Third-level institutions need to adopt a “more commercial approach” if they are to survive, according to a major review of the financial health of higher education.

The study by consultants Grant Thornton argues for the outsourcing of "non-core" campus functions and a more aggressive policy of seeking donations from alumni to help balance the books.

But it says revenue also needs to be boosted from international students, which it calls “an untapped opportunity”, with less than 1 per cent of total income raised from this source in the Institutes of Technology (IoT) sector in 2011.

“Irish institutions will need to perform better in international league tables and internationalise curricula if they are to win in the competitive market to attract students from overseas,” it adds.

The findings are being presented to heads of universities and Institutes of Technology this week.

Tuition fees
Billed as "the first independent review of the financial health of third-level institutions", the report shows colleges are increasingly reliant on private tuition fees rather than Government support, and it anticipates that this will increase in the future.

Analysing 21 higher education institutions – the seven universities and 14 Institutes of Technology – the report found tuition fees accounted for 31 per cent of income across the sector in 2011, overtaking State grants (at 28 per cent) as the main source of income in that year.

It also found that between 2007 and 2011 the financial surplus of institutions fell by 58 per cent (from €100 million to €41.9 million).

“This means universities and IoTs have an increasingly limited financial cushion for strategic development and to withstand potential future funding shocks.”