Higher Education institutions face financial problems across the UK, with specific challenges in Wales. The new Welsh Government will decide whether continuing to increase tuition fees is part of the solution whilst balancing that against a decrease in the number of Welsh students.
Financial challenges facing universities have been headline news over the last year, with a spotlight on staff redundancies and student loans. Fundamental questions remain about the sustainability of individual institutions and the funding model of higher education (HE). While the financial sustainability of the HE sector is a UK-wide issue, there are specific challenges to institutions in Wales.
Universities aren’t the only ones in the tertiary education sector facing difficult financial choices. Further education colleges are also seeing budgetary challenges due to rising costs and rapid growth in learner numbers over the last couple of years.
Where do universities get their money?
The latest Higher Education Statistics Agency (HESA) income data for HE providers in Wales, shows just over half of the total is from tuition fees and teaching (55%). Funding grants, including from Medr (a Welsh Government arms-length body) (15%), and research grants (12%) are also important income streams.
The ‘other income’ category accounts for 16% of total income. This includes commercial activities where universities can generate their own income, such as student residences and catering.
Figure 1: Higher education providers income 2024/25
Source: Higher Education Statistics Agency (HESA), Consolidated statement of comprehensive income and expenditure 2015/16 to 2024/25
The total income of the Welsh HE sector for 2024/25 was £1.9bn. For scale, there are three English universities whose individual annual income is higher than the whole Welsh sector: University of Oxford (£3.0bn), University of Cambridge (£2.7bn), and University College London (£2.2bn).
Tuition fees
While tuition fee and education contract income accounted for just over half of total income for Welsh HE providers in recent years, its composition has changed over that period: with a shift away from Welsh domiciled student fees. Tuition fees from those ordinarily resident in the rest of the UK now make up the largest share of fee income for Welsh institutions.
Figure 2: Percentage of tuition fee income in 2017/18 and 2024/25
Source: HESA, Tuition fees and education contracts analysed by HE provider, domicile, mode, level, source and academic year 2016/17 to 2024/25
There’s been a large increase in the proportion of international non-EU tuition fees, which now also exceeds Welsh fees. Welsh HE providers’ income from international non-EU fees increased in recent years peaking in 2023/24 at £353m: more than the funding from Medr, research grants and contracts, or from other income. However, in 2024/25 it was £274m, falling below the funding from Medr but still exceeding the value of research grants and contracts.
International student fees are uncapped, unlike those for UK students, and differ between university and course. They can range from £15,000 to over £25,000. Tuition fees for home status students (including those usually resident in Wales and the rest of the UK) on full-time undergraduate courses are capped at £9,535 for 2025/26.
Institutions are increasingly reliant on international fees and use them to cross subsidise other areas. These include the cost of teaching UK students which has increased above UK tuition fees.
Where do students at Welsh universities come from?
Tuition fees vary significantly depending on where a student is normally resident. This means the geographical mix of an institution’s student population has an impact on its finances.
Total student numbers
While the total number of students at Welsh HE providers decreased slightly in 2024/25 compared to 2020/21, there has been a notable shift in where students are coming from.
Figure 3: Number of student enrolments at Welsh HE providers by permanent address 2020/21 to 2024/25
Source: HESA, HE student enrolments by permanent address 2020/21 to 2024/25
Note: Scotland, Northern Ireland, other UK, and not known have not been included in the graph due to lower numbers.
Welsh students
Students normally resident in Wales made up just less than half (48%) of the total number of students at Welsh institutions in 2024/25 compared to just over half (52%) in 2020/21. This is much lower than the proportion of home students going to universities in their home nation compared to other UK nations.
Figure 4: Proportion of home domiciled students at each home nation university for 2024/25
Source: HESA, HE student enrolments by permanent address 2020/21 to 2024/25
The number of Welsh students at Welsh HE providers has dropped by 9% in
2024/25 compared to 2020/21. This is the largest percentage decrease across the UK nations, with home domiciled students in Scotland decreasing by 6% and in Northern Ireland by 5%; while England saw a 3% increase across the same period.
The decrease in Welsh students means that Welsh institutions are increasingly reliant on students from beyond Wales for tuition fee income. This trend is greater in Wales than the other home nations.
