Record fine on the University of Sussex for governance breaches: what next for a sector already in financial distress?

Posted: 05/06/2025

On 26 March 2025, the independent regulator for higher education, the Office for Students (OfS) imposed a record £585,000 fine on the University of Sussex for governance breaches relating to freedom of speech and academic freedom. 

The level of the fine, together with suggestions from the OfS that this may be the first of several investigations and fines that it will impose, has left many higher education institutions feeling nervous. For a sector in which many are already projected to fall into financial distress in the next few years, the threat of substantial fines is deeply unwelcome.

Background

The OfS initiated its investigation into Sussex in November 2021 following protests at the university calling for the dismissal of professor of philosophy Kathleen Stock due to her gender critical views. Professor Stock subsequently left Sussex, citing attacks from colleagues, and a statement made by the Sussex branch of the University and College Union which expressed solidarity with the protesting students. 

The OfS investigation and fine did not relate directly to the departure of Professor Stock, but rather to the university's failure, according to the OfS, to comply with its ongoing conditions of registration E1 and E2. 

Condition E1 relates to governing documents. The OfS found that Sussex's trans and non-binary equality policy statement failed to uphold the freedom of speech and academic freedom public interest governance principles set out in its regulatory framework. The OfS said that this resulted in a 'chilling effect' which caused the potential for staff and students to self-censor, and that the case of Professor Stock was an example of this type of self-censorship. The larger part of the fine, £360,000, related to this breach. 

Condition E2 relates to management and governance arrangements. The OfS found that Sussex failed to have adequate and effective management and governance arrangements in place to ensure that it operated in accordance with the delegation arrangements set out in its governing documents. The remaining £225,000 of the fine related to this breach.

The university has now written to the OfS stating its intention to seek a judicial review of its findings and to appeal the fine. It claims that the OfS findings are unlawful because (i) OfS acted 'ultra vires' (beyond its powers), (ii) the decision was wrong in law and (iii) the argument about the supposed 'chilling effect' was irrational.

Why is the sector particularly concerned about this fine?

Voices from across the higher education sector have expressed concern about the implications that this OfS investigation and fine will have for other institutions. Their concerns include the following:

• The OfS has 24 ongoing conditions of registration, including conditions F1, F2, F3 and F4, which relate to financial sustainability. Many institutions now fear that the OfS could impose substantial fines for technical breaches of any of those 24 conditions.
• Sussex disputes the OfS position that the trans and non-binary equality policy statement was one of its governing documents. As the university has pointed out, this was just one of many hundreds of statements that it has published on a variety of topics. Nevertheless, if (as the OfS says) this statement does fall within the scope of condition E1, other institutions will have many more published documents which could be similarly scrutinised by the OfS. These institutions will have far greater exposure to potential fines relating to governance issues than they may have previously understood.
• It is not clear why the OfS decided to investigate Sussex and, ultimately, to levy this unprecedented fine, rather than supporting the university to correct whatever issues may have existed in its policies. The OfS is both an industry body and a regulator; it wields both the carrot and the stick. Other institutions now fear that they may, unwittingly and unexpectedly, find themselves the subject of a similar investigation.
• Sussex made multiple changes to its trans and non-binary equality and policy statement during the course of the investigation, yet the OfS has still not confirmed whether the final version of the statement is acceptable. Protecting freedom of expression in universities is a complex and evolving issue, particularly in light of successive governments changing positions on the implementation of the Higher Education (Freedom of Speech) Act 2023. Higher education institutions are calling for greater clarity from the OfS about what they need to do to comply with conditions E1 and E2. In the absence of satisfactory guidance, many are seeking legal advice on how to comply, which comes at a cost. 

The insolvency perspective

The OfS investigation took almost three and a half years, and little explanation has been provided as to why it took so long. The threat of long-winded investigations with potentially large penalties at the end creates huge uncertainty for institutions already struggling with declining liquidity. 

Whilst an institution may be in a comfortable financial position at the start of an investigation, this may no longer be the case by the end. The OfS has stated that it took Sussex's financial position into account when determining the level of the fine, but in circumstances where financial pressures are mounting and global events may swiftly undermine operating models, institutions cannot assume that a future fine will necessarily be manageable. 

This creates a particular problem from an insolvency perspective: when will an institution which is the subject of an OfS investigation be at risk of insolvency? Clearly, an investigation of this sort should trigger every institution to seek legal advice from an insolvency specialist, particularly where the fine would constitute a large contingent liability on a delicate balance sheet. 

This case also raises broader questions about government funding and oversight of higher education. As for most universities, the majority of Sussex's income comes (albeit indirectly) via government funds, through tuition fees and research grants. It is not clear what OfS will do with the fine paid by Sussex (if it is ultimately paid at the conclusion of judicial review and/or appeal). Will the government (via the regulator) essentially reclaim funds that it has already paid to the institution? This seems particularly circular given that the OfS is already worried about the solvency of a number of universities. Fines from regulating bodies should now form a factor when managing an institution's finances and solvency considerations.

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