HEconomics: is the glass half full?

A lens is being focused on the economics of higher education. The value of higher education institutions (HEIs) for students and the local economies and communities in which they are based is under scrutiny.

The following is adapted from a speech we gave at Wonkfest

Universities and places: why does it matter?

The UK’s poor productivity performance is well documented. There is also a real issue with regional economic inequality, and the disparities are widening. There are plenty of statistics to choose from:

• A 64% productivity gap per hour worked between the most and least productive local enterprise partnership (LEP) areas. Or if you want to be more depressed, this rises to 71% when measured per job.
• Following the financial crisis, GDP per head in South Yorkshire fell by almost as much as Greece’s did, relative to the EU average.

For those of us who have worked in economic development for some time, these observations are nothing new. But they are receiving a lot of attention in government now. Indeed the 2017 Tory Party manifesto notes that:

“We see the opportunity to close this [inter-regional] gap as the biggest prize in Britain today. It will be a great endeavour by government, business and civic society over many years.”

(our emphasis)

 They add:

“we want to see universities make their full contribution to their local community and economy.”

Universities have big footprints

Where do universities fit in to all of this? They are significant economic drivers, but have not always been fully recognised as such. We think the tide is turning.

HEIs are spread across the country, often employ thousands of people, generate large amounts of income and have big balance sheets. The three universities in Manchester (and Salford) generate over 50% more income than Manchester Utd and Manchester City combined! One institution we are working for owns one-third of the real estate in its city. Indeed, in some locations the university is one of the only successful businesses.

Universities also generate very significant multiplier effects both through their own spending and by attracting thousands of students and visitors to the area. At one university, more than 1 in 6 local residents of working age either studies there, or has a job linked to the institution.  And, in another, around 6% of all jobs in the city are linked to a single university. That is before we even try to capture their reputational role in and other drivers of economic growth.

A move towards greater local engagement?

But, what can HEIs do to maximise their local contribution? Third stream activity is not new. As HEFCE recently noted, and our collaborator David Marlow also says in his guest blog, the idea of universities as anchor institutions is now firmly established.

What we have observed over the past few years is a cocktail of factors converging to drive a more local focus:

• LEPs have become better established, overseeing increasing amounts of economic development funding, with universities explicitly in their strategic sights. Some universities were founding partners of LEPs and now have their own sub-groups with staff seconded in to help develop policy.
• Local authorities and partners have experienced very significant cuts which have reduced their funding for public services. Rightly or wrongly, HEIs are seen as having capacity and have been turned to for help.
• Devolution and the decentralisation of local government finance are creating a much sharper focus on local areas with opportunities for universities to influence these agendas and drive local growth.
• The advent of degree apprenticeships provides yet another emerging opportunity for HEIs to develop stronger linkages to local employers.

And now we have an industrial strategy with a big focus on place.

Universities as economic and social anchors

Many HEIs that Regeneris has worked with have been stepping up their economic and social development activities. Here is a selection of examples that have struck us from our recent work:

1. Leading major partnership-driven regeneration projects. Several HEIs have been working with other anchor institutions and businesses to develop schemes with significant wider regeneration benefits:

• The Institute of Cancer Research has been driving the London Cancer Hub project in partnership with Sutton Council and with the local NHS trust.  This is a £1 billion, 25 year project, expected to generate 13,000 jobs and £5m in annual business rates. It was recently awarded RPIF funding, partly due to its local economic impact.
• The £350m Newcastle Science Central regeneration project has been delivered in partnership between Newcastle university, the City Council and leading companies, and is expected to create 4,000 jobs.

2. Linking research and innovation to local economic and sectoral priorities. Keele University recognised that by opening up its planned smart energy network on campus as a demonstrator facility, it would be able to access further funding, enhance the research outputs of the university and at the same time make a key contribution to a LEP priority sector: a triple win. The project forms part of a package called the Keele Deal, for which Regeneris has helped to develop the business case. Similarly, UCLan has levered in over £20m from the Lancashire LEP, ERDF and HEFCE to develop its Engineering Innovation Centre.

Universities that spot and exploit these kinds of opportunity will make a strong contribution to the government’s industrial strategy.

3. Enhanced collaboration. HEIs in some locations recognise that there are benefits to be had from collaborating and pooling strengths. Coventry and Warwick, Keele and Staffordshire, and Liverpool and Liverpool John Moores have all come together recently. They are growing their cities by co-ordinating activities, sharing expertise, eliminating duplication and achieving greater scale. Midlands Innovation has brought together nine regional institutions, to develop collaborative research projects which build on each of their key research strengths and collectively aim to generate synergies.

4. Driving local skills development and widening participation. Some universities we have been working with are stepping up to enhance skills delivery for local employers, address graduate retention and social mobility issues in their areas. A great example is the University of Lincoln’s partnership with Siemens set up in response to concerns around local skills shortages. Today, Siemens’ biggest UK plant is located in Greater Lincolnshire and Lincoln’s graduates complete Siemens’ graduate scheme four times faster than other graduates. Or take NMiTE, a new entrant taking innovative approaches to training the next generation of engineers for the local and regional workforce. Several HEIs have also set up new campuses in HE cold spots.

5. Boosting culture and local visitor economies. Universities are developing and running cultural facilities, which generate additional economic and social benefits for their cities. Bangor University recently developed the Pontio Arts and Innovation Centre, which includes a new cultural space for the community and brings visitors to the city. Similarly, the University of Lincoln runs the Engine Shed, a premier live venue in the city. Universities around the country have also been playing important roles in developing City of Culture bids such as in Stoke where Staffordshire University put staff into the bid development team. Even where these have not succeeded, valuable partnerships have been put in place that will help future strategic project development.

6. Providing intelligence to policymakers. HEIs represent one of the most important concentrations of knowledge and expertise in many locations. Several HEIs have even been setting up economic and civic think tanks: e.g. City REDI in Birmingham, Metropolis at Manchester Met or Nottingham Civic Exchange at NTU

A look to the future

Alongside the industrial strategy and devolution agenda, the Knowledge Exchange Framework, Shared Prosperity Fund to replace EU funds on Brexit, and an enhanced impact weighting in the REF will all give added scope for more local focus to HEIs. The returns to local engagement are likely to increase, as will the opportunity costs of not doing so.

Some universities have been anchoring major parts of their strategy to the development of place, and are already well placed to respond to the challenge. Others may be at a much earlier stage in their thinking on this. Over 140 institutions signed up to HEFCE’s Local Growth Academy, suggesting that the sector as a whole is starting to take this agenda seriously.

At a time when the reputation of the sector has taken a hammering, universities need to better assert economic and social contribution. How they best do this will depend on their size, specialisms and local context. There is a big opportunity to help seize that “biggest prize in Britain today.” The glass is indeed half full.

For more information on how we can help you measure your local socio-economic contribution, think through the implications of the industrial strategy, develop business cases for funding, or plan for evaluation, contact Tim Fanning.

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