Navigating the Age of Consolidation: How UK Universities Can Merge Successfully

The UK higher education sector is at a critical tipping point. 

The Office for Students (OfS) has previously warned that 64% of institutions could face deficits by 2026-27 if student recruitment didn’t improve. Alongside that, fresher data shows that 40% ran at budget deficits in 2024, with three institutions in serious financial peril. 

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, while funding changes may severely impact almost 50 institutions, according to the University and College Union (UCU). 

Without bold, strategic action, many universities risk unsustainable futures. 

Mergers and consolidations are no longer a question of if but when. The recent announcement that Cardiff University is, sadly, cutting 10% of its academic staff as a result of significant financial challenges is the latest example of the perils facing Higher Education institutions. The conversations of that nature are getting louder, with the OfS chief executive, Susan Lapworth, saying “the time for bold and transformative action” is here, while the OfS interim chair David Behan has also said universities “need to consider mergers.”

While challenging, mergers offer a path to financial stability — provided they are guided by clear planning and a focus on achieving genuine efficiencies.

Mergers can bring transformative benefits if approached with precision and foresight. They offer the promise of cost savings through economies of scale, streamlined operations, and strengthened financial resilience. 

Yet, achieving these benefits is far from straightforward. From technical integration to cultural alignment, the journey is fraught with challenges. 

We’ve seen how strategic intelligent transformation can help universities navigate this process successfully, creating not only efficient institutions but also ones that continue to deliver value to their communities.

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 and consolidations have emerged as one potential solution. By pooling resources and combining infrastructures, universities can achieve economies of scale, reduce costs, and better compete on the global stage. 

Yet, as we’ve 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.”

The goal of any merger should be to double the impact without doubling the costs. Achieving this requires meticulous planning and a focus on value creation.

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. 

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.

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.

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.

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 £2bn annually by 2030.

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.

The higher education sector in the UK stands at a critical juncture. Financial pressures are mounting as institutions grapple with constrained budgets, rising costs, and reduced access to EU funding.

The situation is so severe that a fresh report published by the Office for Students (OfS) predicts that up to 72% of UK universities could be operating at a deficit by 2025/26, with 40% having fewer than 30 days of liquidity.

What little funding our vital universities have is being carved into wafer-thin portions and split to deliver as many requirements as possible. For so long, IT infrastructure has been under-resourced, and we’re now operating in an era of technical debt that is constantly being deepened by legacy IT architectures and siloed operations.

Now, more than ever, digital transformation isn’t just an option for universities; it’s a necessity. In this article, I explore how this transformation can help universities navigate the financial and operational challenges they’re facing.

The challenge here is an obvious one. Universities have often withheld investment in technology simply to manage cash flow, reduce costs, and “keep the lights on”. The constant pressure to maintain and develop facilities to remain attractive to national and international students has constantly eaten into budgets.

As a result, university leaders have found themselves on a hamster wheel. Higher education institutions remain operational, doing what they need to in the moment, but in a digital-first world, the technology doesn’t align with the expectations of students or staff.

The inability to invest adequately in technology risks undermining the global competitiveness of UK universities in research and education delivery. The recent announcement of a modest tuition fee increase starting in 2025/26 is unlikely to provide substantial relief because of concurrent cost increases like National Insurance hikes.

Many universities in the UK depend on a patchwork of legacy systems running outdated software, limiting their ability to integrate modern learning tools and applications. These legacy IT systems have become a resource-intensive burden, and substantial investments are needed to keep them running.

Adding to these pressures, attracting and retaining talent presents another challenge. Salaries in higher education are not always competitive, restricting access to the best talent and making institutions dependent on external consultants.

This is the reality universities face going into 2025. Legacy systems cannot be addressed overnight.

The public sector — not just education — remains heavily reliant on management consultants to plug gaps left by hiring challenges. Fees paid in this direction reached record levels, driven, in truth, by short-term necessity.

While this can be a value-for-money approach, it is essential to ensure consultants help build long-term capabilities that enable universities to move forward under their own steam.

If nothing is done, the gap between well-resourced universities and others will widen. While the former will continue to thrive, those with fewer resources will fall further behind. This reality underscores the urgency of adopting a long-term vision for digital transformation and creating an actionable roadmap of improvement priorities.

When advising universities, we encourage a focus on two key areas: enhancing the student experience and infrastructure maintenance efficiency. By addressing these priorities, universities can not only cut operational costs but also create systems that empower staff and attract students.

All students expect seamless, high-quality digital services both on campus and online. A 2023 survey found that upgrades to platforms and systems ranked highest on students’ list of priorities, with 71% citing digital technologies as fundamental to their education.

By investing in digital tools that meet these expectations, universities can attract and retain students for the duration of their learning journey. Digital transformation isn’t just about saving money; it’s about creating value for students and staff alike.

A modern, fit-for-purpose IT foundation is essential for enabling future initiatives. For example, updating student record systems and CRMs can centralise essential information such as exam timetables, schedules, and funding statuses. This improves both operational efficiency for staff and the overall experience for students. Modernisation of the data integration layer(s) ensures consistent data use across systems, greatly reducing inaccuracies and increasing confidence in system reliability.

Two recent projects conducted by Differentis, a leading consultancy specialising in intelligent transformation and strategic advice, with two of the highest-rated Russell Group Higher Education institutions in the UK, highlight digital transformation’s tangible benefits.

Imperial College London recognised the need to improve support for students with disabilities, ensuring their learning experiences were inclusive, effective, and equitable. Addressing this challenge required a comprehensive approach to align IT systems and processes with the specific needs of these students.

Differentis reimagined key support workflows, crafting detailed user journeys that prioritised accessibility and inclusivity. By integrating and streamlining systems, we simplified access to resources and support, empowering students with disabilities to navigate their education more effectively.

The impact has been transformative: students now experience a more tailored and supportive learning environment, while staff benefit from reduced administrative complexity, allowing them to focus more on individual needs. By implementing a prioritisation framework for disability-focused IT projects, we ensured alignment with the university’s strategic goals, further embedding inclusivity as a core value.

Centralising support systems has maximised the impact of technology investments, creating a seamless experience for students and staff alike. This initiative demonstrates the powerful role of strategic IT alignment in fostering a more inclusive academic community.

When a leading university in Devon considered decentralising its IT service operations into multiple units, Differentis identified a critical flaw: fragmentation would complicate support access, frustrating students and staff alike.

Instead, we recommended centralising first-line IT support to act as a triage system, efficiently directing queries to the right teams, leveraging leading ITSM toolkits and data analysis to complement first-line knowledge with actionable insights that led to faster time-to-resolution

This approach preserved a seamless user experience while reducing inefficiencies — a prime example of how thoughtful IT structuring can save resources and enhance service quality.

Digital transformation requires collaboration across stakeholders. Universities should engage with local authorities, industry partners, and other institutions to share resources and expertise.

Additionally, workforce transformation must be a priority. Investing in reskilling initiatives can help existing staff adapt to new roles, while innovative recruitment strategies can attract top talent, ensuring the sustainability of transformation efforts.

The UK’s higher education sector faces significant challenges, but the opportunity for transformation has never been greater.

By focusing on enhancing the student experience, modernising infrastructure, and leveraging emerging technologies, universities can create lasting value for students, staff, and their communities.

Digital transformation is not just about cutting costs; it’s about building resilient systems that enable institutions to thrive. With bold leadership, strategic investments, and a commitment to collaboration, UK universities can navigate today’s financial pressures and secure their place as global leaders in education and research for decades to come.