After the A-level fiasco, universities are facing a harsh lesson

Covid-19 has accelerated the shift from older, established institutions to newer, more agile and cheaper international competitors. Our education leaders will need to devise a coherent plan to counteract this, and if they don't, the UK's position as a higher education leader will come under serious and immediate threat

The Government's decision to scrap its controversial method for calculating A-Level grades may have proven a popular choice among students. But, as a consequence of swapping Ofqual's "mutant algorithm" for teachers' more generous predictions, grades have been heavily inflated, allowing more pupils to go to the university of their choice.

There will be a heavy price to pay further on with universities, colleges and other higher education institutions that provide "higher-tariff" courses becoming oversubscribed, while "lower-tariff" institutions will face a shortfall, and as a consequence, be at greater risk of requiring a Government bail-out worst cases face closure.

Ultimately, however, the greatest knock-on effect will see international students – a vital source of funding for British universities opt instead for more agile overseas challenger universities.

Exacerbating the problem is the government's recent move to lift the cap on the number of students that universities are permitted to enrol, which is driving even more demand for high-tariff institutions. They are also likely to attract more domestic students at the expense of their higher fee-paying international counterparts.

A financial cash cow for many universities, overseas students contribute £3 billion to the higher education sector every year, according to the Institute for Fiscal Studies. Worryingly, though, surveys suggest that, in the future, international students enrolling in UK universities could fall by more than 50 per cent, resulting in a £1.5bn loss in annual revenues.

The Covid-19 pandemic has had a deep effect too, with London Economics estimating that it could cost the sector as much as £2.6bn next year, and result in as many as 30,000 job losses. Added to that, Brexit has been the No.1 cause of a decline in students from mainland Europe. But the problem isn't limited to the UK and Europe: international student enrolment in the US was also down 10 per cent between 2015 and 2018.

Added to all this, many institutions face mounting debt obligations resulting from poor decision-making on funding models. This is borne out by findings from the Higher Educational Statistical Agency, which estimates that 119 out of 194 UK universities are in deficit.

But perhaps the biggest challenge for British universities is from overseas competitors. Countries such as China, whose young people account for the highest proportion of UK and US overseas intakes, are undergoing a boom in their own higher education provision. Reflecting this improvement in standards, the number of mainland Chinese institutions that feature in the QS World University Rankings climbed by 25 per cent in the last three years alone.

Countries closer to Europe are also opening state-of-the-art higher education institutions. Next month, a brand-new, hi-tech STEM-focussed campus university will open in the Republic of Georgia. Backed by billionaire and former prime minister Bidzina Ivanishvili and his Cartu Foundation to the tune of $1.2bn, Kutaisi International University (KIU) will target international Asian, Russian and European students whose previous preferred options would have been the UK, Europe and the US.

Next year, the country's first post-independence university will unveil a series of ultra-modern medical and scientific research centres, including the Caucasus region's first Proton Therapy Clinic, a combined diagnostics and treatment facility for treating cancers using state-of-the-art proton beam therapy. A key objective is to provide a cheaper "gateway" into European medical practice.

KIU plans to enroll around 15,000 students by 2024/25, beginning with a modest student cohort of around 1,000 students this year. The university is first targeting talented Georgian students primarily. The catchment area will subsequently broaden out to the wider region, the former Soviet Union, Asia and the Middle East and Europe. Initially, it will have the support of eight eminent professors from the Technical University of Munich. Additionally, classes will be offered in English and the university will take part in international exchange programs such as Erasmus+, Fulbright and DAAD. It is hoped that the new venture will drive new opportunities in science, technology and innovation in the region.

Covid-19 has accelerated the shift from older, established US and European institutions to newer, more agile and cheaper international competitors. Our education leaders will need to devise a coherent plan to counteract this, while adapting to the changing market. If they don't, the UK's position as a higher education leader, and all of the economic and cultural benefits derived from it, will come under serious and immediate threat.