Why government must support universities to deliver on tech, innovation and growth
Universities are core infrastructure for the UK’s technology-led economy. They power the research breakthroughs that underpin entire sectors, from AI and life sciences to clean tech and quantum, while training the skilled workforce that tech businesses rely on to grow and compete globally. Government analysis shows that 88% of new jobs will require graduate-level skills by 2035, with many in technology or adjacent fields.
As the UK government seeks to realise its ambition of the highest sustained growth in the G7, it has published a 10-year Industrial Strategy focused on key sectors including advanced manufacturing, clean energy and digital technologies. There is some recognition of the role universities should play in delivering the Strategy, but institutions need the conditions and support to deliver.
The contributions of universities extend across every level of the economy. Nationally, they drive frontier R&D, attract global investment and talent, and fuel high-growth sectors. Regionally, universities anchor innovation ecosystems, help spin out new ventures, and act as partners for local businesses. Locally, they provide not just jobs and infrastructure, but also access to skills, research, and enterprise, and often serve as the single most important economic institution in their area.
But these contributions are at risk as the higher education sector faces myriad challenges that are forcing institutions to rethink their activity and putting some at risk of insolvency. From research to teaching, funding deficits underscore the precarity of university finances and the unsustainability of the existing system.
Public funding challenges
Domestic undergraduate tuition fees in England and Wales have been frozen at £9,250 since 2017, rising slightly to £9,535 in 2025/26. Inflation has eroded their real-terms value, while costs have increased. In Scotland, tuition is free for Scottish students, but universities receive only £7,610 per student. Institutions rely heavily on international student fees to cover costs.
Core research funding like Quality Research (QR) has declined in value by 16% since 2010, with even sharper drops for block funding in devolved nations. The Strategic Priorities Grant (SPG), meant to support high-cost and strategically important subjects, was cut by £100 million this year and has fallen 18.4% in real terms since 2018/19, despite government commitments to revise it in the new Industrial Strategy.
Project-specific research funding covers only a portion of actual costs, with recovery rates worsening, forcing universities to subsidise research from already stretched budgets. Capital investment has declined annually since 2022/23, with government significantly cutting its allocation for higher education infrastructure.
Overall, universities face a £6.2 billion research funding shortfall and a £2 billion teaching gap. Nearly half are expected to run deficits next year, with 1 in 2 cutting courses, staff, and maintenance. Around 20% have reduced research investment, and 79% are considering further cuts.
New policy changes in 2025/26 – including SPG cuts, cuts to level 7 apprenticeship funding, teacher pension and NI changes, as well as a levy on international student fees – are estimated to reduce funding for English universities by £1.4 billion, compounding existing pressures.
Policies on international students
International students make up 24% of enrolments and contribute £11.8bn in fees (around 23% of university income) subsidising domestic students and university research. But numbers are falling: 2023/24 saw a 4% drop, and visa applications declined 17% year-on-year. Visa changes and restrictions on dependants are key factors.
Proposed changes in the Immigration White Paper – including shortening the Graduate visa to 18 months and a 6% levy on international fee income – risk worsening enrolment declines. These policies would reduce UK attractiveness and harm sectors like tech that rely on international STEM talent.
A survey of prospective international master’s students found that 58% said changes would make them less likely to choose the UK for their studies, with 37% somewhat less likely, and 21% much less likely.
Post-1992 institutions, which serve more disadvantaged UK students and rely heavily on international fees, are especially vulnerable. Russell Group universities, hosting 51% of international students, would also be hit hard by the levy, losing up to 3% of income according to modelling by Wonkhe.
International student policy cannot be separated from the financial health of UK higher education. Without a balanced approach, the sector’s ability to deliver growth, innovation, and skills is at risk.
Risks to UK growth
It is clear that the financial fragility of the higher education sector poses serious risks to national and regional prosperity.
Talent pipeline disruption: Cuts to funding and international student restrictions threaten the supply of skilled graduates, especially in STEM fields vital to the tech sector. Reduced post-study work options and high visa costs make the UK less attractive to global talent.
