Business schools are feeling the Brexit heat

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What have business schools ever done for us? We may not have provided public order, irrigation, central heating and communal baths, as the Romans did.

Yet business schools are an essential economic asset for universities, businesses and society in Britain, and one that is at risk of being dangerously overlooked as we tumble towards a hard Brexit and ever-tighter immigration controls. On multiple fronts – immigration, economic growth, research, and regional development – fundamental damage to these vital institutions will have knock-on effects far beyond our doors.

Immigration limitations

Britain’s top business schools depend on their ability to recruit the best academics, the best PhD candidates, and the best MBA students from around the world to match our leading North American and European competitors. International postgraduate students are a particularly integral, normal part of our operations. Indeed, the business model of business schools (and dare one say it, of British universities) is entirely dependent on recruiting such students, alongside a predominantly domestic undergraduate student population.

Business and administrative studies is the most popular subject at UK universities, with over 325,000 students on a business programme in 2014-15. This is one-in-five of all UK university students. In 29% of universities the business school is the largest school.

To consider it another way, just ask any Finance Director how important the business school is to their university. According to HESA data and the Chartered Association of Business Schools, in 2014/15, the value of EU students to Britain’s business schools, and critically to the wider regional economies in which they are situated, was £0.8 billion.

Roughly 36,000 students from the EU study business and management in the UK – that’s 11% of the total. These students spend £792 million annually, including £384 million in fees. Beyond the EU, international students constitute 34% of all business and management students (both undergraduate and postgraduate). Reflecting this scale, the total annual value of business school students from outside the EU to our universities and the UK economy is £2.4 billion.

I hate to monetise what is essentially a much bigger, philosophical and human-orientated argument, but the financial impact of international students on both regional and UK economies cannot be underestimated.

Deterioration in the numbers of students recruited from abroad will mean cuts elsewhere in the university, often manifested as reductions in the workforce. Job losses in big regional employers such as universities could lead to regional downturns. More immediately, reductions in numbers of international students will hit the service sector in the increasing number of university dominated towns across the UK – just ask any taxi driver.

Growing, growing, gone

The value of business schools lies not just in their capability to generate surpluses for investment across the university, but also the contribution of their graduates and research to business practice and performance.

Business schools have the capability to produce the type and calibre of graduates required by an innovative knowledge-based economy, and provide the quality management development support necessary for British businesses to be competitive on the global stage. They also generate the research that underpins new business models and improves operational systems and processes.

Connecting these strands together, business schools play very significant roles as economic ‘anchor institutions’ in their regions. The Brexit risk is that the funding streams on which Britain’s business schools have relied may be compromised, and the ability to perform such economic support functions is at risk.

Return on investment

Between 2010 and 2014 research funding for business schools from all European sources increased by 166%. Funding from European government bodies increased by 22%, and is a growing and important source of research funding especially as funding from UK government sources fell by 36% over the same period.

A quarter of all research funding in British business schools is now from European sources. This research contributes not only to the standing and competitiveness of British business schools on the global stage – and hence ability to attract international students – but which also contributes to supporting British business performance.

If the potential loss of research funding would have an indirect impact on the contribution which business schools make to the economy, loss of access to EU growth and development funding would have a more direct impact on regional economies across the UK. Since 2008 ERDF funded development programmes delivered by business schools across the UK have led to increases in business income, profitability, productivity and created nearly 200,000 jobs.

Indeed, business schools working in collaboration with LEPs and other local partners are pivotal in the delivery of the training and R&D elements of these programmes. Lancaster University Management School’s ERDF projects, such as the LEAD programme which created over 10,000 jobs and boosted the regional economy by £15.80 for each pound received exemplify such contribution. Without such interventions there is the risk of a widening management skills deficit – and in turn innovation deficit – in the businesses and regions which we need to thrive if Britain is to succeed as a global trading nation post-Brexit.

Moving forward

Addressing the potential loss of development funding is more problematic unless the UK government is willing to commit to providing new funding streams into which business schools can tap. Business schools have been successful in securing funding to support SME development from the private sector, whether in the form of bank funding such as the Goldman Sachs 10000 small businesses programme, or in the form of BAE Systems support for innovation in their SME supply chain. However, such funding cannot support the wider range of business support activities which business schools are distinctively well placed to delivery.

Rather government support is needed to provide the range of interventions which business schools can provide to start-up and scale-up businesses together with improving productivity and export performance. Britain’s business schools already have taken steps to enhance the reach of their development support for SMEs through initiatives such as the Small Business Charter but ultimately it is a combination of public and private funding which is required if business schools are to deliver the support required for businesses to thrive in the post-Brexit world.

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