Digital Economy Dispatch #253 -- Lessons in Leading Universities Through the AI Revolution

Over the last thirty years, UK higher education has gone through some seismic shifts. What started as a sector rooted in academic tradition is now more clearly a high-stakes global contest for students, educational relevance, and entrepreneurial leadership. Consequently, it's often under the microscope for funding issues, public value, and its ability to adapt to local and national business trends. I've seen the transition up close while working with universities in the UK, US, and Spain, both as a participant and a close observer.

Now seen from my position in the UK, the current situation feels more complex than I can ever remember it. The UK government is issuing demands for UK universities to “deliver better value for money”, and promising to “crackdown on rip-off degrees”. Meanwhile, UK business leaders are concerned that universities are not staying in touch with the business skills they need and “do not believe current graduates are prepared to succeed in a world driven by artificial intelligence (AI)”. At the same time, The UK Office for Students says that “43 per cent of institutions …[are] forecasting a deficit for 2024-25”.  How can UK universities respond to these challenges?

A System Under Strain: Enrollment Surges and Financial Crises

First, we must start by recognising that demand for university places has never been higher. The most recent data shows UK higher education had 2.904 million students in 2023/24, representing stable demand after years of growth. Much of this sustained interest is fuelled by international postgraduates; a UK education still holds real appeal for students from abroad. And unless something major changes, applications are forecast to rise by as much as 30% by 2030.

But beneath those headline figures, the system is showing serious cracks. These days, nearly half of all English universities are forecast to run a deficit this year, and by 2026/27, the Office for Students estimates that more than 70% could be in the red. They believe that around 40% might be running so close to the bone they'd have less than a month's running costs in hand, something unthinkable just a few years ago.

A big part of this problem is that domestic tuition fees have been frozen for years, while costs keep going up and government teaching support has collapsed, down 60% since 2010/11 in real terms. What's kept many universities afloat is their success with international students, who bring in a vital income stream (worth £9.4 billion last year, or 1 in every 5 pounds flowing into the sector). But that cushion looks increasingly thin.

Last September, 80% of universities missed their overseas recruitment targets. Enrolments from some key non-EU markets, like Nigeria and India, have dropped sharply, and further falls are on the cards. At the same time, new visa rules and government levies could push numbers even lower; official forecasts have warned of significant drops in student visa applications.

From “Sage on the Stage” to the “Guide on the Side”

Amidst this financial strain, the very nature of teaching and learning has also been substantially transformed. Back when I started out, the typical university academic was the unchallenged "sage on the stage", acting as the expert whose word was law. Now, effective educators are seen as "the guide on the side", a phrase used to describe a shift towards student-centred, active learning. This means acting as partners and guides, working alongside students, encouraging independent thought, and creating space for discovery and debate.

Many educators have found this shift both energizing and necessary, while others have struggled to let go of the old certainties. Is it, therefore, any surprise that they now also are challenged by the disruption now arising from AI’s rapid adoption in education? What will be the role of teaching and learning in AI era?

What Does Educational Leadership Look Like in the Age of AI?

The arrival of AI is forcing a fundamental rethink of roles and impact for everyone in higher education. Here are three ways I see things evolving:

The AI-Powered Mentor

AI tools are starting to deliver learning at scale: personalised, always-on, and fast. What's left for the human academic? I think it's the truly human work: bringing emotional intelligence, offering ethical guidance, and helping learners tackle the problems AI still can't manage. The latest pilots show just how powerful AI-assisted support can be by personalizing and adapting materials to the diversity and wide range of abilities, backgrounds, and motivations present in today’s UK student body.

The Skills Orchestra Conductor

With machines handling the core basic knowledge transfer, real value now lies in finding, solving, and framing complex problems. Educators need to become curators of knowledge acting as conductors by coordinating industry links, real-world projects, and cross-disciplinary teams. It's those "uniquely human" skills of creativity, collaboration, and resilience that will set students apart in the age of automation.

The Critical Thinking Provocateur

With so much AI-generated info out there, the educator's job is often to challenge, question, and nurture scepticism. The new core skill is helping people interrogate data, test assumptions (whether human or machine) and debate the big questions. Research shows that when students rely heavily on AI for information, their ability to engage in reflective problem-solving may decline, making it crucial that educators foster a culture where questioning and critically assessing AI is encouraged. In my view, this is the most exciting chance for universities to prove their worth as places for experiment and dissent, serving as arenas for free inquiry and democratic debate.

 The Uncertain (bur Opportunity-Rich) Future

There are no easy answers: the future for UK universities is full of uncertainty. Financial pressures are real, competition is global, and digital disruption is constant. But I also believe the opportunities are huge. The universities that thrive will be those that turn toward AI, not away from it. Those making progress will combine industry partnerships, innovation, and their historic mission to foster both understanding and wisdom.

The key opportunity for AI lies in democratizing access and rehumanizing teaching. By deploying adaptive learning platforms and restructuring teaching tasks, AI can automate the delivery of foundational content, personalize exercises, and handle high-volume administrative tasks, effectively ending the era of rote instruction. This fundamental shift frees up the most valuable resource (the educator) to focus on high-impact, meaningful tasks: facilitating critical debate, offering personalized mentorship, supervising research, and inspiring the next generation toward complex problem-solving, thereby fulfilling the historical mandate of higher education.

Implications for Leadership: Rethinking Staffing, Structure, and Partnerships

Yet, university leaders can't face this shift by just tweaking the syllabus or buying some new tech solution; the challenge requires a deeper organizational reset. They must fundamentally rethink their whole staffing profile to bring in people with real skills in AI strategy, digital learning, industry engagement, and ethics. AI itself can be a powerful lever here; intelligent tools can quickly automate tasks to mitigate the immediate impact of the skills gap (which latest reports show affects more than half of UK tech leaders, twice as many as last year). This creates the necessary bandwidth to get serious about re-skilling both academics and students in the core digital and AI-driven working practices needed to lead in our future.

The most immediate opportunity for financial relief and strategic restructuring lies in reimagining the administrative core of the university. The sector employs a substantial 207,000 Professional and Support (PS) staff, a large workforce whose tasks often involve predictable, high-volume administrative work across finance, HR, and student services. By deploying intelligent tools for functions like automated data entry, first-line student query handling, and workflow management, universities can substantially automate or remove these administrative burdens. Only by using AI to uncouple cost from delivery and embrace smarter administration can universities afford to stay relevant. This requires leaders to adapt their ways of working directly to the digital era: faster decision making, more flexible delivery, and a recalibration of costs and value.

Crucially, this isn't simply about cutting jobs; it’s about freeing up staff for high-impact, meaningful tasks such as personalized student support, strategic partnership brokering, and complex problem-solving. Leaders must leverage this technology to strategically redefine job roles, transforming the largest cost-saving lever into a strategic advantage

In addition, maintaining university relevance demands much deeper, AI-enabled partnerships with industry than currently seen. This will lead to seamlessly shared digital platforms, co-created projects, internships, and joint innovation as crucial priorities for investment. Around the world and here in the UK, we're seeing how these collaborations lead to real impact for students, staff, and employers alike.

These are substantial efforts. Yet, leaders who prioritise such an approach to drive this move to transform workforce agendas and build strong industry links will give their institutions the best chance not just to survive but to thrive, reshaping what higher education means in a world remade by AI.