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

Last Updated: 19 August 2011
Article by Deloitte Government & Public Sector Group

Most Read Contributor in UK, August 2017

"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 Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.