'The model places pressure on domestic student numbers'

Tuition fees are free for undergraduates in Scotland, with the funding for universities provided by a mixture of the Scottish Government, research grants from the private sector, and fees charged on students from overseas.

However, while underlining the importance of the university sector to the skills pipeline and technology development, one prominent Glasgow business figure has warned Scottish universities’ growing reliance on fees from foreign students has left them in a “precarious position”.

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Stuart Patrick, chief executive of Glasgow Chamber of Commerce, told The Herald: “We cannot overstate the importance of Glasgow’s universities to the City Region. Beyond providing a crucial skills pipeline to sectors like financial services and driving innovation in life sciences, quantum technologies, and creative industries, they also play a vital role in the broader economy.

“For example, every year, Scottish universities collaborate with over 20,000 Scottish businesses on innovation projects and create around 300 start-ups and spin-outs, fuelling economic growth and entrepreneurship in Glasgow and beyond. We should not and cannot take the role of our world-class universities for granted.”

However, he added: “The reliance on international student fees to subsidise research and teaching has left universities in a precarious position. Despite per-student public investment being five times higher in Scotland than England, Scottish universities still receive 23% less funding per student, forcing them to rely on international students.

“There is no doubt that international students play a vital role in our cities, greatly enhancing our campuses and workforce. However, the funding model also places pressure on domestic student numbers, limiting opportunities for local talent. In Glasgow, we must protect opportunities for homegrown talent to study, work, and contribute to their local economy. This is the only way we will ensure sustainable success.”

Mr Patrick said a review of the funding model was needed to ensure the stability of the funding pipeline.

“In Glasgow, where universities drive the innovation and skills pipeline, a sustainable, long-term funding model is urgently needed to avoid future instability and ensure the continued economic contribution of these institutions,” he said.

“Cities like Glasgow are central to addressing the UK’s productivity problem. The strength of our universities in sectors like life sciences and creative technologies positions the city as a growth hub. However, universities can only help to drive this growth if they receive the investment required to sustain research and innovation.

“For every £1 million invested in university research, £8.1m is generated in economic return, so we know the size of the prize is significant. However, without stable funding, Glasgow’s ability to lead national growth and productivity will be undermined.”

Catherine McWilliam, national director (Scotland) of the Institute of Directors, also voiced concern over the current university funding model. Ms McWilliam said universities in Scotland “play an important role in equipping graduates with the skills and attributes businesses need”, adding that they “do a good job of keeping up with the demands of business” in an environment where the “range of skills needed changes at a rapid pace”.

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However, she warned skills shortages and gaps “remain a significant concern for businesses in Scotland”.

“According to this year’s IoD State of the Nation Directors’ Survey, only 54% of directors were confident they could recruit enough skilled staff in the next 12 months, down from 57% in the previous year,” Ms McWilliam told The Herald. “There is a key role for universities and further education establishments to play in addressing this; ensuring they align their offering with the needs of the commercial sector.

“The current funding model may also play a role in limiting the extent to which universities can adapt to commercial demands. While it has enabled free tuition for Scottish students, it places significant pressure on university resources, potentially limiting the capacity for investment in cutting-edge facilities and programmes.

“With the Scottish Government allocating funding to universities, and in the absence of tuition fees, there is a cap on student numbers. In England, there is no cap, and teaching grants are only provided for courses that are expensive to run.

“This is its own issue to debate. However, it does mean the English sector has become much more commercialised than the Scottish sector.

“Future options could include exploring more diversified income streams through private sector partnerships, increased international student intake, and greater support from government for industry-linked research and innovation programmes.”

Read more in the series:

Why are foreign students so important for our universities?

Funding has to increase to support free university tuition

In the north-east of Scotland, Aberdeen & Grampian Chamber of Commerce said the city’s two universities and a college work closely with the business community across the region, notably with respect to providing skills needed for sectors such as energy, food and drink, and life sciences.

However, chief executive Russell Borthwick said the organisation would like to see “more joined-up thinking between departments at the Scottish Government, particularly when it comes to the key skills required for the future economy”.

“The energy transition is a good example of this; higher education establishments here are having to make cuts at a time when the Government should be supporting them to grow courses where young people can pick up the skills this region needs for the future,” he told The Herald.

Mr Borthwick also urged the UK Government to reverse the ban on international students bringing their dependants to the UK and maintain the Graduate Route Visa to ensure the country “continues to offer internationally competitive post-study work for international students”.

“The UK Government must also recognise that some postgraduate courses are only viable due the presence of international students,” he added.

The Federation of Small Businesses (FSB) in Scotland said, while small firms have good links with the college sector, there was scope to improve communication with universities.

Vikki Manson, FSB’s deputy head of policy, said: “Scotland’s small businesses have strong working relationships with the college sector. There is certainly a willingness among universities to engage with the small business community, and vice versa. We are aware of good work being done by universities in this area. The challenge perhaps lies in universities finding ways of communicating that are more accessible to business owners.”

Meanwhile, Universities Scotland has signalled the sector’s desire to work closely with business to provide the skills companies need, now and in the future. Director Claire McPherson said: “Granular projections of workforce needs are notoriously difficult to do over the long-term but at a skill level or sector level, the data strongly suggest that the vast majority of new jobs by 2035 will be, at a high skill level and that there will be tremendous jobs growth in computing and engineering, education, health and the creative industries, which are all sectors that universities are well-placed to support.

“Universities work closely with employers and are responsive to workforce needs and new models of provision. They have shown a strong appetite to expand graduate apprenticeships in partnership with business and are keen to bring greater agility to this model.

“Beyond apprenticeships, universities offer students other work-based and work-related opportunities within a degree. This means our graduates have the knowledge, the experience and the confidence to hit the ground running in their careers and have a transferrable skill set that sets them up for a long and varied career. Last year, 83% of Scottish senior leaders with a degree said that going to university gave them a good foundational knowledge of their industry/sector.

“Looking to the future we can also be sure that we’re going to need to re-skill and upskill the existing workforce as Scotland’s demographics shift and as new industries emerge and grow. Scotland will need flexibility in its teaching funding model and student support options to empower mature and part-time learners to study at degree level and potentially in shorter courses.”