Since the increase in tuition fees in 2010, universities have had to adapt to a rapidly changing funding environment. Greater reliance on fees, which account for over two-thirds of total income at 42% of universities, has left their finances vulnerable to sudden changes in student numbers. Concerns over value for money, along with long-term spending commitments on pensions and infrastructure, also weigh heavily. These challenges have been exacerbated by Brexit, which puts substantial amounts of EU-related funding from students, staff and research projects at risk, as well as the overall attractiveness of the UK as a learning destination.
To be sustainable after Brexit, universities must prioritise the student experience whilst also finding new ways to maximise efficiencies and diversify revenue.
Commercialisation is not a new concept in higher education. Examples of innovative income generation include university trading companies that manage events using campus facilities such as lecture halls and industry partnerships that draw funding to commercialise research discoveries or incubate start-ups. Sector-owned shared services like UCAS and Jisc, which provides a common digital platform to 149 HE institutions, are widely used and save millions of pounds every year. Procurement practices have also seen marked improvements in efficiency since 2010.
However, as universities move into a new era it will be increasingly important for them to access the expertise of private providers to rethink how they operate. Policy Exchange estimate universities could save 30% of their procurement spending if they outsourced functions such as FM and accommodation services. When institutions outsource, 78% say they have benefited from the decision to do so.
Cultural and practical barriers explain why existing university-private partnerships have so far been limited to traditional support services such as cleaning, security, administration and IT support. In-house teams may lack the confidence or expertise to embark on large scale transformation programmes with external providers. Uncertainty over whether VAT applies when outsourcing services can also be a significant hurdle.
There are several areas where the private sector could usefully work with universities. From libraries to laboratories, campuses need to be future-proofed, energy efficient, attractive living and learning environments. Service providers can ensure the needs of students are built into the design of new buildings, particularly accommodation, from the start. They can provide innovative integrated FM services that promote improved quality of life for students, such as tailored catering options, and deliver operational efficiencies like energy reductions though the latest LED lighting technology.
Students and staff also want a seamless, integrated digital experience across the campus. Rather than use in-house IT teams that operate in silos, private providers can implement unified communications solutions to support the collaboration needs of staff and students across numerous locations. Pioneering industry-led technologies such as blockchain and predictive data modelling could allow universities to simplify their planning processes, from forecasting student numbers to identifying attendance patterns. Partnership working with the private sector could even extend to academic services, such as the use of joint ventures with specialist education providers who run foundation courses to attract international students.
With a changing funding base universities will have to rethink how they operate and deliver services while remaining financially viable. Universities might usefully draw upon the experience of ‘commercial councils’, local authorities who have worked innovatively and strategically with private sector providers to reshape how their services are delivered. Similar collaboration could be a key part of a more commercial approach that ensures the long-term success of universities beyond Brexit.
By Alasdair Hutchison, Senior Policy Advisor, BSA