News blog: Is estates spending a capital idea?

Chris Havergal asks whether spending money on new buildings and facilities can give universities a competitive edge

July 24, 2015
Spending graph

When it comes to investing in buildings, facilities and equipment, universities around the world are big spenders.

A study conducted for the Higher Education Funding Council for England found that US higher education leads the way globally on capital expenditure, splashing out nearly $3,000 (£1,930) per student in 2011.

The UK lags far behind, spending about a third of that amount.

In an article for Times Higher Education this week, I explored fears that the UK’s world-class reputation for higher education could be at risk, with the Hefce report revealing that a third of English universities have cut spending on campus facilities by more than a quarter since 2008.

But campus spending varies widely around the rest of the world, too.

Calculations in the report, based on Organisation for Economic Cooperation and Development data, show that Switzerland spends more than $2,500 per student annually on capital.

Australia and Spain are the only other nations to fork out more than $2,000 per capita. Many countries spend between $1,000 and $2,000, but only seven are listed as spending less than the UK: Italy, Slovenia, Finland and Portugal, plus Sweden, Mexico and Belgium.

Of course, there are a number of factors behind these figures, with the long tradition of philanthropy in the US likely to be a key factor in the country’s performance. And it’s not necessarily the case that every country would want to spend $3,000 per student on capital projects every year.

Spending plans may be affected by the age, size and planned expansion of a higher education sector, before the actual availability of resources is considered.

The extent of marketisation, and competition for students, may also determine how much importance is placed on estates and equipment.

But policymakers considering whether to increase capital investment would do well to review the econometric analysis in the Hefce report, which was drawn up by Frontier Economics.

Looking at English universities, the authors calculated that a university could expect to recruit about 500 additional full-time undergraduates for every £5 million that it laid out on capital expenditure.

For the same investment, universities can expect to receive an additional £220,000 of annual income from consultancy and contract research activities.

For every £3 million spent, universities can expect to recruit four extra research students.

Universities are operating in a competitive environment within the UK and overseas, and this analysis suggests one way in which institutions – and sectors – can give themselves an edge.

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