UK universities face chill winds of change

United Kingdom universities are vast organisations. Many are the biggest employers in their areas and a small number have incomes that surpass £1 billion (US$1.3 billion) a year.

If they are able to, they will grow much bigger still. Demographic trends are about to deliver a big increase in the number of school leavers. Only around half of all younger people currently go to university, but a staggering 97% of mothers of young children want their offspring to get there.

Meanwhile, politicians of all parties say they want more spending on research and development as a way of delivering future economic growth. And, as a higher proportion of research spending goes to universities in the UK than in most other countries, this would directly boost the higher education sector and universities’ bottom lines.

Given this positive story, why has the credit rating agency Moody’s just downgraded its perceptions of some UK universities, including Oxbridge, Leeds, Keele and De Montfort?

Economic and political upheaval

The answer is that universities are not unconnected islands; they are rooted in wider society. When there is economic or political upheaval, they are often among the first to feel the chill winds.

The downgrading by Moody’s reflects the tougher environment in which UK universities are now operating and all the signs suggest things could get worse before they get better. The challenges are international, national and regional.

Internationally, there is huge competition. Only this week, Clarivate Analytics showed China has snatched the UK’s number two spot behind the United States for the concentration of highly cited researchers.

China’s rise is not just in research; it is in teaching too. In the West, we regard China as a source of international students for our universities. We typically forget that 1,000 Chinese universities are now attracting hundreds of thousands of international students of their own.

General election

At a national level, the current UK general election campaign is adding extra uncertainty. Resolving the UK’s future relationship with the European Union could be helpful, but a bad Brexit would mean less research funding and less staff and student mobility.

The election manifestos are now confirming that more than one party wants to end England’s high tuition fees, which would mean less money for teaching as well as likely new restrictions on student places. Meanwhile, the culture wars that have unsettled universities in various countries, including the US and Hungary, are getting closer to British shores.

At a regional level, higher education is perhaps even more out of favour. Take the potential Oxford-Cambridge arc, which the property company Savills has just declared to be “one of the greatest opportunities for economic growth in Europe”. Instead of celebrating this as a fantastic prospect, the election candidates of the main political parties on the route are falling over themselves trying to outdo one another in their opposition.

So higher education institutions are aware they are living in more febrile, more competitive and more challenging times. University staff feel under such enormous pressure that many are on the cusp of industrial action.

Their managers meanwhile argue, with hard evidence and some force, that keeping the UK university sector’s world-class position means not only surviving but having the resources to deliver more teaching, undertake better research and build improved campuses. When other countries are developing their higher education systems so fast, to stand still means to go backwards relative to your competitors.

International fees

It is often forgotten that, of all the things universities do, only one makes a financial surplus. The income from home and EU students roughly cover the costs of teaching them, while research projects are generally severely underfunded. So there is a shortfall that has to be made up in the UK (as in competitor nations, like Australia) from international student fees.

That is another reminder that higher education is at its best when it is at its most connected. Universities were originally made up of travelling bands of scholars with little respect for boundaries. Later on, the great cities of the world founded universities with a greater sense of place, but they sucked in people from around the world.

That history should remind us that, in our own century too, the most successful academic endeavours will be those that are both globally interconnected and have the support of their local communities.

All UK universities have bold strategic plans to stay at the top of their game as well as globally competitive. The downgrading by Moody’s won’t send them into an immediate panic, but it will still concern governing bodies. It could, in time, affect their capacity to borrow to invest and to work with partners at home and abroad. Most importantly, it could be seen as a warning sign of worse to come.

Nick Hillman is director of the Oxford-based Higher Education Policy Institute, an independent think tank.