Higher education: Contribution to the economy and levelling up

The House of Lords is due to debate the following motion on 7 March 2024:

Lord Blunkett (Labour) to move that this House takes note of the contribution of higher education to national growth, productivity and levelling up.

Education legislation, in particular the Education Reform Act 1988 and the Higher Education and Research Act 2017, defines higher education (HE) courses as those above A-level either resulting in a qualification or taken in preparation for a higher professional exam.^[1] For example, HE courses include level 4 and 5 qualifications, such as higher national certificates (HNCs) and higher national diplomas (HNDs), degrees (including postgraduate studies) and other professional qualifications. HE courses can be provided by further education (FE) providers, such as colleges, as well as more traditional HE providers such as universities.

This briefing has been written with these definitions in mind. However, the material referred to may use narrower definitions of what it counts as HE courses and providers. For example, some of the material may focus more on the particular contribution of universities.

1. Headline figures and analysis

1.1 Economic impact of higher education institutions

In August 2023 the economics consultancy firm London Economics published analysis of the impact of the higher education sector on the UK economy.^[2] The analysis was commissioned by Universities UK (UUK), which represents 142 universities across the UK, and was based on the 2021/22 academic year.

Its analysis estimated that the ‘economic footprint’ of HE providers across the UK resulted in:^[3]

• 768,000 full-time jobs
• £71bn in terms of gross value added (GVA)
• £116bn in terms of general economic output

It explained that these figures were calculated on the basis of direct impacts from HE providers, for example capital and operational expenditure, but also their ‘indirect and induced’ impact, such as spending flowing from suppliers and employees of the industry.^[4] For example, the analysis broke the economic output down as £46bn of direct impact and £70bn of indirect and induced impact.

In addition, it explained that these figures did not account for estimates of spending by international students who started studies in 2021/22. With this included it estimated that the economic output of HE providers was approximately £130.5bn.^[5]

It also set out analysis of these impacts by nation/region and type of industry.^[6] For example, it found that each region of the UK benefited by more than £2bn in terms of economic output, with London and the South East benefitting the most and Northern Ireland and the North East benefitting the least. The different benefits experienced across the UK’s nations and regions is displayed by London Economics using the map below:

Figure 1. Impact of the higher education sector by UK nation/region

Moving to industry impacts, the analysis found large benefits for a number of sectors outside the HE sector itself, including real estate, services, transport and production:

In addition to the large impact within the government, health, and education sector itself (£52.8bn of economic output), the activities of UK HE providers are estimated to generate particularly large impacts within the distribution, transport, hotels, and restaurants sector (£15.4bn), the production sector (£12.6bn), the real estate sector (£9.7bn), and the professional and support activities sector (£9.2bn).^[7]

However, the report cautioned that as all these impacts were only estimated on the basis of the direct and indirect economic impact of the HE provider’s existence, it did not account for other wider impacts. For example, it noted arguments that HE providers also deliver other economic benefits through education outcomes and research and innovation:

The education and training that these institutions provide increases human capital and productivity across the UK (reflected in graduates’ earnings and employment outcomes), while the world-class research conducted by the sector contributes to innovation and long-term economic growth.

[…] the estimates presented here focus only on the economic impact associated with the ‘physical footprint’ of UK HE providers, but do not consider the significant additional economic contributions associated with their teaching and learning activities, their wide-ranging research, or their educational exports in the form of international students coming to study in the UK.^[8]

A previous London Economics report, commissioned by the Department for Education, did consider the impact of educational attainment on productivity.^[9] Overall, it stated that the evidence suggested there was a positive effect of skills on wages and labour productivity. However, it stressed the difficulty assessing this and recommended further work on the area.

In addition, UUK has highlighted other evidence of the HE sector’s impact on innovation and business, stating that in 2020/21:

• 4,528 new graduate start-ups were created
• 167 new university-owned or part-owned spin-off companies were created^[10]

1.2 Contribution of international students to the UK economy

A further study involving London Economics, published jointly by UUK, the Higher Education Policy Institute, and Kaplan International Pathways (an organisation focused on international students) in May 2023, sought to assess the specific benefits of international students to the UK economy.^[11] It considered aspects including tuition fees, living expenses and expenditure by students and family members, as well as the impact on public services. As with its above analysis, it calculated this both on a direct and indirect level. It also noted that the analysis did not take into account tax revenues from current or future employment, benefits to soft power and trade links, and possible societal or cultural benefits.

