UK: Making The Grade 2011 - A Study Of The Top 10 Issues Facing Higher Education Institutions

"Higher education funding sources, including government grants and international student fees, are shrinking in the UK. Rising tuition fees go hand in hand with increasing student demands and the as yet unforeseen impacts of higher education moving towards functioning as a market economy. At the same time, companies are demanding graduates with different skills in order to compete effectively on the global stage. To be successful in this new environment, higher education institutions will have to radically transform the way they do business. This publication highlights key issues facing higher education, which our research shows transcend national borders. Our aim is to work together as a global education practice to help create shared solutions and bring new insights to our clients."

Julie Mercer, Associate Partner and Head of Education, Deloitte United Kingdom

"For higher education institutions, success involves a large range of activities – from improving student outcomes and maintaining educational excellence to attracting the best faculty and planning for the future. Deteriorating financial conditions put all of these activities at risk."

Kathy Karich, Principal and U.S. Higher Education Lead, Deloitte United States

"Higher education institutions are in the midst of a perfect storm. Government funding is declining, market conditions have reduced the value of endowments, private backing is on the wane and costs are going up. Yet, these combined challenges create a unique opportunity for transformation. Educational institutions willing to think laterally can position themselves to outperform into the future."

Louise Upton, Principal and Canadian Higher Education Lead, Deloitte Canada

A transformation in education

In today's uncertain global economy, the continuing acknowledgment that education is critical to long-term economic prosperity seems to be the one constant. According to the Organization of Economic Co-operation and Development (OECD), "investments in education pay large and rising dividends for individuals, but also for economies," with "educational attainment linked to long-term social outcomes such as better health, political understanding and interpersonal trust."1 This holds particularly true for higher or tertiary education. Indeed, "the net public return is almost three times the cost of investing in tertiary education."2

All who have meditated on the art of governing mankind have been convinced that the fate of empires depends on the education of youth.


Despite the obvious economic benefits, however, spending on higher education is coming under increasing pressure these days. As nations around the world work to recover from the global financial crisis, they are tightening their budgets, leaving fewer funds available to the educational sector. At the same time, market weakness has reduced the value of many of the endowments educational institutions rely on. Economic hardship is also affecting enrolment levels at many institutions, as students opt for less costly educational programs or opt out altogether.

To make matters worse, educational institutions are now finding that they must meet a host of costly demands just to stay competitive. Students are expecting user-friendly, self-service administrative options as well as access to the latest technologies. Deferred maintenance is catching up with campuses with aging infrastructure badly in need of upgrades. The costs of attracting and retaining high-calibre faculty are increasing as staff retires in increasing numbers. And colleges and universities are under ever-more scrutiny and compelled to invest in systems that provide the highest levels of transparency and accountability.

Though institutions of higher education vary in terms of structure and funding from country to country, nearly all are facing these competitive pressures as they confront shrinking resources and increased demands. Clearly, higher education can no longer maintain the status quo. To achieve their mandates and serve their constituencies, they must face up to the unique challenges that the 21st century now presents. This report, produced by Deloitte Canada in consultation with Deloitte education practitioners from around the world, identifies the top 10 issues that will prove most pressing in the coming year for institutions of higher education and most in need of their attention. The report focuses on public universities and colleges and private non-profit institutions as well as looks at some of the issues facing private and market-funded institutions.

But identifying challenges is only the first step in what will need to be a radical transformation in the way tertiary institutions do business. Not only will they need to overthrow the status quo – no small task in many institutions of higher learning – but also aggressively execute on new approaches and seek out best practices from around the world and perhaps from outside the academic sphere itself. This report provides some essential strategies that institutions should consider as they seek to address their challenges as well as some fresh thinking on key institutional drivers. Drawn from the professional experience of Deloitte practitioners from both inside and outside the industry, these steps may not only help colleges and universities survive current economic hardships, but also reinvent themselves to meet the educational needs of the future.

1. Over budget and underfunded

As funding declines, cost management is key

What happens when access to funds drops at the same time costs rise? This is precisely the quandary facing higher education institutions – and solutions are hard to come by.

When the global financial crisis hit, the education sector was disproportionately affected. Private schools as well as public institutions that rely on private investment, saw the value of their endowment funds fall as declining markets took their toll. This affected many private donors as well, who lost either the ability or will to invest significant sums within the industry. At the same time, regulations limiting tuition fee increases are making it harder for many institutions to establish their own pricing and restricting them from delivering on their mandates.

