I am a researcher in Artificial Intelligence focusing on university strategy and institutional AI preparedness. Given my research interests and leadership of large knowledge exchange and brokerage projects across the North of England I have spent much of the last few years supporting university senior leaders in their preparation for this new wave of AI. The UK Higher Education (HE) Sector is facing significant challenges, all intertwined and difficult to address, we require innovative approaches and a new mission for UK HE.

The sector is facing a ‘perfect storm’ of interlinked challenges. On the financial front, a decade of frozen tuition fees and recent visa restrictions have put universities in – sometimes severe – budgetary distress.  A recent Universities UK (UUK) survey shows that half of our institutions are closing or consolidating course offerings, cost cutting measures – including operational cutbacks such as reducing repairs and maintenance costs – are in place across the sector. The near future may see further reductions, currently one in five universities have reduced investment in research with a further 79% of institutions considering future research reductions. Universities are trying hard to protect core widening participation and student support budgets, but around half say they will need to reconsider these costs within 3 years.

At the same time, the rise of Generative AI is disrupting traditional teaching. Widespread AI use – with over half of students regularly using tools such as ChatGPT – has sparked discussion about academic integrity and the value of a degree. This technological shift challenges universities to rethink pedagogy and reimagine curricula. Difficult in the current survival mode! I maintain that at least part of the issue here, is not what Generative AI can do, but how many institutions think it will be a de facto cost saver.

Finally, public and political opinion adds to the sense of crisis. The Higher Education sector’s image is ambiguous. Recent research from Kings College London suggests that Universities rank highly amongst British Institutions, but that only 19% of people think they should be mainly state funded (a drop from 68% of people in 1988). However with 75% of people concerned that higher fees will put off people from poor backgrounds attending university, any significant fee rise may exacerbate the financial precarity of – at least – some institutions.  Public opinion is mixed, whilst the value of universities economically and as a global sector is recognised, at least one in five people think ‘a university degree is a waste of time’. There is a burgeoning trend of employers choosing non-graduates, as well as broadly negative messaging from government around universities.

These three crises – financial, technological, and perceptual – are deeply intertwined. Government under-investment in higher education (evidenced by frozen domestic fees and reduced R&D grants) is both a cause and consequence of public attitudes. Many voters are uneasy about the value of a university degree, pushing politicians to promote austerity. The calculation is quite simple, government feels that the voters three priorities are the economy, the NHS and immigration. Whilst we can debate the accuracy of this, government action is quite clear. In these troubled economic times, HE is not a voter priority and so not a spending one. However, the evidence is quite clear, universities deliver both economic and social benefits, they are a boon to their regions and have multi-level benefits regionally and nationally.

Even so, universities must begin to understand the threats the face as a single questioning of their place, role and value in our modern economy. Many universities are siloing the challenges they face. Developing strategies around AI that are defensive and insular, rather than harnessing these to support their wider civic and economic roles. They are consolidating courses based on recent historical trends rather than an anticipation of future economic need. The language of university economic impact is aimed at government rather than voters. However, it is voters that government are listening to. Leaders must recognise that debates about AI-driven automation feed into perceptions about university value: is higher education about dispensing facts (now easily AI-generated), or about nurturing creativity and critical thinking? The answer will shape whether the sector is seen as an outdated cost or an essential engine for future skills. The answer also lies in being able to convey to the wider population why critical thinking is valuable.

Given these complexities, effective leadership in UK universities – and especially in business schools – demands a holistic, strategic response. Rather than treating financial woes, AI fears and public distrust as separate issues, leaders should develop plans that address their root causes together. For example, fostering stronger regional and civic ties can both open up new income streams and rebuild local trust. Business schools, in particular, can leverage their industry connections: co-designing courses with employers can attract corporate funding and ensure graduates have “skills and capabilities challenging for AI to replicate”. Graduates must be AI ready and AI aware. Similarly, overhauling assessment methods (e.g. project work, vivas or portfolios) not only counters cheating but can form the basis of innovative executive education programs. Leaders must also become vocal advocates for the social and economic value universities bring – from boosting local economies to driving innovation – because public support correlates with funding decisions. In short, universities need to reposition themselves as indispensable civic and economic anchors.

The challenges facing the UK HE sector feed into each other. Financial pressures lead to reductions in teaching, research and knowledge exchange, reducing the offering of universities. Negative press and political pressure justifies further austerity (often a simple inaction whilst inflation reduces the value of fee to universities[1]). AI intensifies this loop, if universities are seen as simple knowledge factories (replaceable by AI), then both taxpayers and businesses will push for more basic offerings to save money. If however, leaders can reframe universities as proactive civic partners and genuine innovation hubs that narrative can pressure governments to invest. Simply put, university leaders must approach all three fronts together, otherwise solutions to one challenge – such as additional government financing – may be undermined by problems in others, such as a public backlash or technological disruption.