Summarising its findings, the report stated:

• The total net impact on the UK economy of the cohort of first-year international students enrolled at UK HE institutions in the 2021/22 academic year was estimated at £37.4bn across the duration of their studies. Approximately £3.9bn of this net impact was associated with EU domiciled students, while the remaining £33.5bn was generated by non-EU domiciled students in the cohort.
• The estimated total benefit to the UK economy from 2021/22 first-year international students over the duration of their studies was approximately £41.9bn, while the estimated total costs were £4.4bn. This implies a benefit-to-cost ratio of 9.4. The net economic impact per student was estimated to be £125,000 per EU domiciled student, and £96,000 per non-EU student. […]
• Reflecting the 40% increase in the number of international students between 2018/19 and 2021/22, the net economic impact has increased from £28.2bn for the 2018/19 cohort to £37.4bn for the 2021/22 cohort (a 33% increase in real terms). The impact has also increased by 58% in real terms since 2015/16 (from £23.6bn in 2015/16 to £37.4bn in 2021/22).^[12]

The report also estimated that, on average, international students in the 2021/22 cohort made a £58mn net economic contribution to the UK economy per parliamentary constituency, equivalent to about £560 per member of the resident population.^[13] However, although it stressed that these benefits were visible across all regions of the UK, it did report that they varied considerably. For example, it reported far higher economic benefits per resident in London compared to areas such as the North West and Wales:

The average impact was highest for parliamentary constituencies in London (with an average net impact of £131mn per constituency, equivalent to £1,040 per resident). The average impact per parliamentary constituency in the North East and Scotland was estimated at £640 and £750 respectively per member of the resident population; between £500 and £510 per member of the resident population in the East and West Midlands, Northern Ireland, and Yorkshire and the Humber; and between £360 and £390 in the North West, South East, South West, the East of England, and Wales.^[14]

1.3 Statistics on student enrolments and outcomes

The Higher Education Statistics Agency (HESA) publishes a range of statistics on higher education students, including numbers enrolling, course types taken, backgrounds and outcomes upon completion of studies. This section highlights selected statistics in the context of this briefing. Full statistics can be accessed at:

• Higher Education Statistics Agency, ‘Higher education student statistics: UK, 2021/22’, 19 January 2023
• Higher Education Statistics Agency, ‘Graduate outcomes 2020/21: Summary statistics—summary’, 31 May 2023

The following table shows student enrolments by course type (‘other undergraduate’ includes courses such as HNCs and HNDs) and by type of provider for the last five available academic years:

Table 1. Number of students enrolling on higher education courses, by type of course and institution: 2017/18–2021/22^[15]

The table below shows enrolments, in terms of numbers and proportions, by disability status and ethnicity in 2017/18 and 2021/22.

Table 2. Disability status and ethnicity of students enrolling (where recorded) in 2017/18 and 2021/22^[16]

The next table shows the background of students in terms of educational setting they came from, socio-economic status of parents, and whether they came from a ‘low participation’ neighbourhood (using the POLAR4 classifications of neighbourhoods). Again, this shows numbers and proportions for 2017/18 and 2021/22.

Table 3. Backgrounds of students enrolling in 2017/18 and 2021/22: Numbers and proportions (of those reported)^[17]

In addition, the statistics reported:

• In 2021/22, half of the students enrolled in first degree courses with known parental education had one or more parent(s) that attained a higher education qualification. This compared with 32% for those enrolled in other undergraduate courses.^[18]
• 24% of students enrolling in higher education institutions in 2021/22 were non-UK. This was made up of 120,140 EU students (a decrease of around 22,000 since 2017/18) and 559,825 non-EU students (an increase of roughly 233,000 since 2017/18).^[19]
• Business and management was the most popular subject among students, with 19% of all students enrolling in this subject.^[20]

Turning to graduate outcomes, HESA reported that for 2020/21 graduates:

