a high-risk financial context.

Research and sector summaries describe a "perfect storm" of funding pressures, rising costs, and reduced public funding that is forcing redundancy programmes and restructuring across multiple campuses.

In England, independent analyses suggest many universities are running deficits, especially following drops in international student fees and rising expenses — and a parliamentary inquiry has been launched into financial viability.

Universities are under serious financial strain across the UK and Scotland, but the situation varies by institution:

Most at risk / nearest to solvency issues:

University of Dundee — widely reported as close to insolvency without emergency support.

Seriously troubled but not imminently insolvent:

University of Aberdeen — ongoing deficits and difficult forecasting.

University of Edinburgh — massive deficit but strong overall institutional resources.

Across the UK: Several universities have large deficits (e.g. Coventry, Middlesex, Sheffield Hallam) but are managing through cuts and restructuring rather than facing collapse.

Insolvency is still rare, and regulators and governments have so far acted to avoid outright institutional failure. However, without improvements in funding or significant restructuring, the risk of more universities coming under severe financial duress — and possibly exiting the sector — remains elevated.