THE majority of Scottish universities are in a financial deficit, a new national report has found, leading to growing concerns over the country's higher education sector.
The Scottish Funding Council, the body which allocates money to higher education, found that 10 of Scotland’s universities were in a financial deficit in the academic year 2024/25, and predicts similar results next year – despite more funding.
The council warned the situation could become worse if expected income from international students does not arrive, describing some other forecasts as “optimistic”.
The report found that three of Scotland’s “ancient” universities – Edinburgh, Glasgow and St Andrews – recorded the largest surpluses, while modern universities were more often in deficit.
Heriot-Watt, Strathclyde, University of the West of Scotland and University of the Highlands and Islands all recorded deficits.
The report found that overall, Scottish universities recorded a surplus of £90.6 million – an improvement from the previous year’s £15.8m.
This falls, however, to a deficit of £7m for the rest of the sector when the universities of Edinburgh, Glasgow, and St Andrews are removed - revealing the struggles faced by modern universities in Scotland.
Paul Devoy, interim chief executive of the SFC, said Scotland's colleges and universities were operating in one of the most challenging financial environments the sector had faced for many years.
He said: “These reports shine a clear light on the scale of that pressure, drawing on detailed analysis of accounts and forecasts. They are a snapshot in time, but an important one.
“SFC is working closely and actively with colleges and universities across Scotland to understand the pressures they face, strengthen financial resilience and support their short-term viability and long-term sustainability.”
Older universities tend to hold greater reserves, assets, and cash endowments which could be drawn on in times of crisis.
Research income is also concentrated within the ancient universities, which are expected to have raised approximately 75% of it in 2025/26.
The newer institutions are more vulnerable to fluctuations in income streams from the level of international students and a long-term proportionate drop in public funding. The report’s suggested “mitigating actions” include increasing levels of transnational education, and avoiding over-reliance on any one country for international student numbers.
The University of Dundee – which was bailed out by the Scottish government after a financial collapse - was excluded from the annual report, as its accounts were not finalised. Staff commenced strike action earlier this month for five weeks, in protest against staffing cuts and potential compulsory redundancies.
The universities with the greatest operating deficits were Heriot-Watt, at £9.88m, Strathclyde, at £9.5m, and the University of the West of Scotland, which spent £8.88m more than it took in.
Glasgow Caledonian University (GCU) was one of the only non-ancient universities to report a surplus in the academic year. Staff have recently protested the job cuts, and today announced a two-week strike over the dispute. The university has claimed it is facing a £10m deficit in the next academic year, and is protecting its long-term financial security.
Staff at Aberdeen, Strathclyde and Heriot-Watt universities have also taken industrial action in spring, while 2025 saw strikes at other institutions.
The SFC also released an annual report into the financial health of the college sector, finding only three colleges have forecast a break-even position for the academic year ending in July.
The Scottish Government's Tertiary Education minister Alyn Smith said he recognised the challenges highlighted in both reports.
He said many of the issues were outside the government's control and not unique to Scotland, such as visa restrictions, Brexit, inflation and National Insurance rises.
Smith said ministers were working closely with universities and colleges to develop a more sustainable and resilient model.
