Universities under the hammer - Can devolved funding power-up the engines of growth in our regions?
Universities aren’t just places of learning. In many post-industrial towns and cities. especially across the North and Midlands, they are economic anchors, cultural lifelines, and engines of local opportunity. When traditional industries faded, higher education stepped in. Today, universities are a ballast for local economies. In many towns, they are among the largest local employers - not just of academics, but of administrators, technicians, hospitality staff and contractors. In places such as Sunderland or Teesside, the local university is one of the largest employers in town.
But the model is cracking. New research from the Tony Blair Institute lays bare the fragility of the UK’s university funding system and its consequences for regional Britain. Domestic tuition fees have been effectively frozen since 2012, declining in real value every year. To keep the lights on, universities have become increasingly dependent on international students, whose fees cross-subsidise teaching, research, and even local services. In 2023/24, nearly a fifth of all university income came from non-EU international students, a 15-fold increase since 2000/01.
This dependence leaves many universities deeply exposed. As TBI’s research shows, these institutions are disproportionately located outside London and the South East. With political pressure mounting to cut immigration this financial lifeline is under threat, and so too is the future of the towns that rely on their universities to hold their economies together.
According to recent research from Public First, university-related activity now generates over £20 billion in annual exports - nearly as much as the pharmaceutical sector and comparable to car manufacturing. While cars and chemicals may dominate headlines, higher education is the largest single export sector in 26 parliamentary constituencies and ranks in the top three for 102, most of them outside the South East.
This is no longer a niche story about universities. It is a national story about place. In many towns, the local university is the new car plant. When students arrive, so does money for housing, retail, hospitality and services. Public First estimates that 183,000 jobs are directly supported by international students and the export income they bring.
The vast majority of the growth in international student recruitment has been concentrated in institutions outside the so-called “Golden Triangle” of London, Oxford and Cambridge. These are the very places most vulnerable to sudden shocks in overseas student numbers. And in many cases, they are post-92 institutions that widen access, serve commuting students, and anchor civic life.
This isn’t just a funding problem. It’s a spatial one. The UK’s university model has become an accidental policy of regional subsidy, plugging holes left by the retreat of both industry and the state. But it’s doing so without recognition, reward or resilience. If we want universities to be part of the long-term solution to Britain’s regional inequalities, we need to give them more than a fragile business model.
Is Devolution The Solution?
What’s needed now is a new settlement, one that recognises the wider public role of universities, particularly in left-behind areas. For those who champion devolution, the answer lies not in central tinkering, but in place-based reform. That could mean:
Regionally flexible funding models: devolved areas could receive funding directly to commission courses and projects aligned with local priorities.
Joined-up learning systems: simplifying the patchwork of adult, further and higher education budgets to create clearer, locally responsive skills pathways.
More flexible fee models: exploring ways to adjust or vary student contributions in line with local economic and workforce needs.
Revenue-sharing mechanisms: enabling places to retain some of the economic uplift driven by higher education.
Stronger civic partnerships: aligning university priorities with those of local leaders and communities through formal agreements.
Local control over infrastructure: devolving capital investment to support university facilities that serve regional growth.
Together, these ideas offer a roadmap for reform: locally accountable, regionally tailored, and economically grounded. They embed universities within the civic fabric of their communities and ensure that public policy delivers not just qualifications, but transformation.
That also means giving local leaders, including metro mayors, a seat at the table when it comes to shaping the future of university funding, international student policy and skills development.
None of this means ignoring public concern about immigration. But it does mean being honest about trade-offs. As TBI argues: “As the government seeks to reform the immigration system, it is worth considering the interplay of these changes with the broader need to reform the higher-education funding system so that it is put on a more sustainable basis.”
A more sustainable system would spread the burden, reward outcomes, and embed universities more deeply in the renewal of their regions. That might mean differentiated visa rules for areas with lower economic demand. It might mean linking university funding to civic impact. And it will certainly mean replacing short-term fixes with long-term strategy.
In the end, the health of our higher education system isn’t solely about graduates or degrees. It’s about place. And if we want every part of Britain to thrive, we need to rethink how these institutions are funded, structured and supported. That means radical reforms such as embracing technology to cut costs, simplifying regulation, and allowing universities to earn and reinvest through more flexible revenue models. Public money alone won’t fix this. But with the right rules and incentives, we can build a system that is both financially sustainable and locally transformative.
Because if we let the current model fail, we won’t just lose courses or campuses. We’ll lose the scaffolding that keeps many of our towns standing.
Join us at our next Devo Network Soiree and live Podcast ‘ Have Mayors got the “A” Factor?” to talk about accountability, growth and economic drivers of change. Tickets are available HERE.
