Is UK Higher Education Shrinking? Understanding the Sector’s Contraction

Over the past few years, there has been growing concern that the UK Higher Education (HE) sector is shrinking not necessarily in prestige or importance, but in financial stability, student numbers, and institutional resilience. Once seen as a robust and globally attractive industry, the sector is now facing systemic pressures that could reshape its future.

A Perfect Storm: Why the Sector Is Under Pressure

1. Falling Domestic Student Numbers

The UK is experiencing a demographic dip in 18 year olds which is expected to recover only gradually over the coming years. While the “baby bust” of the early 2000s has long been predicted, universities are now grappling with the real consequences: fewer domestic applicants, especially to non-Russell Group institutions. 

This has led to increased competition for students and in some cases course closures.

2. Over-reliance on International Students

International students have long been the financial lifeline of UK universities, especially post-Brexit as EU student numbers dropped. However, the tightening of UK visa rules (especially affecting dependants), rising costs of living, and growing global competition from countries like Canada, Australia, and the Netherlands have dampened demand. 

This is creating budget shortfalls in institutions that built their financial models around continued international growth.

3. Funding Model Cracks

The real terms value of domestic tuition fees has been eroded by inflation. Introduced in 2012 at £9,000 and capped at £9,250 since 2017 tuition fees have failed to keep up with soaring costs. Universities are now caught in a bind: unable to raise fees, under pressure to deliver “value for money” and struggling to maintain staff and resources. 

This financial squeeze is leading to staff redundancies, hiring freezes, and scaling back on research.

4. Unchecked Software Spending

Another factor exacerbating the financial strain on universities is the unchecked rise in software spending. Over the past decade, SaaS companies have increasingly capitalised on the complex procurement systems within higher education, often locking institutions into costly, inflexible contracts with limited transparency on usage or ROI. 

Many universities now find themselves overpaying for underutilised platforms, with overlapping functionalities and minimal integration. In an era where every pound matters, tackling software overspend represents a significant, yet often overlooked opportunity for cost savings. By conducting thorough audits, consolidating tools, and renegotiating vendor contracts universities could reclaim millions of resources annually that could be redirected toward core teaching, research, or student support.

5. Geographic and Institutional Disparity

Not all universities are equally affected. Some smaller, post 1992 institutions are bearing the brunt of the downturn, while elite universities continue to attract applicants and funding. This growing divide risks entrenching inequality within the HE system, where access to high quality education becomes increasingly concentrated in a handful of institutions.

Signs of Shrinkage

• Course Closures: A growing number of universities have cut courses, especially in humanities and arts and some have merged departments or downsized campuses.

  
  

• Job Cuts: Redundancy programs have been announced at institutions like the University of Aberdeen, University of Kent and others.

  
  

• Fewer Undergraduate Places: Some universities are reducing intake caps or becoming more selective to manage quality and resources.

  
  

What This Means for the Future

If current trends continue, the UK HE sector may become leaner, more market driven and polarised. There’s a risk that:

• Smaller institutions could be forced to merge or close.

  
  

• Curriculum offerings become overly aligned to economic utility (e.g. STEM and business) at the cost of broader liberal education.

  
  

• Staff morale and research output deteriorate under growing financial stress.

But there are opportunities too:

• Rethinking the funding model, including reintroducing teaching grants or index linking tuition.

  
  

• Strengthening ties with industry to boost employability outcomes and diversify revenue streams.

  
  

• Investing in flexible, digital, and lifelong learning models to attract non-traditional learners.

  
  

Final Thoughts

The phrase “shrinking sector” doesn’t necessarily mean fewer universities but it does mean a recalibration. The current HE landscape is being reshaped by globalisation, economic realities, and political choices. Whether this leads to a leaner but stronger sector, or a system that leaves students and staff behind, depends on how policymakers and universities respond now.

How we can help:

If you work at a university and want to check whether you're being affected by overspending on software, get in touch with us. We offer a free spend review to help you identify waste, uncover savings, and take control of your software costs.