The Office for Students (OfS) published its November 2025 update on the financial sustainability of providers in England. While forecasting is more balanced than before, the sector still shows optimism bias – particularly across specific institutional types.

Large research‑intensive institutions predicted a 1.7% fall in undergraduate numbers but achieved 9.9% growth. Medium‑sized institutions predicted 2.7% growth and achieved 2.3%. Teaching‑intensive, smaller and specialist institutions projected growth, yet undergraduate recruitment fell across these groups.

35% of institutions forecast a deficit in 2025/26; the OfS models this at 45%. Low liquidity (fewer than 30 days) is projected to affect 16% of the sector in 2025/26, rising to 26% in 2026/27. Initial analysis by THE in January 2026 reports that a third of UK universities have posted deficits for 2024/25 with losses increasing.

Against this backdrop, effective governance is critical. The Committee of University Chairs (CUC) is consulting on a refresh of the Higher Education Code of Governance – an opportunity for institutions to rethink their approach.

What’s next for higher education governance?

Given the breadth of challenges, an integrated approach to risk and assurance is needed. Mapping where assurance exists helps governors target higher‑risk areas where assurance is lacking or indicates weaknesses. Well-defined KPIs and early‑warning indicators, underpinned by robust data governance, give governors confidence to act on emerging opportunities and to mitigate risks.

Operating models have been shifting however a step change may now be needed. Hybrid work and study can reduce demand for space and free resources to invest in the digital tools staff and students expect. With a demographic peak in 18‑year‑olds on the horizon, digital delivery also extends reach beyond geographic constraints.

Government focus on levels four and five and priority industry skills creates an opportunity for agile institutions to pivot and progress provision that meets demand.

Whilst stress testing features in OfS returns, comparison of actual 2025/26 student recruitment to forecasts suggests the sector has under‑modelled downside risk. Institutions should consider reviewing five years of forecasts versus outturns to calculate a standardised error rate bespoke to their own circumstances– and apply that to forecasts presented to the governing body.

Some institutions will have already had difficult going‑concern conversations. Governing bodies should lead robust options appraisals – spanning efficiency drives, operating‑model and portfolio reviews – and, where needed, explore collaboration models from partnerships through to mergers.

What makes good governance in higher education?

The Nolan principles remain central. It’s timely for governing bodies to assess how these are embedded. For individual governors, the following tenets—set out in the 2003 Higgs report—remain foundational for effective non‑executive directors:

• Uphold the highest ethical standards of integrity and probity.
• Support executives in the leadership of the institution while monitoring conduct.
• Question intelligently, debate constructively, challenge rigorously and decide dispassionately.
• Listen sensitively to the views of others—inside and outside the board.
• Earn the trust and respect of other board members; promote high standards of corporate governance and seek compliance with the Code wherever possible.

Mapping skills and gaps – across the governing body can identify areas where resilience is needed. Governing bodies should consider external expertise via consultancy, co‑opted members or other options. Attendance and engagement should be monitored: a skills mix may work on paper, but if individuals do not attend or engage, a gap exists.

Ultimately, governance is about people working together. The Chair should ensure personal interests do not distract from what matters. Productive relationships between governors, committee chairs and the executive are essential to deliver the institution’s vision, mission, values and objectives.

If you would like to discuss governance, financial sustainability or risk management in higher education, please contact Lisa Randall or Louise Tweedie.

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