How the pandemic will shake up the university landscape

The coronavirus crisis will hit British universities a lot harder than their Continental European counterparts — at least initially.

Much like schools, higher-education institutes across the world had to shut their doors and switch to distance learning as the pandemic took hold.

With terms now drawing to a close in most European countries, students are fretting about their summer exams, but university leaders are also worried — with many bracing for the financial storm looming over the higher-education landscape.

“Unlike schools, which are sheltered under the safe shield of public funding, universities will have to confront a serious assault to their business model,” said Dirk Van Damme of the OECD Directorate for Education and Skills.

Given travel restrictions, universities are expecting a pandemic-induced drop in international students, who usually pay higher fees than their domestic or EU counterparts, leaving a hole in their budgets. The imminent economic crisis, meanwhile, puts their public funding in jeopardy. More domestic students are also likely to struggle to pay fees during a recession; others might delay going to university until distance learning ends.

Most Continental European universities, which tend to rely on public funding rather than tuition fees, stand on firmer ground.

All this, Van Damme said, will hit universities with the highest fees the hardest. And given that British and other Anglo-Saxon institutions tend to charge much more than those on the Continent, they’re likely to experience a far greater drop in income.

“The pandemic will reinforce hierarchies in the higher education landscape,” he said. “Institutions with large endowments or other buffers will be more resilient. But it will also shake up the landscape, with Anglo-Saxon universities on the ‘losing’ side and European universities on the ‘winning’ side.”

Continental universities, however, could also face financial trouble down the line if the post-pandemic economic downturn prompts states to slash the higher-education budgets they depend on.

Higher fees, more problems

British universities in particular rely on high tuition fees and international students for their income. According to the Office for Budget Responsibility, education is the sector hardest hit by the coronavirus in the U.K., with the impact likely to be felt most by universities. Some have warned that the pandemic could even spell the end for some institutions.

Universities U.K., an advocacy organization, warned that a significant drop in international student numbers could have dire consequences. International fees amount to about £6.9 billion annually, about a third of all tuition fee income, they said.

“Universities cannot face this financial storm alone. Without any action, universities would be forced to make huge cuts, jobs would be lost, vital research will be halted and most importantly students will suffer,” a Universities U.K. spokesperson said.

After the financial crisis of 2008, the U.K. higher-education system underwent a drastic change — reducing direct public funding and increasing tuition fees, said Thomas Estermann, director of governance and funding at the European University Association. “That new funding is now particularly vulnerable.”

The same goes for high-fee universities in the United States and Australia.

Nearly half of students who intended to study abroad have changed their study plans due to the pandemic, according to a recent worldwide survey from QS, an educational-rankings agency. Half of the universities surveyed said that the virus will have a “detrimental impact” on the number of student applications to their institutions.

While top private research universities will cope because of large endowments or other financial buffers, the looming recession will particularly hurt public universities in the U.S., as well as U.K. universities that aren’t part of the Russell Group, which represents some of the most prestigious British universities, including Oxford and Cambridge.

“Those universities are more likely to lay off staff on temporary contracts, which is already happening in the U.K., which are often young and promising research staff,” Van Damme said.

This would have an effect on quality, he added. “In a sector with a distorted age pyramid that is reliant on the research potential of younger staff, this is a risky strategy. If they cut off their pipeline for new talent, it’s difficult to see how they can uphold their research excellence.”

Public-funding question

Most Continental European universities, which tend to rely on public funding rather than tuition fees, stand on firmer ground.

“Countries that work with a system of mostly public funding, such as is the case in Belgium, are better armed than institutions that rely more on enrolment fees, especially if a large proportion of them comes from international students,” said Koen Verlaeckt of the Flemish Interuniversity Council.

Yet as EU countries struggle with the economic fallout of the pandemic, there is a risk that public university funding across Europe will decrease in the next two to four years as governments prioritize other economic sectors, the European University Association warned in a recent report.

Moreover, there are big differences in public funding among European countries, and that investment gap is likely to grow.

The EUA report notes that since the financial crisis of 2008, countries like Luxembourg, Germany, Switzerland, Norway, Austria and Denmark have significantly increased university funding relative to their GDP growth, while countries such as the Czech Republic, Romania, Slovakia and Ireland reduced funding over the same period.

“Countries where public funding was already high, such as Germany, Austria and the Nordics, will probably keep it up as much as possible, while universities in other European countries might have more difficulties,” said Estermann, one of the report’s authors.

With large public funding and extended research policies, universities in Germany and the Nordic countries look to be best-equipped to cope with the crisis.

“The continuous rise of these universities in global rankings will probably be confirmed and reinforced,” Van Damme said. “Whereas other European countries that have switched more to international students, like the Netherlands, will be impacted more.”

Two major questions remain, analysts say. The first is how quickly universities will bounce back. That will depend on how the pandemic develops, which will determine when international travel can resume — and when flying will feel safe for students and researchers.

Developments such as a second wave would also have an as yet indeterminable impact on the economy, which would also have an effect on the recovery of university finances.

The second big question is how the pandemic will affect Asian universities.

Enrollment in higher education has boomed across Asia in the last two decades. The growing middle class in these emerging markets has also led to a steep rise in Asian students attending Western universities. Due to travel restrictions and delays in visa processing, these students might look more into regional opportunities.

Estermann noted that China had invested enormous sums in several domestic research universities to enable them to compete globally, making them more attractive for students. It’s a trend he expects to continue despite the pandemic’s impact on China’s economy.

“It’s still unclear how much this will affect the European and global university system,” he said, but added that it was crucial for the Continent’s governments to maintain or increase university funding in spite of the coronavirus crisis.

“If everyone says research and innovation is important but that doesn’t translate into figures, Europe will have a big problem in the long term.”