The UK Treasury is pushing back against calls from the country’s universities for a £2 billion bailout, according to the Financial Times, stoking fears of bankruptcies in a sector that has been hammered by Covid-19.

The Treasury’s opposition to a sector-specific bailout package, which according to the FT has been confirmed by “officials from three Whitehall departments”, comes as universities continue to warn of potentially irreparable holes in their balance sheets come September, should international student enrolments take a substantial hit. Revenue from international students contribute nearly £7 billion a year to the UK higher education sector.

Whitehall is reportedly divided over how to approach a stimulus package, which universities argue is essential to protect research departments that will play an integral role in solving problems linked to the Covid-19 pandemic.

Universities UK (UUK), the higher education sector’s lobby group, has tabled a proposal in which it promises to cut costs, accept restructuring and curb predatory admissions policies that risk leaving less prestigious institutions worse off financially. Rishi Sunak, the UK chancellor, is expected to review UUK’s proposal in the coming days, according to the FT. But the newspaper’s Whitehall sources – who have stressed that no final decision has been made – have said that the early signs suggest the Treasury is not receptive to what is considered “special pleading” from universities.

The Treasury believes that institutions should instead take advantage of furlough schemes and crisis loans before seeking any further bailout, according to the FT, which reported that the departments of education, health, and work and pensions signalled support for a bailout last week during a cross-departmental meeting.

Alistair Jarvis, chief executive of UUK, said there was “urgent need” for clarity on financial support. He warned of significant cost-cutting in the sector if the government does not intervene in the coming weeks.

“Without government intervention there is a real risk that some universities will go bankrupt, which will have significant adverse impact on those local communities which can least afford it,” he said.

Earlier this month, the government announced that it would place caps on the number of domestic and European undergraduate students that universities can admit in the next academic year, in a bid to prevent certain institutions scooping up students and leaving others with empty courses.