11 December 2023

This year fewer people in Wales applied to university than at any point in the past decade. The gap in 18-year-old participation between Wales and the UK as a whole is also the widest it has ever been. More broadly, our population remains less well-qualified than other parts of the UK.  

Meanwhile, our universities face some of the most pressing, difficult financial circumstances in recent memory.  

Universities Wales has often talked about the wide economic benefit of our universities and how universities will be crucial to preparing Wales for net zero, rapid changes in the workplace, and technological change. When we prepared our response to the Senedd’s call for evidence for the 2024-25 budget, our focus became more fundamental: what is needed to maintain the benefits our universities deliver, and to address the very real possibility that we will have cohorts of young people less well qualified than their immediate predecessors for the first time in decades.  

And while there are things that universities are doing to improve sustainability, including reviewing businesses models, these are long-term projects that do not address the urgent short-term risks. Delivering these types of transformation programmes also requires resource at a point where the level of borrowing by the Welsh university sector is already comparatively high: in Wales, borrowing is 49% of income compared to 34% for the UK as a whole.  

What are the challenges we face? Most crucially, that the income of the Welsh sector is increasing at a slower pace than our expenditure. This is perhaps unsurprising - we are all aware of the upwards pressure on costs brought about by inflation - but still a sobering reminder that the real-terms value of fee income and many of the public funds universities rely on have shrunk considerably in recent years.  

In practice, this means that, on average, fees and funding no longer cover the cost of delivery for home undergraduate students in any subject area. Similarly, research grants only cover around 68% of the cost of delivery.  

This is why Welsh Government funding for higher education is so crucial. Without the £205.4m revenue funding invested in 2023-24, Welsh universities would not have been able to secure research and innovation grants or to teach the breadth of students that they did. It is the Welsh Government investment in HEFCW that enables universities to secure other income sources.   

Quality research funding (QR) is a good example of how that investment is so essential. The correlation between levels of QR funding and the amount of competitive funding secured has been well illustrated: parts of the UK with proportionally higher levels of QR tend to secure a larger share of competitive funds. Allocations for research and innovation in Wales, including QR, were £105m in 2023-24. When adjusted for a population basis, this is £44m lower than England and £68m lower than Scotland. This puts us at a disadvantage in competing for the same funds as universities in the rest of the UK.  

And there are other pressures. For example, teaching international students brings widespread social and economic benefits across Wales, and underpins university finances.  However, we operate in a global recruitment market and one that is becoming more challenging and less reliable.  

As we have said many times, our universities are part of the fabric of our communities. They support public services in many ways: from training public sector staff, such as teachers, nurses and doctors, to delivering free services such as law clinics; from providing communities with sporting and nursery facilities to maintaining arts and community centres, parks and botanic gardens.  

It is this civic-mindedness and relationship with communities which perhaps drives the high impact achieved by Welsh universities. In the 2021 Research Excellence Framework, Wales was found to be UK-leading for impact. 94% of the Welsh case studies involved collaboration with non-academic partners including public sector bodies, national and local government, and industry. Analysis of those case studies has found that Welsh universities’ research and innovation work directly benefited children and young people, policymakers, the elderly, women, and people with disabilities. 

Our evidence to the Senedd is pragmatic. We know the wider pressures that public finances face and we know the difficult decisions being made across the entirety of the government’s budget. But we must also remember that the infrastructure, assets and talent in our universities that have taken decades to establish can be lost in very few years. We have already seen this: as we warned in February 2023, there were over 1,000 highly skilled jobs at risk at Welsh universities due to the loss of European Structural Funds. Much of that talent and capacity is now gone.  

The economic impact of the decisions that universities would have to make in the near future, were nothing to change, would be felt across health, education and more. Yet the risks for Wales are greater: the risk that communities are unable to rely on the assets that have for so long formed part of their communities; or generations without the same opportunities to access higher education as those that came before; an economy that is unable to keep pace with our global competitors.  

This at a moment in time where we know we need more graduates, with an estimated 400,000 extra in Wales needed by 2035, against a decline in participation.    

That’s why we have asked for opportunities to continue to work with government to address the fundamental funding challenges, including the unit of resource for part-time and full-time education, to identify invest-to-save funding or finance, and to help maintain the talent and infrastructure being lost, or at risk of being lost, as a result of a lack of EU funding.  

Our universities are not just assets to deliver us benefit today, but institutions that future generations must be able to draw on for those same benefits. The risks to our university sector have never been quite so great, and perhaps neither has our need for them.