See the big picture
Various policy changes as a result of a new Government, combined with continued cost pressures in the sector, may require educational institutions to take time to reassess their strategic priorities, ensuring they really know their core market, refine their unique selling points, and deliver the right student experience.
Head of Education, Barclays Corporate Banking
Despite the announcement that fees are set to rise in line with inflation for the academic year 2025/26, universities’ margins will continue to be squeezed by the long-term real value decline in the domestic undergraduate fee cap and rising costs. Many universities have boosted their income by attracting more international students in recent years, but this has declined significantly for the 2024/25 academic year, following the introduction of various visa restrictions, causing many institutions to take action by refocusing their priorities and right-sizing their cost base.
By equipping students with the skills employers need, as well as through breakthrough research, universities are of course a vital part of the UK’s economic fabric. However, they may need to renew their focus on longer-term strategic goals and investment plans in 2025, as well dealing with short-term financial viability challenges. This could include focusing more on courses that develop skills for the workforces of the future, building closer ties with local businesses, advancing research to help drive UK productivity, and making a clear case for the long-term social and economic value they add.
I think 2025 will see more universities removing inefficiencies and exploring income diversification, to generate new revenue streams and better margins from commercial activities.
Head of Education, Barclays Corporate Banking
Independent schools will continue to be considering their options in response to the loss of their VAT exemption and the impact this is likely to have on parents’ choices. They will also be reassessing their models and fee structures to account for the loss of their charitable business rate relief and the increase in employers’ national insurance contributions from April 2025.
We’ve already seen an increase in activity in terms of mergers and some closures in the second half of 2024 as independent schools started weighing up their options, and I expect to see further consolidation and sharing of resources throughout this year as they continue to explore how best to balance their fee income and costs, with student numbers potentially shrinking. Innovation, differentiation and the ability to clearly demonstrate value for money may be key to their ongoing viability and ‘future readiness’.
Leveraging shifting policies
I’m hearing lots to suggest that the government is likely to focus more resources onto FE colleges, to increase access and support lifelong learning through a range of different channels. Following the formation of Skills England, I’m looking forward to seeing how new initiatives are introduced to address the skills gaps and support training for the workforce of the future. This could include some reprioritization of where government funding goes.
Colleges and higher education institutions are likely to position themselves so that they can best take advantage of any policy changes and ensure that they’re ideally placed to contribute to the development of the country’s skills base.
Providing experiences that offer access to high-quality facilities and teaching, foster well-being, demonstrate value, and ultimately result in enhanced employment prospects will be key to institutions’ satisfaction ratings and reputations.
Continued cost pressures mean education providers will need to prioritise their spending carefully in the year ahead and explore income diversification opportunities. Being clear on their purpose and unique selling points, along with how they can contribute to the economy over the long term, should help guide their strategic focus and may open up new opportunities.
Institutions need to be realistic about what they can achieve in relation to their net zero commitments and prioritise actions that will have the biggest impact, given the potential costs involved.
If you’re looking to unlock growth opportunities to move your business forward, our £22bn Business Prosperity Fund is available through some of our borrowing and refinancing options. See how we could work together to achieve your ambitions and strengthen the UK economy. Subject to normal lending assessment, status and application. Terms and conditions apply.
Keeping fraud front of mind
Fraudsters are as active as ever across Educational institutions, impersonating our colleagues and attempting to defraud our clients. To help protect you and your business we have a wealth of resources available. You can view our quarterly fraud webinars and take a look at our other educational resources on our Fraud Protection Hub.
To discuss your business requirements and how Barclays can support you, contact us today.
