The odds are stacked against the UK’s small and specialist providers

Almost every major UK university was specialist once. Like tech unicorns and garage bands destined for greatness, nearly all started small. With government, industry and society incentives, they then grew bigger and climbed higher.

But the ladder has been taken away. This damages today’s challenger universities and the sector’s overall viability, as shown by Size is Everything: What small, specialist and practice-based providers tell us about the higher education sector, my new report for the Higher Education Policy Institute (Hepi). It’s the first major survey of these providers, which make up 40 per cent of institutions in England (15 per cent in Scotland) and account for 15 per cent of all students.

In most sectors, small businesses are more agile than large ones, able to innovate and make major changes to their operations with minimal investment. Likewise, competitive focus (also known as specialism) usually confers significant business advantage, including in innovation. However, that’s much less true of UK higher education. Notwithstanding their global reputation in practice-based fields, small and specialist providers are severely limited by financial and structural barriers.

Despite reforms by former universities ministers David Willetts and Jo Johnson in favour of small players, recent figures from the Office for Students (OfS) suggest a sector with declining competition and growing market power for the largest institutions. The 35 biggest providers by turnover (9 per cent of total institutions) now account for 50 per cent of the sector’s students.

Large providers are better able to capitalise on growth in student numbers. Small providers are kept in place by resource scarcity and are more vulnerable to financial shocks, according to as yet unpublished benchmark analysis recently conducted by PwC for Universities UK. This is because they have fewer levers to address such shocks.

This hostile operating environment is partly due to the oligopolistic behaviour that Tim Devinney pointed out in these pages last year, and the high barriers to entry within the system as a whole. Ignorance is a more fundamental problem. We lack the basic measures of size and specialism found in other countries, such as the US’ Carnegie Classification of Institutions of Higher Education. As the OfS itself noted in Provider Methodologies 2022, existing approaches (including Transparent Approach to Costing (TRAC) groups, OfS registration categories and tariff groups) are now either outdated or too broad to be useful. No kidding. In official communications, the ambiguous term “specialist” can mean anything from a limited number of subjects to a type of further education. Effective policymaking is impossible without an accurate understanding of the full range of providers it will affect.

Status also plays its part. In the UK, many specialist universities provide practice-based education, but this lacks the status it enjoys in Germany and other countries. A practice-based, experimental and industry-engaged approach is a demonstrably effective way to understand and produce the world in which we live, in fields as diverse as agriculture and the creative industries. 

This is in part because specialist institutions arguably have a deeper understanding of how to mitigate risk in their fields than would sit comfortably in a more complex university risk register. In health sciences, for example, AECC University College is perhaps the only higher education institution registered with the Care Quality Commission. The NHS is therefore able to subcontract services directly and quickly to AECC, with assurance that appropriate clinical governance procedures are in place.

There are welcome signs of structural adaptation at major sector bodies. For example, Advance HE has sharply reduced the administrative burden of the Athena Swan gender equality programme and the Race Equality Charter, recognising the struggles of small institutions. Perhaps most significant are moves by the Arts and Humanities Research Council (AHRC) to ensure the long-term sustainability of practice-based providers, including through capital investment. Small providers might meet this initiative halfway by forming research consortia that get them over grant thresholds: AHRC’s typical grant minimum is £100,000, yet it often receives much smaller bids for £20,000 from small and specialist institutions.

Small providers might look very different, but they share core interests in new technologies, economies and global challenges. In an ideal world, they would collaborate extensively to gain strategic advantage and support growth. They could share fixed costs, such as HR support and data reporting; GuildHE’s research repository is an example of how costs are made affordable by a shared service approach across 16 providers.

Yet collaboration requires significant, ongoing management attention, which small providers often struggle to release. They seem as likely to disappear into mergers with large institutions as they are to make shared services work over the long term. But not so long ago, big universities were encouraged by the government to adopt schools; could they not lend administrative capacity for collaboration to small universities instead?

What we really need, though, are structural and regulatory changes in favour of small and specialist providers. Better understanding by policymakers and regulators of such institutions’ strengths and vulnerabilities will restore the ladder to their success. In doing so, it will boost innovation, business dynamism and renewal in higher education as a whole.

Edward Venning is a partner at Six Ravens Consulting LLP. He was formerly an executive board member at the University of the Arts London, the UK’s biggest specialist university.