Universities add £100bn to UK economy. Who benefits?
(Last updated: 4 March 2020)
Last week, Universities UK published an analysis of the impact of universities in the UK. Their report includes the eye-catching figure that universities make a gross contribution of £95 billion to the UK economy annually, along with a few other surprisingly large numbers!
What do the figures mean?
Put simply, that £95 billion figure emphasises the immense value of the university sector to the UK economy. It covers a variety of means by which universities make money, including not only student tuition fees but also their contributions to profitable research projects that aid our economy, and the number of people they employ. The university sector employs 940,000 people, which accounts for about 3% of the UK's entire workforce!
There are other noticeable aspects to the analysis, including the fact that international students alone make a gross contribution in excess of £25 billion to the economy through the money they and their students spend on- and off-campus. What’s more, 250,000 of the jobs maintained by the UK sector are attributable directly to the international student market.
One slight cautionary note, though: Times Higher Education reports that the £95 billion figure takes into account the "knock-on effect" of universities' expenditure. This is a methodologically difficult concept to quantify exactly but includes funds generated by collaborations with local businesses, and the expenditure generated by universities in their local areas by activities such as staff and student spending. What is beyond dispute, however, is the £21.5 billion that universities contribute directly to the economy through their own activities before any knock-on effects are calculated. This is a figure that the THE reports dwarfs the contributions of the entire accountancy sector and accounts for an impressive 1.2% of GDP.
What are the implications?
In the most widely-quoted soundbite related to the analysis, Universities UK's president Janet Beer described it as a "timely reminder to policymakers of the increasing economic, social and cultural impact of universities on their local communities." But the significance of this impact feeds back into the ongoing debates about the sharp rise in tuition fees in recent years and the spiralling student debt crisis.
Another significant finding of the report is that universities now draw just 31% of their income from public sources, a figure that represents a sharp downward trend. This is shockingly low for a sector whose members remain notionally public bodies, even if they increasingly act and are required to act as private entities.
On one level, this could be seen as a robust success story. As universities reduce their reliance on the state for funding, they become more profitable and their contributions to GDP. Viewed in this light, the Universities UK report could easily be spun as unambiguously good news for the sector, reflecting the desirability of financial autonomy and self-sufficiency, and or private funding models over public ones.
However, this interpretation becomes less sustainable in light of the fact that these high levels of economic contribution come alongside tuition fees that have risen sharply in recent years. Universities’ turnover is now increasingly financed directly from the pockets of their students via fees. This is a notionally “private” source of funding and is in turn financed by student loans of increasing size. These student loans are then underwritten using public money, with most experts agreeing that many students will never pay back more than a fraction of the money they owe. This is simply a deferred form of public subsidy, and a precarious one at that, given that the exact extent of the shortfall won’t be known for many years. It’s no wonder that the current system of loans and fees has been described as a “Ponzi scheme”.
Janet Beer is quite right to suggest that the report demonstrates the value of universities and to their communities in general. But the news that universities are increasingly profitable to the public should further ongoing calls for them to be treated as a public asset. What’s more, they should be given the funding such assets deserve – within a sustainable model rather than one built in an unsustainable spiral of debt.