The Higher Education Funding Council for England¡¯s annual report on the , based on 2012-13 results and 2013-14 forecasts, also predicts that the abolition of student number controls will widen the financial gap between individual universities.

Overseas student numbers across all years of study in English higher education institutions grew by 1.2 per cent in 2012-13, compared with 4.6 per cent in 2011-12, says the report, published on 4 March.

Universities fear that the government¡¯s tightening of the visa regime has deterred overseas students from coming to the UK.

Hefce says in the report: ¡°In terms of overseas student recruitment, the latest data for 2012-13 and 2013-14 indicate a slowing of growth in the numbers of overseas students recruited by the sector, compared to recent years, which could make plans for income growth more difficult to achieve.

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¡°This could have a material impact on the sector as overseas fee income represents a significant source of income for many institutions.¡±

Hefce also notes that the increase in home/European Union student numbers in 2014-15 and the abolition of quotas in 2015-16, announced by George Osborne in his autumn statement, will have financial impacts.

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Institutions ¡°will face increasing levels of uncertainty over student recruitment, with some institutions being more successful in attracting students than others. This could lead to greater volatility of financial forecasting and a widening of institutional financial performance in the coming years,¡± Hefce says.

The report also says that ¡°a new requirement on institutions to include pension scheme liabilities¡± for multi-employer funds such as the Universities Superannuation Scheme ¡°will have a significant impact on the financial plans and performance of institutions in future¡±.

The deficit of the USS, used by pre-1992 universities, stood at ?7.9 billion in June 2013, the report notes.

Hefce adds that this ¡°indicates that sector reserves could be significantly overstated, depending on the value of the USS deficit¡±.

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It continues: ¡°Confidence levels in the financial strength of the sector may be impacted by the inclusion of USS deficits on institutions¡¯ balance sheets.¡±

The English sector¡¯s income grew to ?24.3 billion in 2012-13, up from ?23.3 billion the previous year. Forecast income for 2013-14 is ?25.3 billion.

However, the sector¡¯s operating surplus as a percentage of total income fell from 4.2 per cent to 3.9 per cent in 2012-13. And the collective surplus is forecast to be 2.2 per cent in 2013-14.

john.morgan@tsleducation.com