Higher Education is operating in a financial environment in which many of the assumptions that once underpinned institutional planning have become increasingly uncertain.

Student recruitment is more volatile. Costs remain under pressure. Universities need to continue investing in people, technology, estates and academic capability while protecting the student experience and research mission. At the same time, institutions are being asked to demonstrate greater financial resilience and make increasingly difficult choices about where scarce resources should be deployed.

The Office for Students’ May 2026 assessment found that, while the English sector’s aggregate financial performance had improved slightly in 2024-25, universities’ forecasts for future recovery remained heavily dependent on significant growth in student recruitment. It also observed that much financial risk management remained predominantly short-term.

This is not simply a challenge for university finance functions. It changes the strategic importance of the Chief Financial Officer.

The modern Higher Education CFO cannot simply tell the institution what it can afford. They increasingly need to help the institution decide what it should choose to afford.

From financial control to strategic choice

Financial stewardship remains fundamental. Universities need strong financial controls, accurate reporting, effective treasury management, robust forecasting and appropriate oversight of investment and expenditure. But these are increasingly the foundations of the CFO role rather than its limits.

The bigger challenge is helping institutional leaders translate financial information into strategic choices.

Recent work by PwC, Universities UK and Lloyds Banking Group highlights the importance of stronger financial governance and financial acumen across universities. Only 47% of roundtable participants felt that financial reporting in their institution actively influenced priorities and trade-offs, while only 25% said that information available to decision-makers was clear, timely and supported informed challenge.

A university can have accurate financial information without necessarily having decision-useful financial insight.

The strategic CFO therefore needs to help leaders ask:

• Which activities genuinely create academic, financial or strategic value?
• What is the full cost of delivering them?
• Where are we cross-subsidising activity, and is that subsidy deliberate?
• Which assumptions are driving our forecasts?
• How sensitive are those assumptions to changes in recruitment or cost?
• Where should we invest despite financial pressure?
• What might we need to stop doing?
• What is the long-term financial consequence of avoiding a difficult decision today?

These are not simply finance questions. They are questions about institutional strategy.

Moving beyond the annual budget

Universities understandably devote considerable energy to annual budgeting. But one of the risks in a financially constrained environment is that the budget becomes the strategy.

When this happens, institutions can become focused on achieving a particular year’s financial target rather than making the structural choices required for long-term sustainability.

The Office for Students has highlighted this tension, identifying increasing action by providers on cost reduction and income diversification while noting that much financial risk management remains short-term.

A balanced budget next year does not necessarily mean the institution has a sustainable operating model. Equally, carefully planned investment or restructuring costs today may be necessary to create a financially stronger organisation tomorrow.

Financial sustainability should therefore be understood not simply as balancing income and expenditure, but as ensuring that the university’s strategy and operating model are economically viable over the long term.

From cost-cutting to understanding value

Cost reduction may be necessary, but not every saving creates value. Removing expenditure without understanding the activity it supports can reduce institutional capability, weaken services or create additional costs elsewhere.

For CFOs, this means developing a much more sophisticated understanding of cost, contribution and value. The 2026 PwC work on financial acumen specifically highlights the importance of understanding the cost and contribution of different activities and having trusted information that can inform institutional choices.

This should allow the conversation to move from “Where can we cut?” towards:

“Where should we invest, reduce, redesign, collaborate, grow or stop?”

That is a fundamentally different role for Finance. It moves the function from controlling expenditure to helping allocate scarce resources towards the activities that matter most.

Challenging optimism and improving forecasting

Universities operate in a sector where forecasts depend heavily on assumptions about student recruitment, international demand, research income, inflation, staffing and other factors that may change rapidly.

The Office for Students’ 2026 assessment cautions that anticipated sector recovery relies heavily on projected recruitment growth. In this environment, forecasting should not mean producing one confident version of the future. It should mean understanding multiple plausible futures.

The strategic CFO can strengthen decision-making through scenario modelling, sensitivity analysis and stress testing:

• What if recruitment is 5% below plan?
• What if international demand changes significantly?
• What if the benefits expected from transformation arrive two years later than planned?
• What if inflation, borrowing or employment costs move differently?

The purpose is not to produce increasingly pessimistic forecasts. It is to ensure that strategy remains resilient when reality inevitably differs from plan.

Investment during financial constraint

Perhaps one of the hardest challenges facing CFOs is that transformation itself costs money. Universities need to invest in AI and digital capability, cyber resilience, new skills, organisational redesign, estates rationalisation and sustainability precisely when financial capacity is constrained.

This creates a tension between affordability today and capability tomorrow.

The strongest CFOs will therefore need to resist two equally problematic positions: assuming every transformation programme represents worthwhile investment, or assuming expenditure reduction is automatically prudent.

Instead, the CFO needs to ask:

• What return are we expecting?
• How will we measure it?
• What assumptions support the business case?
• When will benefits actually materialise?
• Who will own those benefits?
• What happens if we choose not to invest?

That final question matters because failing to modernise can itself create significant financial risk.

The CFO as an investor in transformation

The CFO should increasingly think like an institutional investor. Universities have finite financial capacity. Every pound committed to one priority is, implicitly, unavailable for another.

Capital allocation therefore becomes one of the institution’s most important strategic processes. Investments in technology, people, estates, academic portfolios and partnerships should not be viewed as independent business cases competing for approval. They should form part of a coherent portfolio of institutional choices.

