Briefing - University business model explainer

31 August 2023

Russell Group universities are educating the skilled workforce of the future and producing world-class research and innovation to deliver advances in knowledge and technology that will help drive economic growth and productivity. Their positive impact is felt in local communities and across the UK, acting as anchor institutions for a wide range of other economic, social and cultural activity.

However, delivering these benefits is becoming increasingly challenging as the costs of delivering high-quality education and impactful research are not being met by funding from UK tuition fees and government grants. For research, UK universities invested £2.9bn to subsidise their activities in 2014/15, but this rose to £5bn in 2021/22. In 2015/16 educating UK undergraduate students was, for most universities, fully funded through a combination of government grants and student fees. However, Russell Group analysis now shows that in 2022/23 English universities on average supplemented the cost of educating each UK undergraduate student by £2,500 per year, withall subjects now making a loss on average.

The Russell Group has published a briefing paper setting out the university business model, looking at research-intensive universities like those in the Russell Group. It aims to evidence the scale of financial pressure on the education system, provide more transparency around the key areas of spend in delivering high-quality education, explain the difficulties in reducing spend without impacting quality and show why it is difficult for universities to address funding shortfalls in other ways.

Universities cannot address increasing pressures and continue to deliver the same level of benefits to students and the UK without additional investment. A more sustainable approach to funding higher education is therefore needed – one that can offset the impact of inflation on the unit of resource, and one that is fair and affordable for students and taxpayers, while safeguarding the pipeline of science, skills and innovation necessary for the growth and prosperity of the UK economy.

The full briefing can be downloaded below. Russell Group Policy Manager Lily Bull has written for HEPI setting out some of the key takeaways from the briefing paper here.