Latest published financial accounts show the eight universities in Wales with a collective deficit of £116m

Whilst last week’s column demonstrated the rhetoric of the Welsh Government’s approach to higher education in Wales, today’s focuses on the reality after the release of the 2024-25 annual accounts from Welsh universities.

What these show is that the story is no longer one of individual institutions making local adjustments but of a sector trying to shrink its way back to viability while still being expected to deliver the same level of teaching, research and civic contribution.

Let’s start with the bottom line.

Taken together, the eight institutions report an aggregate deficit of roughly £116m for 2024/25, with Cardiff University reporting a deficit of £45m, Swansea University posting a deficit of £40m, and Bangor University having a deficit of £18m.

READ MORE: Data centre and renewable investment plans at Global Centre of Rail Excellence site delayedREAD MORE: Cardiff Parkway train station project expected to secure major UK Government funding boost

Beneath that, the rest of the sector is not “fine”, but is simply losing smaller amounts with Cardiff Metropolitan University losing £4m, University of South Wales (USW) Aberystwyth University and University of Wales Trinity Saint David about £3m, and Wrexham University around £0.2m.

If we examine the USW accounts in more detail, it shows exactly where the problem sits across Welsh higher education.

It shows full-time international student fee income falling from £56m to £38m which is due to a loss of over 2,000 overseas students in a single year.

That seems unsustainable but to put this in context, USW has lost over 8,200 UK students since 2014-15 with the vast majority of those from the local area where it is based.

This is at a time when numbers of home students have grown by over 22,000 in the rest of Welsh higher education.

So, if you build an operating model where you fail to recruit UK students in sufficient numbers and have to replace them with a volatile segment that cross-subsidises the rest of the institution, you do not get to call the outcome “headwinds” when it has been a major strategic mistake for over a decade.

What makes it worse is that USW’s annual report makes clear that the risks were known and the failure was in treating it as a paragraph in a risk register rather than a live constraint on strategy, staffing, and capital commitments.

Of course, reliance on international income runs across the system, but the point is not that overseas recruitment is bad, but that it has been treated as enough to underwrite everything else.

When that assumption fails, you do not simply lose a revenue line, you expose the underlying economics of the institution.

That is why these accounts matter because they show Welsh universities moving from a position of growth to one of survival.

The second signal is staffing, because it is not only the cost base but also the capability base.

Across the eight institutions, the combined change in average staff numbers is a net reduction of 666 full-time equivalent posts which is not simply a tally of redundancies or a measure of individual departures but an indicator of the overall direction of contraction across the sector.

The third signal is what universities are doing about it and across the reports you see the same institutional reflex with the same words being repeated – “transformation”, “rebalancing”, “portfolio review”, “efficiency programmes”, “voluntary severance”, “cost base reset”.

These are not the actions of organisations expecting to bounce back quickly but of institutions that have accepted the need to operate at a smaller scale, at least in the medium term.

This is where the public debate often goes wrong as we talk about universities as if they are simply large employers that need “help” but they actually convert staff, estates, intellectual capital and reputation into student outcomes, research outputs and civic benefit.

When the financial response is primarily payroll reduction, you are not just fixing a spreadsheet but are altering the productive capacity of the institution.

Cut too far, too fast, and the university can end up weaker in the market it needs to win because the student experience and the academic proposition become harder to sustain.

That is why the current period is so dangerous and the fixes that stabilise cash today can undermine competitiveness tomorrow.

So, what does the comparison of all eight institutions tell us about the state of Welsh higher education?

It tells us that Wales is now in the early stages of a managed retreat unless the fundamentals change and the massive deficit is not a “bad year” but a signal that the income model, the cost base and the risk assumptions are misaligned.

The net fall of over 660 FTE posts is not “efficiency” but a reduction in capacity to match constrained income and the USW example is particularly instructive because it shows how quickly the model can break when international fee income drops sharply, even when the risk is explicitly acknowledged in the narrative.

The next 12 months will define what Wales’s higher education system becomes and the truth, unlike the report from the higher education group, means there are only two routes from here.

One is that Wales makes system-level choices deliberately with a clearer division of mission, fewer duplications, more collaboration on provision and shared services, and an honest conversation about what scale and breadth the nation can sustainably fund.

The other is that each institution makes individual cuts to survive, with the system “reforming” itself through drift, closures, emergency interventions and the slow erosion of capability.

Unfortunately, the accounts suggest Wales is closer to the second route than the first with the numbers show a sector responding tactically to financial shock.

However, universities need to stop pretending this is a temporary weather pattern and start treating it as what it is, namely a tsunami which spells the end of a funding and recruitment model that universities quietly came to rely on.

However, the longer they delay that reality, the more they will pay for it in lost provision, lost talent and a weaker contribution to Welsh economic and social life.