Page last updated at 01:59 GMT, Saturday, 20 March 2010

Universities look into the future

By Mike Baker

Leafy campus
Will universities in the future still look like this?

The current funding crisis will transform Britain's universities by 2020.

University campuses will be unrecognisable.

The conventional image of today, which is still fondly perpetuated in the media, is already as antiquated as college scarves and sherry with the tutor.

The 18-year-old school leaver, living on campus, studying full-time for a purely academic, three-year undergraduate degree is fast becoming a minority species.

The current financial squeeze, which is set to continue for the next decade, will accelerate a transformation that has begun in many universities.

Already more than one in three students studies part-time and one in six is from overseas.

The BBC News website is looking at the challenges facing higher education in the UK in a series of articles.

There will be more mature students, more studying part-time, more living in their own or their parents' homes, and many more studying online.

There will be more tailor-made vocational courses, operated in partnership with individual companies and employers.

There will be more "pick-and-mix" degrees, with students accumulating course credits at different universities, even across different countries, and with gaps for employment in between.

Students will increasingly become "consumers" as we reach the tipping-point where their contribution to the cost of the degree is greater than that made by the government.

Private providers will take over an increasing share of the university market.

The all-round university will increasingly lose out to more specialised institutions.

Finally, universities will become more global.

A few may be allowed to go to the wall.

The most successful British universities will take in even more overseas students.

They will also run more courses based in other countries, either on their own foreign campuses or through partnerships with overseas providers.

Others, though, may start to lose out to the strong competition of overseas students from the US, Australia and, increasingly, from continental Europe.

With income from both overseas students and from government grants being squeezed, some universities will be forced to merge to survive.

A few may be allowed to go to the wall.

If some of this sounds far-fetched, then consider the facts.

The head of Universities UK, Professor Steve Smith, warns the sector faces "an extraordinarily bumpy financial future".

'Running on empty'

As he points out, the UK is cutting investment in universities just as other countries - the US, France, India and China - are spending more and expanding fast.

The latest modelling from the Institute for Fiscal Studies predicts there will be no more real terms increases in university funding in England before 2018.

That is a worse settlement than under Margaret Thatcher, when overall public spending on universities rose in real terms in every year bar one - though spending per student fell sharply.

According to a study by accountants Grant Thornton for Times Higher Education, one university in five was already in deficit by 2009, before the cuts began.

The average surplus held by universities is just 1.4% of total income. That is half the 3% recommended by the funding council.

In other words, much of the higher education system is already running on empty.

Consider too, that although universities are looking to other sources of income, they rely on the government for 60% of their income.

'Unpopular move'

There is a long way to go before they can escape the problems of the national budget deficit.

So what are the prospects for universities? Many are holding out for the cap on student fees to be lifted.

But the independent review of student finance, led by Lord Browne, will not even report until the end of this year.

Whoever is in government by then, will need time to produce a response, to publish a White Paper, and eventually pass legislation.

If we have a "hung" parliament, the next government will be very wary of taking the unpopular move of raising tuition fees.

Our fees are the third highest in the world

So, whatever happens, there will be no increase in the funds from domestic student fees until at least 2013.

So, many will try to boost their income from overseas students.

There are an estimated 3.5m students who are internationally mobile within OECD countries.

The UK currently has the second largest market share at 11.6% of all overseas students.

But the UK faces a struggle to increase market share. Already some 15% of enrolments are from overseas.

At doctoral level it is even more marked, with 43% of students coming from abroad.

The UK is already expensive by international standards. Our fees are the third highest in the world after the US and South Korea.


So, if looking abroad is problematic, what about raising more from domestic part-time students, for whom there is no cap on fees.

There are two problems.

First, the Browne Review looks set to end the anomalous treatment of part-time students who, unlike full-timers, get no loans and have no ceiling on fees.

Second, this is a cost-sensitive market and higher fees would price many out of university.

There are exceptions. Students on MBA and postgraduate law courses already pay handsomely.

But universities look set to lose out here to relative newcomers.

There are now several independent institutions getting in to this sector, either run as charities or as for-profit providers.

They include BPP, the University of Buckingham, the College of Law and Ashridge Business School.

Or, for a real glimpse into the future, look at EThames Graduate School.

'Hefty fees

It is a private university, based in two office blocks in Ilford, Essex, with no living accommodation for students.

Founded in 2004, it now has more than 1,000 students, mainly MBAs or postgraduates.

These new providers occupy areas of the higher education market with the best and most reliable return, such as postgraduate law and business degrees.

And, as a new study for Universities UK has shown, the spread of the private degree provider is an international phenomenon and British universities will soon face new competition from abroad as they increase recruitment here

In the US several large corporations are taking a growing chunk of not only their own domestic market, but also of the international market.

The largest is Apollo Group, which owns the fast growing Phoenix University, with more than 400,000 students, most of them studying online.

Companies such as Kaplan and Laureate International now have an extensive presence with their campuses in Europe.

Apollo recently acquired the BPP College in the UK, with its 5,500 law and business students.

There will be more students from overseas

So, while the saloon bar expert is still coming to terms with the former-polytechnics that are now universities, real change has already moved on.

Today's novelty is not the student doing media studies or golf course management at an ex-Poly with a smart new name.

Instead, the new image of campus life includes the student studying in a privately-run former office block in Ilford.

Or the postgraduate paying hefty fees to the American-owned BPP in London.

Or the foreign student studying in Oxford on a course run jointly by the University of Kingston and Azad University in Iran.

Many of these changes were happening anyway - but a decade of tight government funding will speed them up no end.

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