• 82% of respondents were in employment or unpaid work approximately 15 months after the completion of their course.^[21] The majority of these graduates were engaged in full-time employment (61%), with 10% of graduates being engaged in part-time employment and employment and further study.^[22]
• At an overall level, the £24,000–£26,999 salary band contained the highest proportion of graduates in full-time paid UK employment at 21%, followed by the £27,000–£29,999 band with 14% of graduates.^[23]
• The proportion of females earning salaries of £29,999 or less tended to be higher than males, while the proportion of males earning salaries of £30,000 and above tended to be higher than females.^[24]
• A higher percentage of white graduates were earning salaries below £27,000 than graduates from ethnic minority backgrounds.^[25]
• A higher proportion of graduates with no known disability were earning salaries above £30,000 when compared with graduates with a known disability.^[26]
• Graduates who were in UK work at the time of the 2020/21 survey were most likely to be working in the same region from which they were domiciled. The East of England had the lowest percentage of graduates who worked in the same region as that which they were domiciled from, at 52% among 2020/21 graduates. Conversely, Scotland and Northern Ireland were the regions with the highest percentage of graduates working in the region where they were domiciled, at 87% and 82% respectively.^[27]

The outcome data above generally refers to graduates of any higher education course (with some exceptions).

1.4 Government figures on graduate employment numbers and salaries

Looking at the labour market as a whole (therefore not just 2020/21 graduates), the government has identified better employment outcomes for graduates than non-graduates:^[28]

• In 2022, the employment rate for working-age graduates (those aged 16–64) was 87.3%, an increase of 0.6 percentage points on 2021 (86.6%). For working-age postgraduates, the employment rate was 89.3%, an increase of 1.1 percentage points on 2021 (88.2%). For working-age non-graduates, the employment rate was 69.6%, a decrease of 0.2 percentage points from 2021 (69.8%).
• In 2022, 66.3% of working-age graduates were in high-skilled employment, compared to 78.3% of postgraduates and 23.6% of non-graduates.
• In 2022, the median nominal salary for working-age graduates was £38,500. This was £11,500 more than working-age non-graduates (£27,000), but £6,500 less than working-age postgraduates (£45,000).

However, this data only includes graduates of undergraduate degrees (including degree apprenticeships or graduate apprenticeships). It does not include level 4 or 5 qualifications, such as higher education certificates or diplomas.^[29]

2. Government policy

The following sections of the briefing outline recent government policy on higher education, and its role in the government’s levelling up strategy.

2.1 Levelling up strategy

The government’s levelling up strategy was published in 2022 and focused on addressing inequalities of opportunity across the UK and boosting the economy. Describing the intention of the strategy, the government stated:

This programme has to be broad, deep and long-term. It has to be rooted in evidence demonstrating that a mix of factors is needed to transform places and boost local growth: strong innovation and a climate conducive to private sector investment, better skills, improved transport systems, greater access to culture, stronger pride in place, deeper trust, greater safety and more resilient institutions.^[30]

Improving skills featured as one of the government’s 12 levelling up missions, namely that:

By 2030, the number of people successfully completing high-quality skills training will have significantly increased in every area of the UK. In England, this will lead to 200,000 more people successfully completing high-quality skills training annually, driven by 80,000 more people completing courses in the lowest skilled areas.^[31]

However, the government has explained that the baseline calculations for this measure do not currently account for higher education, but that this will hopefully be worked into the calculations in the future.^[32] Instead, it counts “qualification-focused 19+ further education and skills training achievement (including apprenticeships)”.

Explaining the purpose of this stated mission, the government said it would support its goal of achieving a “high-wage, high-skill economy”. It stressed the importance of people in all areas having equal opportunities to gain skills and qualifications, stating that this would benefit individuals and local businesses. It then set out policies and proposals focused on:^[33]

• lifelong learning opportunities, such as the provision from 2025 of a lifelong loan entitlement (LLE)
• putting local employers “at the heart” of skills provision, including more focus on outcomes in local FE funding
• improving work opportunities and support for those with disabilities
• strengthening education institutions, including local FE institutions and institutes of technology

The government also highlighted the importance of HE institutions. For example, it stressed the role of HE institutions in local economies, noting some examples:

HE institutions have a vital part to play in supporting regional economies, as significant local employers and through their role as anchor institutions supporting regional collaboration. Examples include Sheffield University and Sheffield Hallam University, working in partnership with Sheffield City Council, on the future design of the city centre around their campuses; or the University of Lincoln’s Institute of Agri-Food Technology which collaborates with the agriculture sector to develop technology which can solve challenges across the food chain in Lincolnshire. […]

Innovative new models of skills-based HE also have an important role to play in levelling up places. For example, the New Model Institute for Technology and Engineering, opened last September in Hereford, offers a model of skills-based learning drawing from global best practice that emphasises work readiness, as well as self-reliance, community spirit and volunteering.^[34]

The strategy also set out government ambitions to improve access to HE courses, including for pupils from disadvantaged backgrounds. For example, it said the government was making changes to improve universities’ work on supporting disadvantaged pupils in education and in their communities.

