The National Union of Students – which represents the bulk of students in UK higher and further education – has revealed it is in severe financial difficulties and has been warning its members to prepare for spending cuts and structural reform.

A letter from the national president, Shakira Martin, and the acting chief executive, Peter Robertson, to the group’s 600 affiliated student unions and associations said that the NUS was unable to meet a projected £3m deficit this year from its existing reserves.

Members were told that the organisation representing seven million students may need to mortgage its headquarters, cut staff and curtail its activities in order to remain solvent, with more “radical reforms” also mooted.

An NUS spokesperson confirmed the letter had been sent and that it was “taking measures to address a number of governance-related challenges” at a summit later this month.

“The NUS group is facing financial difficulty. We are projected to post a significant deficit this year without enough resource to cover the loss,” stated the letter, first published on the Guido Fawkes website. “Alongside structural problems we are facing competitors in student discounts, trading support and policy and strategic support. We have faced challenges to all three of these income streams but rarely to all three at the same time.

“It’s important that we respond to this competition collectively and collaboratively as a movement, if we are to continue to protect the interests of students and students’ unions.

“If we’re right and our income streams suffer as much as we predict we’re looking at a £3m deficit for the group in this and future financial years. Because there are not sufficient reserves to cover this amount we are taking urgent action to stabilise our position.”

The NUS said in its statement: “The boards, officers and executive team are agreed that we need to deliver fundamental corporate, democratic and financial reform by summer 2019. This means there will be a range of proposals brought to a strategic conversation meeting in November 2018 for consideration and refinement with the help of our members, and subsequently to national conference 2019 to be voted on by our members.”

Members were told that the union had taken advice on how to remain solvent in the short term. “It looks likely this will include a combination of borrowing against the building we own, making cuts to staff and turning off some of the activity we deliver. This will free up some cash but it will not address the underlying governance issues,” Martin and Robinson stated in the letter.

The NUS group includes its commercial arms, such as NUS Services and the NUS’s student discount card, Totum.