Background
Universities play an important role in delivering skills, research and innovation, as well as supporting economic growth. In England, around 2.4 million students are taught by over 400 institutions. Much of the sector’s funding comes through publicly backed student loans and government research grants.
The Department for Education (DfE) is responsible for higher education policy and the overall regulatory framework. It sponsors the Office for Students (OfS), the independent regulator, which sets requirements for teaching quality, student outcomes, as well as access and participation.
In May 2025, the OfS reported a third consecutive annual decline in sector‑wide financial performance. This is driven by flat student recruitment and rising operating costs. It found that 45% of providers were forecasting deficits in 2024‑25 and that liquidity levels in the sector had worsened. Providers are independent and responsible for their own financial management. While some providers closing is expected in a competitive market, poorly managed, or unexpected closures can disrupt students, and put public money at risk.
This work builds on our 2022 study Regulating the financial sustainability of higher education providers in England.
Scope
The report will assess how effectively regulation is mitigating the likelihood and impact of unplanned market exit in the Higher Education sector. We will examine:
- whether DfE is clear on the outcomes it wants to achieve for students and taxpayers in the event a provider exits the market
- whether OfS can identify and mitigate the likelihood of disorderly provider closure
- whether DfE and OfS are equipped to mitigate the impact of provider failure, to protect students and minimise taxpayer exposure.
NAO team
Director: Anita Shah
Senior Audit Manager: Simran Nijjar