Finding new sources of income

Higher education is facing a sea of uncertainty regarding how it may operate in the future. With the impact of Brexit and its associated effects on demand from foreign applicants, the results of the government’s post-18 review, and what the spending review has in store, the HE community, along with its FE counterparts, faces many unknowns.

In a sector that often takes the long view in planning, it has been a challenge to foresee the outline of the details. Many HE institutions, regardless of size, have begun to broaden their view of where the sources of future revenue might come from.

Given the pace of technological change, we have all become lifelong learners. Many of us will continue to learn new skills and adapt to new technologies as we work through our careers. This means that institutions must be ready to support older transitional students as well as offer training that mirrors the advances made in technology that will ultimately impact many higher-level learners. This postgraduate area may become a growth area for some universities that will have the flexibility and expertise to offer high-end technology-based courses to older students.

A partnership approach

Partnering with the private sector can be a fruitful way of finding additional funding. In its most traditional form, businesses can look to universities to train or retrain workers to meet the employment demands of technology-driven enterprises. Working with corporate sponsors to develop specialised curriculums to be delivered either on campus or at the workplace provides the benefit of meeting industry’s needs while providing the additional benefit of funding institutions to adapt curriculum to better meet the needs of the increasingly high-end technologies.

University students will also benefit by having them better prepared to enter the workforce. From the university’s perspective, it can reach beyond the traditional pool of the 18-21 year old cohort to older highly experienced workers expanding the size of the potential population that can be served. Universities have also looked at this training function as a way to further leverage facilities that may be under-utilised during off-peak times of the student year. Using existing or even constructing dedicated conference venues can generate additional revenues to support the academic programme.

Some institutions are generating revenue by providing consultancy services to private businesses, using faculty and graduate researchers to provide expertise. These institutions are leveraging their physical facilities by offering combined laboratory and office space to create collaboration where business and university research teams can partner together to incubate new technologies.

This provides stable revenue for institutions and smoothes some of the variability that can be caused by grant funding of research. Collaboration can also help to shorten the amount time needed to get new patents and technologies to market which can drive revenues for both parties. There is also the ability to securitise royalties for those institutions that wish to accelerate the benefits of commercial discoveries to benefit the broader aims of their university.

There have been a few examples of UK universities exploiting another facet of commercialisation. One institution, which has created incubator companies with the purpose of rolling them out, also solicits direct investment in the spin-outs to create additional funding opportunities. Investors need not be related industries or technologies but rather investors looking to get in on the ground floor of the next new discovery.

Philanthropy

Looking to the US, universities have developed sophisticated philanthropy programmes to build long-term endowments. Drawing investment earnings from their significant endowments has created funding opportunities for both academics and research. Appealing to alumni and other benefactors to invest in their alma mater has become a very important source of operating and capital revenue. While there is not such a broad history of this type of philanthropy in the UK, with the growth of alumni, this may provide a future source of revenue.

University sector revenues have been under pressure for some time in the US, which has resulted in more creative means to raise revenues. Asset monetisation has become a recent trend where institutions survey their portfolio of facilities and decide that the facility or function have more value in the hands of the private sector. A major public university solicited bids to sell the rights to the parking revenues on campus for 50 years and took the resulting upfront fees, in excess of $400 million (around £308 million) and placed them in their endowment to fund, in part, research at their medical school and medical centre.

Others have monetised student accommodations on campus by selling residences to private operators and developers who maintain them and run them more efficiently. This structure generates a revenue stream for the institution and removes the expense of having to maintain the facilities.

On many college campuses in the US, sports teams are a significant source of revenue although often some portion of these revenues are ring-fenced for the athletic departments. These revenues, which can be significant depending on the stature of the teams, can include television rights, team branding licensing and naming rights for stadiums and other sports venues.

While it is unlikely we will see some of these trends cross the Atlantic in the near future, it does point to the fact that if HE institutions are pressed to generate revenues to continue to deliver their core services, they will be need to be creative in seeking new avenues beyond student tuition and fees to fund themselves.

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