The Secret CFO: get big, get niche, or get out

I don’t think universities are in financial crisis just yet. That’s a sensationalist label designed for headlines, but it is fair to say they’re struggling.

The vast majority can no longer generate operating surpluses, let alone the margins needed for sustainable investment. There are plenty of levers available to improve the bottom line, but the real issue is financial culture rather than technical fixes.

Ultimately, sustainability depends on making people accountable for decisions, moving at speed, and doing enough due diligence on deals and new initiatives to be satisfied, but not so much that the whole system seizes up.

How did we get here? On a transparent approach to costing (TRAC) basis, almost all income streams lose money, except for international teaching. So, either the cost structures underpinning the core mission are fundamentally too expensive, or the fee is set at a level where unregulated growth becomes the only viable answer.

In practice, there has been a drift towards topping up existing structures with small adjustments around the edges, rather than fundamentally rethinking how universities deliver what they do.

At the same time, the swell of capital expansion over the past two decades, which is now starting to look like an awful idea, was effectively a bet on continued growth. That estate is now very hard to get rid of or repurpose in a useful way.

Jeff Bezos talks about two-way doors and one-way doors (reversible and irreversible decisions). Universities have treated too many one-way doors as if they were two-way.

Universities are wrapped in red tape to the point where they must recruit large, expensive staffing cohorts simply to service compliance. Statutory returns and regulatory requirements are coming out of our ears.

While institutions can sound quite Thatcherite about cutting non-core activity or shedding parts of their estates, the deeper issue is oversupply. There are simply too many programs

While institutions can sound quite Thatcherite about cutting non-core activity or shedding parts of their estates, the deeper issue is oversupply. There are simply too many programs. At some point, universities need to get big, get niche, or get out.

In most cases, growth remains the only realistic option unless an institution is willing to fundamentally transform how it operates. And that is incredibly difficult.

So who is to blame?

Universities are fundamentally different from businesses in that they exist for the public good: educating future generations, delivering groundbreaking research, and translating that research into society, whether through commercialisation, public policy or civic impact. Cross-subsidy is baked into the model.

Academic management styles have undoubtedly contributed to some failures, but professional services are equally culpable. Too often, problems are addressed too little, too late. There is plenty the sector could learn from the private sector, but the two are not directly comparable.

However, I don’t think a large provider, particularly a regionally significant one, would be allowed to go bust without serious government intervention.

What that intervention looks like is anyone’s guess. It could involve conditional support to allow teaching to continue while students complete their courses, or funding to explore mergers.

What is clear is that once financial distress becomes visible, institutions have very little breathing space. Student protection plans will need to be thought about much more seriously.

The gross value added associated with universities is simply too large to allow total collapse without severe damage to local economies. Any bailout, however, would almost certainly come with a requirement for wholesale change.

The biggest threat to our sector is public sentiment. Universities struggle for sympathy when compared with the NHS or schools. To many people, academics are divorced from the real world, sitting in stuffy ivory towers while being profligate with public money.

That perception is not entirely fair, but it matters. The comparison with the NHS is useful: cuts to administrative capacity have pushed doctors into doing more admin, distracting them from what they are there to do. Universities face a similar tension.

But necessity is the mother of all invention. Some universities will be forced to pull themselves up by their bootstraps and make some very hard decisions.

The international student levy, BCA metrics and limits to international student growth set out in the IES will all be major discussion points at The PIE Live Europe taking place in London on 24-25 March 2026. See the full agenda and book your tickets online here.

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