Most notably, however, government budget challenges are leading to reductions in higher education spending around the world. In the United States, 43 states had enacted or proposed cuts to higher education as of August 2010.3 In the United Kingdom, the amount of money going to higher education is set to decline by as much as 80% over the next four years, although tuition increases will likely soften some of that blow.4 While this will likely work to the benefit of the Russell Group (similar to the U.S. Ivy League), which can attract students at high fees, lower tier institutions will likely struggle and may need to consider strategic mergers as a result. For the past five years, government funding to Australia's higher education sector has been on the wane. The same is true in Canada, where the proportion of federal funding to the sector fell from 80% of universities' operating revenues in 1990-91 to 57% in 2007-08.5

Beyond simply cutting budget allocations, governments are also taking a more hands-on approach in the funding approval process. Rather than providing funding upon student enrolment, Canadian and Australian governments are examining linking funding to the number of students retained to graduation. The United States (at the state level) is taking a similar tack in an attempt to coax institutions into improving efficiency, reducing program duplication and fostering cross-institutional collaboration as conditions for obtaining funding.

As operating margins shrink, higher education institutions must find new ways to cut costs without sacrificing services. Some are streamlining their business processes and back-end systems in an attempt to improve operating efficiency. Others are exploring new revenue opportunities as a way to enhance profits without raising tuitions. While responses will vary for each institution, it has become eminently clear that a proactive response is necessary to offset the potential for severe financial loss.

"As funding dries up, some universities are heading into debt for the first time. This is constraining dollars for classroom delivery and research, creating tension among different departments for scarce financial resources and jeopardizing faculty pay and staff increases. As institutions figure out how to leverage their limited resources to attract the best students, researchers and staff, they will learn valuable lessons related to realized losses on their endowment investments and likely begin to increase their investment policy due diligence."

Brian McKenna, Partner, Deloitte Canada

Exploring education's budgetary woes

It is often said that when you are in the eye of a hurricane, a false sense of calm can prevail. On some level, this is how many educational institutions are functioning in the aftermath of the global financial downturn. But organizations that continue to act as though it's business as usual may end up scrambling for survival when the funding storm hits. And the inevitability of the storm can be seen in areas outside of straight-forward government cuts.

In the United States, for instance, rising loan default rates may act as harbingers of new budgetary woes to come. According to the U.S. Department of Education statistics released in September 2010, overall student loan default rates increased to 7% in fiscal 2008 compared to 6.7% in fiscal 2007. The worst marks went to market-funded colleges, which saw their default rate rise to 11.6%. This is almost twice the 6% default rate found at public institutions and almost three times higher than the 4% rate found at private institutions.6 As default rates rise, the Obama administration is doing more than tightening its lending standards. It may also deem certain schools ineligible for U.S. student aid programs – a move that could vastly limit the flow of funds to some organizations.

While Canada does not face similar default rates, educational funding is now being jeopardized on the research side. As research grant values decline and fewer grants become available, Canadian institutions need to get better at attracting research dollars. To this end, higher education institutions must do more than collaborate with industry to identify research programs capable of delivering a social benefit. They must vastly enhance their ability to track and manage research dollars.

This imperative was brought home when some of Canada's leading institutions failed the Tri-Council Review of Institutional Policies Dealing with Integrity in Research. To comply with the integrity policy framework, institutions that receive research dollars need to implement reporting mechanisms that promote integrity and ensure allegations of misconduct are properly investigated. Absent the adoption of sufficiently robust processes, research funding for some institutions could be revoked. This is creating added pressure for institutions whose administrative functions are already overburdened.

"Educational institutions have budgetary issues so much different than a business. Schools funded by student loans, for instance, had almost come to view budgets as an unlimited resource. As lending tightens and legislatures continue to limit tuition increases, organizations need to learn how to handle potentially unprecedented budget constraints."

Thomas Mann, Director, Deloitte United States

To read this document in its entirety please click here.


1 "Investing in the Future," remarks from Angel Gurría, OECD Secretary-General, for the launch of the 2010 edition of Education at a Glance; Education at a Glance 2009: OECD Indicators, The Organization of Economic Co-operation and Development, 2009.

2 Highlights from Education at a Glance 2010, Centre for Educational Research and Innovation, OECD, 7 September 2010.

3 Center on Budget and Policy Priorities, August 4, 2010. "An Update on State Budget Cuts", by Nicholas Johnson, Phil Oliff and Erica Williams, accessed at on November 1, 2010.

4 The Guardian, December 19, 2010. "University funding to be cut before increase in tuition fees", by Allegra Stratton, accessed at on December 28, 2010.

5 Times Higher Education, September 11, 2010. "A false economy? Canada counts costs of downsizing decade", by Sarah Cunnane, accessed at on November 1, 2010.

6 Bloomberg, September 13, 2010. "U.S. Student Loan Defaults Rose to 7% in 2008, Led by For-Profit Colleges", by John Lauerman as accessed at on November 3, 2010.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions