Anderson Quigley

When Demographics Matter

When Demographics Matter

Posted on 26 March 2019

It has become clear over the past two years that the higher education sector is facing a crisis.  Political, social, economic and demographic pressures are continually challenging institutions and while  some universities have grown dramatically, others are contracting through failing to recruit enough students.  Overseas, and especially European numbers, have generally declined.  At the same time investment in new facilities, both for teaching and for student accommodation and services, has rocketed leaving many institutions facing significant long-term debt.  Borrowing using capital markets, is not new; Keele University’s bond issue in 2000 was the first of many but there has been a significant acceleration since 2012 as HEFCE’s annual review of the financial health of institutions has shown.  Across the country universities, large and small, have raised very substantial loans over the past three years, often repayable over decades; for example, Cardiff University (£300 million; 39 years), Southampton (£300 million; 40 years), Leeds (£250 million; 34 years), Liverpool (£250 million; 40 years) and Manchester (£300 million; 40 years).  The largest and longest is Oxford’s £750 million bond repayable over 100 years while Imperial and UCL have between them borrowed £1.7 billion for their new sites in White City or Stratford.  While larger universities, especially those in the Russell group, may regard such borrowing as prudent given their relatively buoyant recruitment and scale of operations, the risks increase substantially for smaller institutions, many of whom have also borrowed substantially.  Time Higher Education have suggested we may be facing a credit crunch while Sir Michael Barber (Chair of OFS) has issued a stark warning that universities cannot be regarded as “too big to fail”.

On the other hand, demography is cyclical.  While the overall decline in student recruitment can be related, in part, to the demographic dip in the number of 18-year olds, something which was predicted from the 1990’s onward, numbers may be set to increase.  In a recent piece on WonkHE, Mark Carver, the co-founder of data analytics consultancy, DataHE, outlined a fresh challenge to higher education in the future, how to deal with a significant increase in student numbers!  From 2021 onward, he points out, the UK population will be growing at a constant rate of 3% per year, amounting to a 27% increase in the total population numbers by 2030.  This will increase the population of 18-year olds in the UK by 1 million over a decade.  Carver suggests, moreover, that future 18-year olds are more likely to embark on a university education due to a variety of socio-economic and cultural factors, potentially leading to an application rate of over 50% of the demographic.

As with all predictions other factors may intervene to change the course of events, but unless there is a significant shift in the appetite of young people for higher education, universities will need to prepare for a major influx of students.  Regardless of whether the present three-year degree format remains the preferred choice, or whether new permutations will develop between three-year, fast track and degree apprenticeships, planning for demographic change is a necessity.

In retrospect, universities who have borrowed heavily today for new facilities may, tomorrow, be regarded as prescient.  Buildings and facilities are only one element in the full equation.  Some institutions have an ageing workforce, while others have depended heavily on overseas and, in particular, European staff whose future UK domicile status remains in some doubt.  More significantly, changes in student demand may have a disproportionate impact on different subjects requiring diversified modes of delivery or different offerings, such as fast-track degrees.  Many universities have recently undertaken significant redundancy programmes which may well need to be reversed and that could prove to be challenging in the present climate.  If today’s “crisis” is partly caused by over-capacity, tomorrow’s may well be under-provision, a significant challenge for HR departments.

by Deian Hopkin