2.2 Higher education policy statement: Response to Augur review

In July 2023 the government published its ‘Higher education policy statement and reform’ consultation response. This set out the government’s plans and its general vision for the higher education sector. The government’s consultation followed an independent review of post-18 education and funding, referred to as the ‘Augur review’, which was published in May 2019.^[35]

Introducing the paper, the government set out its aim for higher education:

The government believes that all students should expect their higher education studies to advance them on the ladder of opportunity and lead them into gainful employment. Higher education qualifications should be of a high quality, give students the skills they need to improve their outcomes in life, and support the growth of our economy by embedding careers-based learning throughout the course of their studies.^[36]

It also said that higher education should represent “value for money for the taxpayer”.^[37]

As part of these aims, the government stressed the importance of “high-quality outcomes” for HE courses. It said there was evidence that a wide range of subjects played a vital role supporting the economy and different industries, and that these could provide rewarding outcomes for individuals. However, it cautioned that even subjects that were considered in high demand for the economy, such as computer science or health and social care courses, could feature courses that did not meet expectations. To this end, it highlighted ongoing work, including by the independent regulator the Office for Students (OfS), to improve the oversight and regulation of the sector. For example, this included the development of more stringent measures of student outcomes.^[38]

The paper then set out proposed reforms across the following areas:

• Promoting and improving access to level 4 and 5 courses.^[39] The government said that level 4 and 5 courses (such as HNCs and HNDs) were vital to meeting the needs of the economy and were often a positive option for people from disadvantaged backgrounds. However, it noted that take-up of these courses was relatively low. It reiterated measures in the levelling up white paper to continue rolling out and improving support for higher technical qualifications (which were introduced in September 2022), enhancing collaboration between FE providers and employers, and adding to the financial support available via the introduction of the LLE. The government also said it would continue to monitor whether the maximum fee limits for level 4 and 5 courses, which are currently set at the same level as for undergraduate degree courses, should be lowered.
• Preventing the growth of provision with poor outcomes (‘student number controls’).^[40] Referring back to the Augur review’s findings, the government stated that too many students were recruited onto courses providing poor outcomes, including “poor retention, poor graduate employability, and poor long-term earnings potential”. It has identified ‘student number controls’, such as course recruitment limits, as a means to address this issue. The government said it would issue statutory guidance for the OfS, utilising existing powers, to impose recruitment limits where higher education provision does not deliver positive outcomes. However, it has decided against the introduction of minimum eligibility requirements for courses (for example, minimum GCSE or A-Level requirements) at this time.^[41] It said that such a measure would need to be introduced with caution to avoid unintended consequences, such as restricting routes of entry for disadvantaged students, and hoped that the other measures it was taking would avoid the necessity of this possible change.
• Fees and loan limits for foundation year courses.^[42] The government outlined concerns that low delivery costs were driving the “disproportionate growth” of foundation year courses, rather than student need or demand. It said that for classroom-based subjects, such as business and social sciences, it had found little evidence that they warranted the maximum fees and loan limits (£9,250) applicable to other subjects. Therefore, it aims to lower the maximum fee and loan limits for foundation year classroom-based courses to £5,760 for the 2025/26 academic year. The government hopes this change will remove any “purely financial” incentive for providers offering these courses and that this would then cause the growth in them to plateau, with courses only offered where they are genuinely required.

The government also said it would continue to explore the possibility of a national scholarship scheme (or something similar) targeted at high achieving disadvantaged students.^[43] In the meantime, it has highlighted other measures it has taken to improve higher education access for disadvantaged students, such as OfS requirements that higher education providers:

• move away from just getting disadvantaged students through the door, and instead tackle dropout rates and support students through university to graduation and into high skilled, high paid jobs
• offer more courses that are linked to skills and flexible learning such as degree apprenticeships, higher technical qualifications, and part-time courses^[44]

The government has published an impact assessment and equality analysis addressing many of these policies, including student number controls.^[45]

2.3 Developments connected to the admission of international students

Some have raised concerns about the number of international students, and their dependents, coming to the UK and the impact of this on immigration numbers. As a result, visa rules were changed on 1 January 2024 so that international students could no longer bring dependents to the UK unless they were studying a postgraduate research course or a course with a government-funded scholarship.^[46]

In addition, UUK has recently announced a review of admissions practices for international students following concerns that institutions were lowering admission standards to bolster recruitment and fees.^[47] This will include reviews of:

• foundation programmes for international and domestic students
• the agent quality framework, which provides tools and best practice guidance for when universities use agents to help recruit international students
• the admissions code of practice, which sets out expectations for university processes

Further information on international students, whose courses are not subject to the same caps on fees as domestic students, can be found in the House of Commons Library briefing ‘International students in UK higher education’ (20 November 2023).

3. Commentary

3.1 Reaction to higher education policy statement

Concerns have been raised about the government’s policy statement on higher education, particularly the student number control policy. For example, writing in an article for the website The Conversation, academics Matthew Aldrich and Helena Gillespie expressed concern that this policy could adversely affect students from disadvantaged economic backgrounds.^[48] It noted that these courses were often less selective and therefore more accessible to those students. It also said that these courses “played a significant role in driving social mobility and supporting the local economy”.

In addition, the authors stressed the important role of universities giving opportunities and experiences to people from a range of backgrounds:

Going to university can be transformative for young people. It provides a window of opportunity that leads to employment, earnings and life success. What’s more, students enter universities with very different backgrounds, prior experiences and academic interests. They graduate with their own notions of success and with different ambitions for their lives and careers.

Despite the fact that the highest earners subsidise those who do not fully repay their student loans, we end up with a workforce that is rich and varied in background and skills and diverse in its make up. The value a degree course has to provide opportunity is perhaps its greatest benefit.^[49]

However, the authors of the article did note that the government had acknowledged these potential impacts in its equality analysis. The government has stated that the OfS would need to consider this when implementing recruitment limits (for example, it stated that the OfS would need to consider the characteristics of students when assessing courses and also the need for proportionality when applying the policy).^[50]

Similar points have also been raised about the policy to reduce the fee limit for certain foundation courses.^[51] In addition, Rachel Hewitt, chief executive of MillionPlus, the Association for Modern Universities, said this policy would increase the current financial pressure on HE institutions.^[52]

Concerns about increasing financial pressure on universities have also been raised with reference to the government’s visa changes impacting international students, with Vivienne Stern of UUK indicating that universities are increasingly reliant on the extra income brought in by such students^[53] Further information on the pressures affecting education finances can be found in the House of Lords Library briefing ‘Financial pressures on higher education’ (21 March 2023).

Rachel Hewitt of MillionPlus also expressed reservations about the government’s policy of considering salaries when assessing student outcomes, arguing that this failed to account for factors such as regional disparities, some pay levels being set within the public sector and the non-monetary benefits of higher education.^[54]

Responding to an oral statement about the government’s policy statement in the House of Commons, Shadow Education Secretary Bridget Phillipson argued that it would restrict opportunities for disadvantaged students and that focusing on salaries as a measure of a successful course was “limiting”.^[55] She set out the opportunities that universities could provide, stating:

Many of our most successful newer universities—the fruits of the determination of successive governments, Labour and Conservative, to spread opportunity in this country—often draw more students from their local communities. Many of those areas are far from London, far from existing concentrations of graduate jobs. Many of those students come from backgrounds where few in their family, if any, will have had the chance to go to university. Many of those young people benefit from extra support when they arrive at university to ensure they succeed.^[56]

Labour has published its own plans for how it would approach education policy if it was in government.^[57] It has set out ambitions to increase the number of people moving into higher education and improving collaboration between universities, colleges and local communities. It stated that it saw universities and colleges as “essential engines of regional growth and opportunity, bringing jobs and prosperity to local communities, and attracting students from across the globe”.^[58]

3.2 Levelling up and economic growth

The chair of the Purpose Coalition and former education secretary, Justine Greening, has highlighted the important role HE institutions play in creating local opportunities, particularly through boosts to entrepreneurship:

Entrepreneurship is a key element of levelling up that often gets overlooked—in our Levelling Up Universities Coalition we’ve seen some great examples of institutions encouraging entrepreneurship and growing the local economy as a result. Universities play a crucial role in spreading opportunity to students that need it most but they have a much wider social impact through job creation, research, procurement and much more.

