Death of a Beast? – Can Higher Education survive in its current form?

I was interviewing Ian Dunn, PVC at Coventry University, and something he said really caught my attention and gave me pause. He was talking about the funding constraints on universities (in the UK) and that it posed a real challenge to the business model as it currently stands.

I wanted to explore the question of survival for the Higher Education industry. This may seem a little inflammatory, but in my exploration I found a few points that I think are worth bringing up, as well as some possible remedies to it.

Firstly, I want to emphasise this is not a criticism of institutions themselves, but more of the envorinoment in which they operate. I know that the university industry is working incredibly hard across all areas to improve and develop. Institutions are being seen more often through the lens of being a business (especially where fees are high) and so it pays to examine the state of play in those terms.

Try to encapsulate the purpose (think: mission statement) of going to university in a single sentence. It’s not easy. I think it varies hugely based on who you talk to and where they are in their industry/career. I have asked this question of a wide range of instructors and the best approximation I’ve found is:

“University provides a learning and living experience to broaden the horizons, embed a love of learning and create opportunities for students to prepare for the world of work”

Straight off – this creates a huge tension in what universities are to focus on. All three of those areas can pull negatively against each other. In the hyper-competitive world we now find ourselves, where everything is and can be commoditized into cash value, does this 3-pronged approach serve up what a student-come-employee actively needs? Is the role of embedding a love of learning (for learning’s sake) a valuable exercise within the job market?

That’s not to say these things are not valuable; They are crucial to the entire ethos of Higher Education and should never be forgotten. If you contrast this with the world of professional training or CPD, however, you’ll find the courses tend to be far more practical and outcomes-based without the loftier ideals that we expect universities to stick to. Do these competing ideas create a goal that is too broad to be completed effectively? Is it possible to hit all three of these areas in such a huge organization?

We have to talk about the business model of universities here. To treat them as a business we have to properly understand the revenue model and that means more of a deep-dive into the trends of the industry. All data below taken from Parliament.uk and runs from 1994-2022

Accepted student places has increased from 271k in 1994 to 563k in 2022. This huge expansion in numbers has been fantastic for universities in their growth stage, but it’s important to understand where they come from:

The expansion of the non-EU market in helping to mitigate the impact of Brexit on student numbers, but the rate of growth is certainly something to watch.

Why am I dumping data on you? Well, through the lens of a business, the audience for these big companies is changing. International students are going to have to become the primary driver. Domestic students are both financially restrictive for UK universities (student fees very unlikely to move anywhere in the upwards direction any time soon) and the increase in applications/acceptances per year is 2.3/2.6% respectively. That is never going to cover the increasing costs of running institutions salary increases, inflationary hikes and interest rate rises on required CapEx.

European students are likely to be a struggle for some time – Brexit looks like it’s going to have a generational impact on both the country and the institutions within it.

So step forward non-EU students to fill this gap. Does this present a similar challenge to the too-broad mission statement? What does a mission statement look like if the mix of students increasingly becomes international? If the audience is changing does the “product” have to shift too? Sometimes I feel universities trade in the international student market based on name and renown rather than the services actually provided by the university.

Before you yell at me, I know that universities work very hard to provide the best quality instruction they can do to their students regardless of their origin. But just think how you might want/need to change the look and feel of your teaching if the mix of your audience increasingly shifts to the international student market? Some course areas already fit very well into that mode (looking at you, Business & Management) and thrive from it, but if that becomes the norm then what does that mean for other subjects?

If the revenue model shifts to reward and invest in the areas that International Students are more likely to study in, what would that mean for Bio & Sports Science with only 3% of the enrolment? To act as a business, it’s plausiable that universities would pull funding back from those subject areas to focus on the more profitable areas of its business. We’ve seen this with the huge expansion (often physically) of business schools to accommodate this demand and generate revenue to fund the rest of the institution, but I would question how far that can go before the institution either starts making poor ROI on another huge lecture theatre or just become a 3-school institution.

It must be said that the non-EU student cohort is not an endless supply. In fact, the student cohort themselves is not an endless supply as birth rates in most developed nations is falling well below replacement rate and projected to continue to fall significantly over the coming decades. If we look at the split of where our students currently come from, we can see some worrying trends

The (non-EU) country with the most international students in the UK is China, with 151,690 students, followed by India, with 126,535 students.

The third country with the most international students in the UK is Nigeria, with 44,195 students; after Nigeria, Pakistan is fourth, with 23,075 students.

United States ranks fifth among non-EU with 22,990 students.

Birth rates for those countries (2003/2023/2043). Replacement rate is 2.1 Source: UN Data

China (1.56 / 1.189 / 1.353)

India (3.122 / 1.999 / 1.816)

Nigeria (6.116 / 5.063 / 3.398)

Pakistan (4.88 / 3.347 / 2.589)

USA (2.042 / 1.662 / 1.6915)

This means that the current targets of International recruitment are going to get smaller and smaller as time continues. The pool of students gets smaller with each year (and let’s not forget this population shrinkage is more pronounced in other developed nations) so Universities will need to become more attractive to a wider pool of students, which further begs the question – what are the universities there to provide?

That’s not to say that everything is doom and gloom though. The spark for this whole investigation was a conversation with Ian Dunn, who presented an idea that I thought at first fantastical but on more thoughtful examination an interesting proposition.

The idea borrows heavily from the primary/secondary education model in the UK (in my understanding). The concept of “feeder schools” (a primary school that naturally links to a secondary school and attendees from the primary are much more likely to attend the secondary) has existed for as long as can be remembered. This became more apparent with the formation of Academies and MAT’s (Multi academy trusts) that linked schools together to share resources, expertise and crucially costs for backend systems and services. It makes sense for your child to attend school A at primary and have a seamless transition into school B at secondary, and the MAT gets to streamline their costs behind the back.

50% of students (roughly) attend university and travel all over the country to get to where they want to study. 37% of students live at their parents’ home in 2022 (Here Student Survey) which might bring that into question. Rising costs may necessitate students remain home (particularly if student loan amounts are capped) so that creates a greater need for local university places.

Ian’s suggestion sounded simple (although I imagine much more challenging to put into practice) – incorporate the MAT model into University. Either creating cross-university groups that share business admin, practices etc or creating a “feeder MAT” for a local area. This would guarantee a student from a certain area a place, should they want it, at their local university.

A radical idea, for sure, but is it one that might help shore up the foundations of Higher Education institutions? Perhaps.

I’m sure this problem has loomed large for senior University leadership for some time. We’ve seen some institutions massively expand their overseas activities for recruitment/satellite campuses and the results are……mixed. These programmes are hugely costly to set up and run and require a very long-term mindset to make work. I’m just not sure that in the current climate Universities are thinking much further than how to make it through the current squeeze…..

What are your thoughts?