The question should not simply be whether an individual investment produces a positive return, but whether it is the best use of the university’s limited capacity to invest.

Collaboration changes the financial model

The financial challenge may also require universities to rethink what they provide themselves. The Universities UK Transformation and Efficiency Taskforce has advocated greater collaboration, shared services and shared infrastructure, alongside digital transformation, benchmarking and new collaborative structures.

This introduces a different type of CFO conversation. Instead of asking “How much will it cost us to provide this?”, institutions may increasingly need to ask:

“What is the most effective economic model for accessing this capability?”

That could mean owning, buying, partnering, sharing or stopping. The CFO can provide the commercial analysis necessary to understand those choices without allowing financial considerations alone to determine the answer.

The particular challenges facing Higher Education CFOs

Short-term savings versus long-term sustainability

Financial pressure creates an understandable demand for immediate savings. But measures that improve next year’s position can sometimes damage longer-term capability. The CFO needs the credibility to differentiate between genuine efficiency and deferred problems.

Prudence versus ambition

Universities cannot preserve their way to prosperity. They need to continue investing and innovating. The CFO’s role should therefore not be to eliminate risk, but to help the institution understand which risks it can afford to take and which risks it cannot afford not to take.

Financial discipline versus institutional mission

Universities are not conventional commercial organisations. Education, research, civic contribution and knowledge creation do not always translate neatly into short-term financial returns. The strategic CFO therefore needs commercial judgement combined with a deep understanding of academic purpose.

Not everything valuable will generate a direct financial return. But everything should have a clear reason for consuming scarce institutional resources.

Transparency versus complexity

Financial choices in universities can be technically complex and politically sensitive. The CFO must translate that complexity into information governors, academic leaders and professional colleagues can understand and challenge.

Financial literacy therefore becomes an institutional capability, rather than simply a Finance capability. The 2026 sector roundtables emphasised this wider need for financial acumen, accountability and decision-useful information.

The CFO as strategic partner

All of this reinforces why the CFO needs to be involved at the beginning of institutional strategy, not simply towards the end when the financial plan needs to demonstrate that the strategy can be afforded.

The strategically positioned CFO can ask:

• Is our strategy financially sustainable under more than one scenario?
• Which activities genuinely create value?
• What assumptions are we relying upon?
• Where is capital tied up without sufficient strategic return?
• What are we choosing not to fund by making this investment?
• Where could collaboration change the economics?
• Are promised transformation benefits actually being realised?
• What is the financial risk of doing nothing?

Finance then becomes part of strategy formation, rather than simply strategy validation.

Financial transformation requires an executive team

As with the other roles in this series, the CFO cannot deliver transformation alone. The Chief Operating Officer connects strategy with operating-model change and execution. The Chief People Officer provides insight into workforce cost, capability and organisational design. The CIO, CTO and CDO connect investment with digital capability, data, AI and resilience. The Director of Estates brings the implications of long-term physical assets and capital. The University Secretary and Registrar connects financial choices with governance, risk and institutional assurance. Academic leadership ensures that allocation of resources remains anchored to the institution’s educational and research purpose.

The CFO brings something that connects all of these: the economics of institutional choice.

The important question is therefore not simply whether each functional strategy is financially viable independently. It is whether people, digital, estates, operations and the academic portfolio combine to create a sustainable university operating model.

From Chief Financial Officer to architect of institutional sustainability

The CFO role in Higher Education is becoming both more demanding and more strategically important. CFOs must protect financial control while enabling innovation. They must challenge optimism without creating paralysis. They must secure savings while protecting institutional capability. They must judge investment when resources are scarce. They must translate financial complexity into strategic choices. And they must help institutions make difficult decisions today whose consequences may not become apparent for several years.

In a transforming Higher Education landscape, the Chief Financial Officer should therefore be understood not simply as the guardian of the university’s finances, but as an architect of institutional sustainability.

Financial sustainability is not ultimately about accumulating the largest possible surplus. It is about ensuring that an institution has the financial resilience, investment capacity and economic understanding to continue delivering its academic mission over the long term.

From reporting the financial consequences of strategy to actively helping shape the strategic choices that will determine the future university.

How this extends Leading the Future University

• University Secretary & Registrar: governance, risk and institutional judgement.
• Chief People Officer: people, culture and organisational capability.
• CIO / CTO / CDO: technology, data and digital transformation.
• Chief Operating Officer: operating model, integration and execution.
• Director of Estates: physical infrastructure, sustainability and the future campus.
• Chief Financial Officer: financial resilience, investment, value and the economics of institutional choice.

Together, the argument becomes increasingly powerful: the future university cannot be created by transforming each function independently. It requires professional leaders who can look beyond their own portfolios and collectively shape a sustainable institutional model.

Sources

• Office for Students, Financial sustainability of higher education providers in England: 2026, 14 May 2026.
• PwC UK, Transformation and Efficiency in the Higher Education Sector 2026: Financial Governance and Financial Acumen, August 2026.
• Universities UK, Transformation and Efficiency Taskforce: Towards a new era of collaboration, 2025.

WRITTEN BY STEPHEN HOBAN, DIRECTOR OF PUBLIC SECTOR INTERIM.