Moving forward there is a huge opportunity to develop the role that universities play as anchor institutions in communities across the UK. There is no doubt in my mind that our universities should be at the centre of the UK’s levelling up plans.^[59]

However, some have expressed concern that the role played by higher education was not highlighted enough in the government’s levelling up plans. For example, David Kernohan of Wonkhe (a website focused on higher education policy) stated:

It would have been unexpected to find universities prominently discussed within such a wide-ranging policy document. But higher education policy watchers could reasonably have expected to find reference to a role for universities in local skills provision, and in locally focused research and development. It would also have been reasonable to bet on some consideration given to the role universities play in supporting local schools and colleges, and to a higher education provider as a major local employer offering well paid and skilled work.

Yet while there are scattered references to the positive role that the UK’s universities can play in levelling up, sector observers might be disappointed not to see a greater role and responsibility for the sector articulated as part of the agenda.^[60]

In particular, he noted that higher education was not included in the metrics for the skills mission (as explained above) and believed there was a lack of policy focused on maximising the benefits of higher education institutions. On this latter point, Mr Kernohan claims:

The very best way to level up a locality is to build a university in it. In one fell swoop you have skilled employment, a pool of graduates, an injection of money (student spending, salaries) into the local economy, research power, and (eventually) civic pride.^[61]

Jonathan Grant and Andy Westwood, in an article for the Bennett Institute for Public Policy (based at Cambridge University), also argued that the role of universities was not adequately recognised in the levelling up paper.^[62]

The authors considered the role of universities in the context of the ‘six capitals’ set out in the levelling up strategy that the government said needed to be focused on, namely the physical, human, intangible, financial, social and institutional. For example, the authors stated:

Universities do and can make significant contributions to all of the government’s suggested six capitals even if policymakers fail to recognise them. The impact on human and intangible capital is self-evident—through their core education and research missions—although neither are without criticism. More for example might be done about low education and skill levels in a particular place or low levels of innovation and applied research in a local economy. But much less thought through are university contributions to the other capitals—physical, financial, social and institutional, which can have both positive and negative impacts on local communities.^[63]

The authors then sought to assess universities’ contributions in these other areas. For example, on physical infrastructure they noted the increased pressures on local resources universities may bring to an area (such as housing), but also the financial contribution universities make when building physical infrastructure. Turning to social and institutional factors, the authors discussed the need for universities to listen to and work with local communities, and to use their “civic power to bring about social change”. They also stressed universities’ ‘anchor institution’ role, described in terms of “economic impact, employing local people, spending in the local and regional economy and working strategically with other local institutions”.

The authors concluded:

The fact [universities’ contribution to the capitals] is not necessarily recognised by government is more a reflection of their current thinking about universities than their ability to make change at a local level. Given how often universities claim to be autonomous institutions, perhaps now is the time for them to collectively seize the initiative and work together to deliver these six capitals—independent of any government support or validation. But there is also a key role for government—either to directly recognise and support such an agenda, or at the very least to step back and stop getting in the way.^[64]

UUK has made similar points about the levelling up and economic benefits universities bring, and has made recommendations for the government about how these benefits can be maximised. In an October 2022 report, it set out four key recommendations for government:^[65]

• Rapidly expand the ‘University enterprise zones’ (UEZ) programme. UEZs are specific geographical areas where universities and business are supported to work together to increase local growth and innovation.^[66] UUK has argued for these zones to be expanded to all universities in England and for work to be done to support similar policies in the devolved nations.
• Create enterprise and opportunity hubs across the UK. Based on the experience of collaborative shared spaces established in some locations (such as Burnley and Dundee), which focus on engaging communities and local business, UUK argued that the programme should be expanded. It stated that the shared spaces should engage all universities and colleges and should reach out to towns and areas “left behind”, working to bring opportunities and investment. It suggested the hubs could include start-ups, remote working space, volunteering and community groups, and could have a focus on sustainability.
• Support universities’ involvement in a new range of sector deals. Sector deals are partnerships between the government and industry on sector-specific issues.^[67] UUK stated that the deals also highlight how universities can work with different sectors to “meet skills needs, promote growth, support productivity and engage communities”. It called for the government to support the involvement of universities in a new range of sector deals to “share intelligence, develop collaborative strategies to help meet skills and talent needs, future-proof the workforce and increase opportunities across the UK”.
• Embed and engage universities in local, devolved and national initiatives and policymaking. UUK stated that universities should be key partners in local initiatives and policymaking, arguing that they “have the experience and the skills to rapidly develop, share and, with support, implement what works”. It said that this could include involvement with the ‘UK shared prosperity fund’ and collaboration with levelling up directors.