Strategies for Navigating the Crisis

For any strategy to work, universities must be collaborative where possible. Where possible university clusters in particular regions or themes should work together to support the overall economic development of that region.

• Diversify income streams. Universities must reduce their reliance on a single source of funding. This means aggressively pursuing alternative revenues: philanthropy, executive and part-time education, professional training courses and corporate partnerships. Indeed, Universities UK recommends “boost[ing] philanthropic giving” – leveraging the fact that donations to UK universities have nearly doubled in the past decade. If philanthropic donations are a viable option, these should be – where possible – directly related to ideas of civic value, and tied into wider provision and offerings.
• Business schools can play a lead role in income diversification by packaging short certificate programs or MBA modules tailored to industry, which both meet employer needs and bring in funds. Cost-sharing collaborations (e.g. shared services or research infrastructure) with other institutions can also cut overheads.
• Build place-based partnerships. Universities should leverage their roles as anchor institutions in their towns and regions. Civic University Agreements in the UK stress that universities have a “high-priority” commitment to local economic, social and cultural needs. Leaders can formalise this by creating a dedicated “local growth” function on, as recommended by UUK’s strategic blueprint. This office would liaise with local businesses, councils and community groups to co-develop projects: for example, a business school might work with a regional tech cluster to upskill workers, or team with the NHS on management training. Such place-based strategies yield multiple gains: they open channels for sponsored research and training, make universities indispensable in regional growth plans and provide a public demonstration of social value.
• Exercise civic leadership and tell the story. University leaders must become more vocal advocates for higher education’s benefits. This means stepping into public debates – in the press, on government panels, or local forums – to highlight the sector’s contributions: from generating high-value jobs to solving societal problems. Polling shows that sustained advocacy is needed so that voters “understand the true value of higher education”. Clear and sustained communication campaigns can help set the narrative about the value of students – and international students – to the local economy. Universities should also showcase successful alumni and innovation spin-outs, reinforcing that universities fuel both individual progress and the national economy. In essence, leaders must practice active civic engagement, projecting the university as a public good supporting its local economy and its residents.
• Reimagine the curriculum and partnerships. Business schools can innovate by co-designing courses with industry to meet future skills needs. For instance, embedding AI, data analytics and sustainability into management programs – in collaboration with tech firms or consultancies – ensures graduates are workplace-ready. Flexible, modular learning (e.g. micro-credentials or stackable qualifications) can attract lifelong learners and employees seeking upskilling, opening new fee streams. Assessment should also evolve: moving away from exam-driven testing to project-based or oral assessments reduces cheating (though this should not be the main driver) and emphasises real-world problem-solving. Many institutions are adopting “AI-positive” policies, teaching students how to use AI ethically and creatively, rather than simply banning the tools. However many university AI policies knee jerked and respond to recent AI rather than the AI use of the future. By aligning courses with emerging industry standards and technologies, universities can remain relevant – and make a stronger case for investment in education as the economy changes.
• Emphasise civic and regional roles to rebuild trust. Finally, universities must tangibly demonstrate their commitment to communities. When institutions embrace their civic mission, they become seen as “anchors” driving inclusive growth. Examples include opening facilities to the public, partnering on local development (from housing to digital connectivity) or giving students real projects that benefit charities and SMEs. Highlighting such activities in media and reports helps rebuild public legitimacy. If local people perceive the university as contributing to jobs and culture, political support for stable funding is more likely to follow.

We should not however read these strategies as a cynical transactional approach. Universities should not simply up their civic role to glean more funding from government. Universities need to transform their approach, delivering and generating value, to repurpose themselves in a new future. UK universities can only navigate today’s multidimensional crisis through integrated leadership. It starts with recognising that the current financial crisis, AI challenges and public perception are pieces of one puzzle. University leaders must adopt a broad mission. Partnering with local and national stakeholders on regional development, advocating for the social value of our work and repurposing the educational model for the future.

All universities will have excellent examples of the above, embracing a mission led approach will mean that creating and demonstrating social and economic value in teaching, research and knowledge exchange becomes the driving purpose of a university. By doing so, universities can harness this period of pressure into meaningful change, strengthening our missions, securing new support, genuinely transforming lives for the better and ensuring that our institutions continue to act as progressive anchors in their regions.

[1] Here I will note, not the value of repayments of any student loan where the value to the treasury is protected through the Inflation+ model of repayments.

Richard will be an expert speaker at our two-part Development Day: Unlocking the Power of AI in Higher Education. Book now.