Research and innovation decline: A £6.2bn research funding shortfall and falling cost recovery rates are forcing universities to scale back R&D. This undermines the UK’s capacity for innovation in areas like AI, clean tech, and life sciences.
Potential institutional insolvency: Nearly half of universities are forecast to run deficits. Insolvency would cause academic disruption, job losses, and reputational damage, with ripple effects across the economy and public services.
Regional economic impact: Universities often anchor local economies. Their decline would weaken local job markets, reduce graduate retention, and disrupt housing, retail, and infrastructure.
Skills provision risk: Cuts to funding for high-cost courses and apprenticeships, combined with falling international enrolments, threaten the UK’s ability to meet future skills needs in priority sectors.
Public service strain: Universities train the majority of NHS and education professionals. Financial instability risks reducing the supply of essential workers and impacting innovation in public service delivery.
Loss of international student contribution: International students contribute £37.4bn to the UK economy, including £58m per parliamentary constituency. A proposed 6% levy on their fee income and declining enrolments would reduce this significant economic input.
Reduced foreign investment: Universities attract global firms through research excellence and talent. Their decline would weaken the UK’s ability to draw inward investment, especially in high-growth sectors.
Threat to lifelong learning reform: The success of the Lifelong Learning Entitlement depends on universities adapting to modular provision. Financial fragility and lacking digital infrastructure risk undermining this reform and limiting workforce adaptability.
Get involved
techUK recently submitted evidence to the Education Committee’s inquiry into higher education funding, institutional insolvency, and international students. Our response highlighted the critical role universities play in powering the UK’s tech-driven economy, and the risks current policy and funding pressures pose to growth, innovation, and talent development.
We made recommendations that included setting out a long-term strategy for the sector, shelving plans for a levy on international student fees, providing greater support collaboration with industry, investing in digital transformation, and getting the Lifelong Learning Entitlement right.
This is an area of growing concern and we’re keen to continue the conversation. If you’re a techUK member interested in discussing higher education, sharing insights, or shaping future engagement, we’d love to hear from you.
Case studies of universities driving innovation and delivering skills
TechSkills delivering industry accreditation for courses
TechSkills delivers the Tech Industry Gold (TIG) accreditation, the result of a unique collaboration between universities and industry. Employers and higher education institutions work together to co-create curricula that develop the capabilities most sought after in the workplace.
86% of TIG degree students are in paid employment 15 months after graduating (compared to 76% for computing grads overall), 84% get a 1st or 2:1 (compared to 76%) and 92% of TIG degree apprentices get a 1st or 2:1.
Aston University is a sector leading KTP provider and its team won the Best Support Team and Best KTP Project at 2023 Innovate UK Awards. These types of projects have an average of 1000% ROI, demonstrating the significant return on investment.
An example of their KTP projects is their work with Advanced Smart Apprentices, developing a software platform to encourage apprentices to complete their training, using machine learning and predictive analytics to reduce attrition.
UEL partnering with Siemens
The University of East London is one of the most ethnically diverse student populations in the UK.
It has partnered with Siemens on a Diversity of Thought programme that addresses key stages of recruitment cycles, and provides underrepresented students with work-based learning, mentoring and work experience. The two organisations were awarded the ‘Outstanding University Partnership with an Employer’ award by the Institute of Student Employers.
University of Exeter supporting businesses
SETsquared Exeter is a business incubator and accelerator that supports its members across Devon to build connections between skills and resources in the University of Exeter and identify sector-specific business support and facilities. The programme includes a range of support to help establish and grow STEM startups and SMEs. 6 out of 10 businesses engaged developed a new product, service or process, 41% collaborated on R&D, and 62% were successful in securing external funding.
Industry-academia collaboration setting standards
Tata Consultancy Services partnered with the Royal College of Art on a 3-year research project focused on vocal accessibility, seeking to better understand vocal interactions with technology and develop a set of accessibility guidelines for designers and technologists.
The initial guidelines were tested in collaboration with designers working for TCS and the Publicly Available Specification for the accessible design of Voice User interfaces was published by the BSI in March 2025.
