Consolidation in higher education: How universities can merge successfully
The UK’s higher education sector is undergoing significant transformation, with consolidation emerging as a key trend reshaping the landscape. To ensure mergers are successful, university leaders must embrace bold leadership, strategic planning, and a commitment to intelligent transformation, writes Richard Alexander, Director at Differentis.
With 64% of institutions possibly facing deficits by 2026-27 according to the Office for Students (OfS), many universities risk unsustainable financial futures. With the OfS also projecting a potential £3.4 billion net income reduction for the sector by 2026, a worst-case scenario suggests that will increase and more than 80% of English universities could face deficits within three years.
In light of these developments, mergers and consolidations in higher education are no longer a question of if but when.
Why mergers are inevitable
Funding has long been the most significant challenge facing universities, with financial pressures now reaching critical levels. Even research funding, while substantial, is often restricted to specific initiatives, limiting its flexibility.
Tight budgets, a result of several factors, including a 78% decline in government grants over the last decade, make it increasingly difficult to maintain operations, let alone pursue meaningful change. Legacy IT systems exacerbate this issue, burdening institutions with technical debt and inefficiencies that drain resources.
Beyond financial strain, the challenges of capacity and capability loom large. Universities struggle to attract top talent, often due to uncompetitive salaries, thereby often relying on consultants quoting expensive contracts to fill gaps.
While this approach can bring immediate benefits, long-term solutions that build internal capabilities are neglected. Without these measures, the disparity between well-funded universities and resource-constrained institutions will widen further.
Mergers offer a path to financial stability – offering the promise of cost savings through economies of scale, streamlined operations, and strengthened financial resilience. By pooling resources and combining infrastructures, universities can tap transformative benefits and better compete on the global stage.
Overcoming the challenges of university mergers
Yet, achieving these benefits from mergers is far from straightforward. From technical integration to cultural alignment, the journey is fraught with challenges.
As seen in both public and private sectors, mergers frequently fail to deliver promised synergies due to poor planning and execution – the example of the failed merger attempt that occurred between the University of Glamorgan and UWIC (now Cardiff Metropolitan University) being an example of that when an independent review cited stumbling blocks such as leadership disputes, federation membership issues, and the challenge of achieving a merger of equals.
1) The pitfalls of poor planning
One of the most significant barriers to successful consolidation is a lack of strategic foresight. Many universities underestimate the complexity of merging two distinct entities. Without a clear roadmap, mergers can lead to duplication of efforts, misaligned cultures, and inefficient structures.
Too many UK university mergers fail due to poor planning and misaligned expectations. The key is a clear roadmap – integrating capabilities and systems, aligning cultures, and ensuring leadership buy-in. Without this, operational disruption and staff disengagement are inevitable. The University of Manchester’s 2004 merger, one of the UK’s largest, succeeded due to strong governance and phased integration.
For example, universities may fail to address how legacy IT systems will integrate, leading to operational bottlenecks and increased costs.
To avoid these pitfalls, institutions must adopt a structured approach to planning. This includes detailed assessments of each university’s strengths and weaknesses, clear alignment with strategic goals, and comprehensive risk management strategies.
2) Reskilling and workforce transformation
Mergers inevitably raise concerns about job security and headcount reductions. While some reductions may be unavoidable, the focus should be on reskilling and redeploying staff to value-added roles.
Mergers reshape university workforces, demanding new skill sets and leaner structures. Rather than blunt job cuts, institutions must focus on reskilling and role evolution to retain talent and institutional knowledge. For instance, finance teams could transition into roles supporting robotic process automation (RPA) initiatives, streamlining operations and driving efficiencies. This not only preserves jobs but also enhances the institution’s capabilities.
The University of Wales’ restructuring showed how workforce transformation, when handled strategically, can reduce redundancies while improving service delivery. Universities UK reports that digitalisation has already transformed over 30% of academic and administrative roles, a trend that mergers will accelerate.
Effective communication is critical during this process. Staff must understand how the merger will benefit them and their communities. By involving employees in the transformation journey, universities can foster a sense of ownership and reduce resistance to change.
3) Preserving community benefits
Universities are more than just educational institutions; they are vital engines of local economic and cultural life. Locations like Sheffield and Nottingham have significant student populations. The presence of a university directly supports the vibrancy of the local economy, as they fill restaurants, pubs, and shops. Consolidation should aim to amplify these benefits rather than diminish them.
Universities are economic and social anchors, so mergers must protect their local impact. Streamlining operations shouldn’t mean severing ties with local businesses or reducing public engagement. The merger of Abertay and Dundee in the 90s maintained distinct community roles while centralising efficiencies. Research by the Civic University Network shows that universities contribute £95bn annually to the UK economy, much of it through regional partnerships.
Collaboration with local authorities is a key part of this equation. By aligning goals and pooling resources, universities and local governments can create a unified strategy for sustaining economic growth and community well-being.
For example, consolidated universities can reinvest savings into community outreach programmes, infrastructure development, or cultural initiatives, turning potential downsides of a merger into opportunities for growth.
4) Attracting international students
A merged institution must be more than the sum of its parts – it should enhance its global appeal. Students, especially international, want strong rankings, cutting-edge research, and robust career pathways. The University of Paris-Saclay merger boosted its QS ranking into the global top 20, showing how consolidation can enhance reputation. The UK remains the second most popular destination for international students, yet its market share is shrinking against Canada and Australia.
International students are a vital source of revenue for UK universities, given the significantly higher tuition fees they pay. The latest data suggest they account for over 23% of the total income across UK universities, scaling significantly from the 1990s. Additionally, they bring diversity and enrich the overall learning environment.
However, Brexit has introduced new barriers, from reduced EU funding to stricter visa requirements, making it more difficult to attract this critical demographic.
To succeed in the post-Brexit landscape, universities must invest in systems and processes that cater to international students. This includes simplifying application processes, enhancing digital touchpoints, and creating robust support networks.
Digital transformation plays a crucial role here, enabling institutions to offer seamless, high-quality experiences that meet the expectations of globally mobile students.
5) Strategic intelligent transformation
Successful mergers hinge on the ability to make data-driven decisions. Intelligent transformation is not just about integrating IT systems; it’s about leveraging technology to drive strategic outcomes. This includes:
- Developing prioritisation frameworks: Ensuring that every initiative contributes to the university’s strategic objectives. For example, we helped Imperial College London align IT projects with their long-term goals, eliminating redundant activities and maximising return on investment.
- Streamlining operations: Reducing inefficiencies through centralised systems. At the University of Exeter, we centralised IT support, transforming fragmented service desks into a seamless, efficient triage system that improved user experience and reduced costs.
- Building resilient systems: Modernising infrastructure to handle future challenges, from growing student numbers to evolving regulatory requirements.
Successful mergers aren’t just about cost-cutting; they require smart transformation – leveraging AI, automation, and data-driven decision-making to create efficiencies without eroding quality. A recent JISC report highlights that AI-driven administration could save UK universities up to £2 billion annually by 2030.
A blueprint for the future
The age of consolidation in higher education is reshaping the sector at a pivotal moment. Universities must approach this challenge with bold leadership, strategic planning, and a commitment to intelligent transformation. By leveraging technology, aligning strategic goals, and focusing on long-term value creation, institutions can navigate mergers effectively and emerge stronger.
The future of UK higher education depends on adaptability and innovation. Through careful planning and a clear focus on operational efficiencies and community impact, universities can ensure that consolidation not only addresses financial pressures but also lays the foundation for a sustainable and thriving educational landscape.
