Three UK universities on the brink of bankruptcy and more reliant on short-term loans ‘to survive’ Exclusive: several institutions are being forced to rely on “bridging loans” to stay afloat

UPDATE: Office for Students warns universities facing bankruptcy ‘you are not too big to fail’

At least three universities are teetering on the brink of bankruptcy, with growing numbers of institutions resorting to short-term financial loans “just to survive”, i can reveal.

Increased competition for students, falling numbers of 18-year-olds and tighter immigration controls on international students have contributed to pushing universities closer to collapse than ever before, experts have warned.

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And in a sign of the tougher economic climate in the sector, several institutions are being forced to rely on “bridging loans” to stay afloat.

Going bust

“A university going bust is more likely than at any other point in the last generation,” Nick Hillman, director of the Higher Education Policy Institute think tank and a former adviser to universities minister Lord Willetts, said.

“What is of concern is those universities that are resorting to taking bridging loans to tide them over until their student fees come in. They are borrowing just to survive,” Hillman warns.

i understands that a university in the North West and two on the South Coast are facing serious financial difficulties, with one already in talks with insolvency lawyers.

Major government reforms in the higher education sector has helped push institutions closer to the edge.

Funding changes

The removal of the cap on the number of students universities can accept and the trebling of tuition fees has led to frenzied competition within the sector to attract students.

It has seen many institutions to lower their entry requirements, which has had a knock-on effect on many lower-tariff universities.

Matt Robb, an education specialist for management consultancy EY-Parthenon, said conditions had become much more difficult for universities.

“I would say there are about three or four universities where it is possible [they could go bankrupt],” Mr Robb told i.

“They are universities that are in places that are not attractive for students to study, or they are smaller universities that are close to more popular institutions.”

Other universities at risk were those in the capital, which had seen their student numbers drop dramatically in recent years.

“Some of them may never have been financially viable in the first place, in which case if they are about to go bust, then if there is no compelling public interest let them go bust.”

Devastating effects

Mr Robb said universities facing financial difficulties should look to sell off land and real estate in order to avoid insolvency.

But unions have warned that such a move would have seismic shock on the surrounding community.

Matt Waddup, head of policy and campaigns at the University and College Union, warned that a university going under would be “devastating” for a local region.

“Along with schools and colleges, universities are the beating heart of their local communities and it is difficult to overstate just how important the spending power of staff and students is for local economies,” Mr Waddup said.