As the coronavirus pandemic bites, Michael Alexander examines the economic impact of the university sector and its roll in driving the future economy.
They are the educational, economic and social power houses that generate billions of pounds for the British economy each year and support thousands of jobs in their respective communities over and above their own staff.
But like all aspects of economy and society worldwide, universities are being hit hard by the coronavirus outbreak and unprecedented uncertainties about the future.
On Thursday, a hard-hitting report from the University and College Union warned that universities could face a £2.5 billion funding “black hole” amid predictions that the pandemic and ensuing recession will result in 111,000 fewer home students, and 121,000 fewer international first-year students, attending UK universities from the autumn.
The report also warned that an estimated 30,000 university jobs are at risk, and a further 32,000 jobs are under threat throughout the wider economy, without government intervention.
The total economic cost to the country from the reduced economic activity generated by universities amid a loss in income is estimated at more than £6 billion.
In Courier Country, the economic importance played by universities in helping to drive the economy of east and central Scotland is evident.
According to a recent economic and social impact study by the Fraser of Allander Institute, Dundee University contributes over £740 million to the Scottish economy annually and supports over 8000 jobs in Scotland.
For every £1 of Scottish Government funding, the university generates over £7 for the Scottish economy, with one in every 12 jobs in Dundee City supported by the university’s activities.
Spending by Dundee University students is estimated to support 1,587 jobs in Scotland, including 800 in Dundee City and the wider local area.
Research at the university also plays a key role in attracting companies into the region with spin-offs and start-ups from Dundee University contributing a further 1160 jobs and over £230m to the Scottish economy.
Abertay University, while smaller, is also an important contributor to the Dundee and wider economy with its world renowned reputation and research.
Meanwhile, St Andrews University contributes over £473 million per year to the Scottish economy and supports 6990 jobs, according to the most recent economic impact report by Midlothian-based Biggar Economics.
With 2690 staff in 2016/17 and around 8940 full-time students, the Economic Impact of the University of St Andrews, 2016/17 report found that overall the university generated £268.6 million for the local St Andrews economy supporting 4260 jobs and £298.3 million throughout the Fife economy supporting 4830 jobs.
For every £1 of public money invested in the university through teaching and research grants, the university returned £11.80 to the Scottish economy.
Scotland’s colleges – which include Dundee & Angus, Fife and Perth – are also a huge asset worth an estimated £350 billion annually to the economy, a recent report said.
Ongoing uncertainties over coronavirus meant that none of the universities would speak directly about the financial challenges they face when contacted by The Courier this week. A fortnight ago, St Andrews University principal Professor Sally Mapstone warned staff and students that the university faced a £25 million black hole in its finances. We told how on Wednesday, the principal wrote to staff and students again to update them on a “range of efficiencies” being pursued. These included the furloughing of up to 500 university staff, the cancelling of 2020 academic promotions – and a commitment that the university was not seeking compulsory redundancies from staff and would not be asking staff to take salary cuts.
Graeme Blackett, the Midlothian-based director of Biggar Economics and author of the recent St Andrews economic impact report, told The Courier that with “about a quarter” of St Andrews University income dependent on overseas students, a decline in numbers would leave “quite a big hole” as “costs won’t go down 25% if their income goes down 25%”.
A St Andrews University graduate and UK university lecturer, who asked not to be named, told The Courier one of the biggest concerns across UK universities right now was the “very likely absence of foreign (read Chinese) students next year which will have a huge impact on all universities”. Nearly 120,000 students from China have been studying at British universities with their tuition fees a key source of income.
However, with approximately one third of St Andrews University students coming from overseas (not UK or EU), Mr Blackett said that the St Andrews institution could not be accused of being “irresponsible and taking risks” by historically targeting their international student markets because “they’ve done something based on the quality of what they can offer”.
Mr Blackett, an economist who has 30 years’ experience advising universities and governments across Europe, said that compared to others, St Andrews University has a lot of assets and is one of the Scottish universities that is least reliant on income from the Scottish Funding Council.
In 2016/17, St Andrews received £40.1 million from the SFC in grants. This was equivalent to 17% of the university’s income in this year. To put this in context, the SFC accounted for approximately 32% of income for all Scottish universities in the same year.
However, every university has a slightly different role. They would also all likely need some kind of support, he said, although this could vary between institutions.
Mr Blackett said one area that’s often overlooked is how important research is for the Scottish economy.
The economic importance of universities was recognised before the coronavirus crisis with City Deals recognising the importance of universities as innovators crucial to driving the future economy.
He hopes, if anything, the current crisis illustrates that they are even more important. He cited St Andrews University’s Eden campus as an example of world-leading innovative ambition in the energy sector.
“How this pans out for all universities actually depends on what the government does because the issue is too big for universities alone,” he said, adding that there was a need for “some sort of intervention”
“Education and research and development is not really a profit making business, but there’s a social investment. The countries that invest more in that are the countries that are most successful economically and socially. It’s very clear. It’s also very clear that if universities were to decline then so would a huge section of the economy with all the socio-economic problems that would come from that.”
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