The Higher Education Policy Institute has also made recommendations to the government targeted at levelling up, this time with a focus on attracting international investment. In a report published in March 2023, it stressed that universities support levelling up both through building research ecosystems that attract investment and by supplying skilled graduates.^[68] It believed that attracting greater foreign direct investment (FDI) into the “innovation clusters” that surround universities would bring a long-term boost for local economies.

Its recommendations included:

• government should target the world’s top 200 research and development (R&D) investors, taking advantage of its new Whitehall departments to launch a refreshed and more ambitious approach to securing FDI into science and technology
• government should incorporate FDI into R&D into its ambitious new plans to forge bilateral international research and innovation bridges with partner nations
• universities, government and local partners should work together to showcase the investment potential of the innovation clusters that surround campuses across the UK
• universities should work together and ‘hunt in packs’ in order to attract more significant inward investment into regional economies
• a more systematic approach should be taken to introduce universities to firms who may potentially or have recently invested in a local area^[69]

In an October 2023 report written as part of the Economy 2030 inquiry (a collaboration between the Resolution Foundation and the Centre for Economic Performance, funded by the Nuffield Foundation), Lord Willetts (Conservative), a former minister of state for universities and science, also considered how higher education can improve productivity and drive economic growth. First, however, he set out four groups of benefits that higher education can offer individuals and society, noting that each was backed up by “robust” evidence:^[70]

Table 4. Benefits of higher education to individuals and society

The report then featured discussion of a range of matters connected to higher education and its economic benefits, including:

• evidence that each year of education undertaken is linked to productivity increases
• the benefits of level 4 and 5 courses, but also how promotion of these courses should be balanced with maintaining the same level of opportunities for traditional undergraduate courses
• how universities could be encouraged to work on boosting the future salary prospects of their graduates, shifting focus away from restricting subjects that may have lower salary outcomes
• better promoting higher education as a key UK services industry, particularly in light of its global reputation and popularity
• utilising the local benefits often brought by universities by seeking to set up new institutions in areas currently without them, potentially via partnerships or expansions involving existing institutions
• better promoting universities’ research and development to local enterprises

Lord Willetts concluded by making a number of recommendations, including funding changes aimed at helping many different aspects of the sector, and stated that the UK needed to “get behind” (or support) an already successful industry. As part of this, he said the UK should embrace human capital and move away from the mindset that there could be too many people doing degrees. He continued:

[The UK should] instead get on with the serious work of how best to reform higher education, given the nature of our wider economic strategy and routes to prosperity and the need to develop what is already a successful industry. The surge in the number of young people over the rest of this decade can give a real boost to our economy. It means more people getting more higher education, at level 4 or 5 or with a full honours degree. It also means stronger higher education institutions spread across the country. To achieve those twin objectives higher education must be properly funded—notably by the income-related contributions from graduates which have been part of the system for 20 years. It also means bold new initiatives so that universities stay in touch with their graduates and innovative new universities are created. It is not enough to pay lip-service to the excellence of our universities. They should be supported and promoted so that they can fully play their role in boosting our economy and strengthening our society.^[71]

4. Read more

• House of Commons Library, ‘Higher education in the UK: Systems, policy approaches, and challenges’, 18 April 2023; ‘Higher education reforms in England: Student number controls and foundation year fee limits’, 16 August 2023; ‘Impact of increases in the cost of living on further and higher education students’, 15 September 2023; and ‘Equality of access and outcomes in higher education in England’, 31 January 2023
• House of Lords Industry and Regulators Committee, ‘Must do better: The Office for Students and the looming crisis facing higher education’, HL Paper 246 of session 2022–23, 13 September 2023
• House of Lords Economic Affairs Committee, ‘Treating students fairly: The economics of post-school education’, HL Paper 139 of session 2017–19, 11 June 2018

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Cover image by Nathan Dumlao on Unsplash.