Why a decline in the UK's university sector is a threat to GDP

Mounting challenges successful nan UK assemblage body are threatening nan nation's economy. 

In 2024, these institutions supported 1.2 cardinal jobs, and universities besides provided £80 cardinal (€92.41bn) of gross worth added (GVA) to nan nationalist output.

Universities successful London and nan South East recorded nan highest absolute contributions, amounting to much than £25bn of GVA.

Meanwhile, regions for illustration nan North East and Wales are much reliant connected university-related economical activities, though nan assemblage successful these areas contributes little to nan nationalist output.

There is an expanding consequence that universities can't support propping up location economies arsenic they look terrible financial pressure, leaving low-productivity regions vulnerable.

In their report, Oxford Economics quantified nan existent economical effect of 166 universities successful nan country.

“Although London and nan South East bask nan largest absolute benefits, their diversified and high-income economies mean that they are little straight reliant connected nan assemblage body for economical output,” economist David Schmutz said. 

“By contrast, nan North East and Wales are overmuch much dependent, pinch nan economical footprint of universities accounting for 6.0% and 4.9% of full GVA, respectively, compared to 3.5% for nan UK arsenic a whole,” he added.

Universities successful nan UK person a backing problem

Financial unit successful nan assemblage chiefly stems from a frost successful tuition fees for home students since 2012, resulting successful a important alteration successful real-terms revenue.

Due to nan mounting restrictions connected student visas, universities are besides having much problem attracting world students, who salary a overmuch higher fee. Domestic students salary a maximum of £9,535 per twelvemonth for undergraduate degrees (€11,021), while fees are uncapped for overseas students and tin scope astir £38,000 (€43,900).

This nonaccomplishment of gross is coupled pinch a superior investigation backing deficit. According to Oxford Economics, nan spread betwixt nan costs of doing investigation and nan magnitude of backing universities get to do it amounts to £5.3bn (€6.12bn). 

Schmutz besides highlighted nan vulnerable business of universities founded post-1992, which are peculiarly limited connected world students and thin to beryllium much reliant connected tuition interest income compared to older institutions. The long-established universities thin to person much investigation backing and tin use from larger financial endowments to unafraid their equilibrium sheets.

The deficiency of wide backing results successful accrued title among nan UK universities to pull much home students.

This is important for regions for illustration nan North East and Wales that trust much heavy connected nan comparatively high-wage, high-productivity assemblage jobs and their economical multiplier effects. That includes world students' spending, arsenic good arsenic spending by assemblage and proviso concatenation employees. 

A diminution successful nan assemblage body could severely impact employment and section services successful these regions, and summation location inequality successful nan country, warned nan report. 

“In a university-reliant section authority economy, a assemblage going bankrupt would person a important antagonistic effect that would resound done nan full area. It is truthful difficult to overstate nan worth of universities to nan UK's economical model, some astatine nan nationalist and nan section levels.”

Preparing for nan early needs of nan labour market

The study suggests that a adjacent collaboration betwixt universities and different participants of nan economy, mostly businesses, could amended nan early prospects of nan sector. 

If these institutions are moving manus successful manus pinch section governments and businesses, arsenic good arsenic focusing connected their maturation plans, they could amended align their courses pinch section skills gaps and investigation needs. 

“Our forecasts show that nan top request of nan UK labour marketplace successful nan adjacent 10 years will beryllium successful nan quality wellness and societal attraction sector, arsenic good arsenic nan highly skilled professional, technological and services sector,” said Oxford Economics. 

The analysts besides propose improving nan proviso of apprenticeships, “which are lacking successful nan UK compared to successful different economies”.