International students
Increases in the number of international students (not from the UK or EU) is largely linked to postgraduate taught (PGT) study. There was a 108% increase in enrolments of students from non-EU countries in PGT study from 2020/21 to
2022/23, which was followed by a 39% drop in numbers from 2022/23 to 2024/25.
Figure 5: Number of international student enrolments at Welsh HE providers with non-EU addresses by level of study 2020/21 to 2024/25
Source: HESA, HE student enrolments by level of study 2020/21 to 2024/25
In 2024, the previous UK Government made changes to the visa routes for students and graduates. These changes included restricting visa requirements which had allowed family members to accompany those on postgraduate taught courses. The current UK Government has restricted study visas from certain countries.
The impact of these UK-wide visa changes highlights the volatility of the international student market and the risk associated with universities relying on income from their tuition fees.
EU students
The number of EU students at UK universities decreased year-on-year from around 153,000 in 2020/21 to around 64,000 in 2024/25, a 58% drop. This reduction mainly arose from changes to the fee status and access to financial support for EU students that accompanied the UK’s exit from the EU.
Figure 6: Percentage change of EU students at HE providers from 2020-21 to 2024-25
Source: HESA, HE student enrolments by permanent address 2020/21 to 2024/25
Wales has seen the largest percentage change in the number of EU students out of the four UK nations. EU students made up around 4% of all students at Welsh HE providers in 2020/21, compared to 1% in 2024/25.
The 2020/21 academic year was the final year that EU students who started a degree were eligible for UK home students fees and financial support. Only under certain circumstances were EU students from the 2021/22 academic year onwards eligible.
Since then, EU students have been subject to international tuition fees. There are currently negotiations between the UK Government and the EU over EU students accessing home tuition fees again.
Where are universities spending their money?
The total expenditure of Welsh HE providers in 2024/25 was £2.0bn. Staff costs have traditionally been the highest category of expenditure of Welsh HE providers.
Staffing
In recent years, the number of both academic and non-academic staff in universities has varied. Since 2020/21 numbers increased year-on-year, before dropping in 2024/25.
Figure 7: Number of staff in Welsh universities 2014/15 to 2024/25
Source: HESA, HE staff by HE provider and activity standard occupational classification 2014/15 to 2024/25
Job losses at universities have been widely reported. The graph below shows the change in academic and non-academic staff combined at each Welsh university.
Figure 8: Changes in staff numbers at Welsh universities from 2023/24 to 2024/25
Source: HESA, HE staff by HE provider and activity standard occupational classification 2014/15 to 2024/25
There were 645 (3%) fewer academic and non-academic staff in all Welsh universities in 2024/25 than the previous year. Wrexham University bucked the trend with an increase of 50 staff over the same period.
Most Welsh universities are continuing to run voluntary redundancy schemes so further reductions in staff numbers are expected in the current academic year.
What can the new Welsh Government do about HE finances?
All Welsh universities are autonomous charities. Therefore, neither the Welsh Ministers nor Medr can get involved with their running, including matters of staffing and course provision. However, Medr, as the regulatory body, does need to be satisfied that universities are financially sustainable.
Between 2012 and 2024, the Welsh Government set the tuition fee limit at £9,000 at Welsh institutions. Since then it has increased each year and it will be £9,790 for 2026/27. This is the maximum amount Welsh universities are allowed to charge home status students for full-time undergraduate courses.
The previous Welsh Government said the fee increase will provide additional income to Welsh universities to help safeguard provision due to the challenges facing the sector. However, Welsh universities have been clear that the home status tuition fee doesn’t cover the cost of teaching these students.
Short of a fundamental overhaul of the HE funding model, there are few levers that governments have to tackle the complex challenge of the long-term sustainability of the HE sector. A key lever for the Welsh Government is increasing tuition fees. Whether and how it uses this lever will need to be balanced against the impact increased fees could have on home student numbers, which are already in decline.
Senedd Research has published an article on student loans which examines how the loans work including for the Welsh Government’s budget and challenges going forward.
Article by Lucy Yarham, Senedd Research, Welsh Parliament