Teaching industry-relevant qualifications through Cisco Networking Academy
Cisco’s Networking Academy programme was established in 1997 to prepare students for careers in networking and IT. The programme has partnerships with a number of universities, including the University of Portsmouth, to offer courses that provide Cisco certifications. Teaching is delivered by fully qualified Cisco Academy instructors, and students can practice, experiment, learn and share their work in a laboratory equipped with the latest Cisco networking devices.
Teaching industry-relevant qualifications through collaboration with ServiceNow
Northeastern University has partnered with ServiceNow on an undergraduate degree programme initiative in the UK to help professionals upskill in emerging tech fields. The degrees and certificates are designed for help employers fill an immediate demand for skilled digital talent inside their own companies.
The programmes are designed by the university faculty and ServiceNow, and those professionals enrolled on the Digital and Technology Solutions degree programme can earn certifications.
Nimmi Patel
Head of Skills, Talent and Diversity, techUK
Nimmi Patel
Head of Skills, Talent and Diversity, techUK
Nimmi Patel is the Head of Skills, Talent and Diversity at techUK. She works on all things skills, education, and future of work policy, focusing on upskilling and retraining. Nimmi is also an Advisory Board member of Digital Futures at Work Research Centre (digit). The Centre research aims to increase understanding of how digital technologies are changing work and the implications for employers, workers, job seekers and governments.
Prior to joining the techUK team, she worked for the UK Labour Party and New Zealand Labour Party, and holds an MA in Strategic Communications at King’s College London and BA in Politics, Philosophy and Economics from the University of Manchester. She also took part in the 2024-25 University of Bath Institute for Policy Research Policy Fellowship Programme and is the Education and Skills Policy Co-lead for Labour in Communications.
Antony Walker is deputy CEO of techUK, which he played a lead role in launching in November 2013.
Antony is a member of the senior leadership team and has overall responsibility for techUK’s policy work. Prior to his appointment in July 2012 Antony was chief executive of the Broadband Stakeholder Group (BSG), the UK’s independent advisory group on broadband policy. Antony was closely involved in the development of broadband policy development in the UK since the BSG was established in 2001 and authored several major reports to government. He also led the development of the UK’s world leading Open Internet Code of Practice that addresses the issue of net neutrality in the UK. Prior to setting up the BSG, Antony spent six years working in Brussels for the American Chamber of Commerce following and writing about telecoms issues and as a consultant working on EU social affairs and environmental issues. Antony is a graduate of Aberdeen University and KU Leuven and is also a Policy Fellow Alumni of the Centre for Science and Policy at Cambridge University.
Jake has been the Policy Manager for Skills and Future of Work since May 2022, supporting techUK's work to empower the UK to skill, attract and retain the brightest global talent, and prepare for the digital transformations of the future workplace.
Previously, Jake was the Programme Assistant for Policy. He joined techUK in March 2019 and has also worked across the EU Exit, International Trade, and Cloud, Data Analytics and AI programmes.
He also holds an MA in International Relations from the University of Sussex, as well as a BA(Hons) in International Politics from Aberystwyth University. During his time at Aberystwyth University, he won the International Politics Dissertation Prize.
Archie Breare joined techUK in September 2022 as the Telecoms Programme intern, and moved into the Policy and Public Affairs team in February 2023.
Before starting at techUK, Archie was a student at the University of Cambridge, completing an undergraduate degree in History and a master's degree in Modern British History.
In his spare time, he likes to read, discuss current affairs, and to try and persuade himself to cycle more.
Jake has been the Policy Manager for Skills and Future of Work since May 2022, supporting techUK's work to empower the UK to skill, attract and retain the brightest global talent, and prepare for the digital transformations of the future workplace.
Previously, Jake was the Programme Assistant for Policy. He joined techUK in March 2019 and has also worked across the EU Exit, International Trade, and Cloud, Data Analytics and AI programmes.
He also holds an MA in International Relations from the University of Sussex, as well as a BA(Hons) in International Politics from Aberystwyth University. During his time at Aberystwyth University, he won the International Politics Dissertation Prize.
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