Universities can’t solve every problem with the economy

Centre for Cities has a new report out and the premise is as follows. Universities are good for the economy, reducing their income will reduce the good things they do in the economy, and this will have negative impacts for places and people’s lives. It’s slightly more complicated than that but not by much. The fascinating bits are the considerations on the different kinds of economic roles universities play.

There are economic stories we are familiar with. Universities employ people who spend their cash in the economy, they recruit students to a place and increase the viability of businesses, and they do research that through a variety of means makes its way into businesses and the public sector.

The problem with these stories is that they are a bit two-dimensional. Taking aside some of the challenges in understanding where students really live, the economic contribution of universities looks decidedly mixed. In overall terms five of the UK’s top ten most productive cities do not have a university (this is different from not having any HE provision) while four of the least productive do have a university.

Of course it could be the case that some places would be even more productive with a university and some would be even less so without one. As the report points out, universities are responsible for a large number of knowledge sector jobs even where the size of the knowledge economy is relatively small. In fact, in places with relatively small numbers of knowledge intensive firms universities are particularly important as the ballast that secures the wider knowledge economy.

One of the fundamental problems is that the UK’s economy just isn’t growing very quickly. Universities work is shaped, skewed, and stifled by the overall economic malaise the country is enduring. This means it is inevitable that skills will go underutilised, places will not make the most of education assets, and universities will play an outsized role in exports.

This is not to say universities are passive actors in the UK’s decline. City centres benefit from students who spend their money, universities create demand for student specific services like housing, and student recruitment makes populations bigger and thereby increase markets for goods and services. The obvious rejoinder to this is every pound spent in one place is a pound not spent elsewhere so the aggregate impact can be overstated. And whether having ever more student accommodation in cities is a good thing or not is highly debatable.

Perhaps the most surprising element of the report is that while universities help foster innovation in direct proximity to them, their overall impact on creating new firms is limited. Almost half of urban spin-outs also move locations, particularly to London. Effectively, creating a spin-out in a place is far from a guarantee it will stay there and therefore it does not follow that creating spin-outs will always improve economic performance of a given location.

The recommendations are relatively short for an analysis that raises such significant challenges within the university ecosystem. The central premise is that universities are constrained by the economic forces that hold back the entire country. Poor infrastructure, regional inequalities, and lack of capacity for places to make full use of its knowledge assets. Tinkering with the allocation of the hypothetical international students’ levy to meet local skills needs and considering university policy through a place-based lens will help align the fortunes of universities and their places.

However, underpinning all of this is an inescapable truth. Government policy, particularly on international students, risks destroying economic activity in the places that desperately benefit from university. At the same time, the lack of nuance on which levers to pull in which places to improve the economic impact of universities also holds back the places where universities seem to be less in financial distress.

It is not so much a worse of all world’s scenario, more a recognition that university reform cannot be separated from places – and if places cannot be separated from the country at large, then reconfiguring the sector is not so much a project about institutional finance but one of reshaping the country.