Regional influence: universities as the new local authorities

Jim O’Neill on how institutions outside London can do more to retain graduates and create jobs with government help

November 27, 2014

Elly Walton illustration ( November 2014)

Source: Elly Walton

I have spent the past 12 months, as chair of the RSA City Growth Commission, thinking hard about how we might boost UK economic growth in the major urban areas outside London.

As a macroeconomist, my focus was on ideas with the scope and scale to contribute to national growth over the long term. In concentrating on the 15 largest metropolitan areas, we assumed that the economic success of London was not some unsustainable bubble and that there were aspects of the capital’s strength that might be replicated.

Early in our discussions, it was noted that although London dominates the UK in terms of economic success, our excellence in higher education is much more widely distributed.

While London’s elite universities always feature towards the top in global league tables, the UK has 29 universities ranked in the top 200 of the Times Higher Education World University Rankings 2014-15, including Oxford, Cambridge, Edinburgh, Manchester, Bristol and Sheffield.

On my travels around the country as part of the RSA commission, it was uplifting to observe the vitality that student populations bring to many cities. Indeed, in a number of them, universities were responsible for educating and employing up to 10 per cent of the urban population – a remarkable figure, and one that cannot be ignored.

This shaped our search for bold ideas to boost economic growth in two significant ways.

First, as outlined in our report UniverCities: The Knowledge to Power UK Metros, we looked at the idea of encouraging graduates to stay in the cities where they had studied to find or create employment.

Graduates, even those from before my student days in Sheffield in the 1970s, have long found the siren call of London so seductive that a decision to return home after gaining a degree has been far from inevitable. But should not universities – or more pertinently, perhaps, local authorities – do more to encourage talented people to stay on where they have studied?

The commission was highly conscious that the prime focus of universities must be to maintain excellence in learning and teaching, and that contributing to the local urban economy should not distract from this, so we put much of the onus on local policymakers to drive key initiatives.

With this in mind, we recommended the establishment of a “Metro Investment Fund for Higher Education”, which could help to fund the following: a “refreshers’ week”, in which graduating students would learn about the job opportunities in the region; an online “graduate clearing” system, helping to pair up talent with local opportunities; the promotion of more entrepreneurial initiatives, including sandwich years and investment in start-up companies via local venture capital funds; the expansion of graduate entrepreneurial visas to allow foreign students to stay in the country for longer than the current system; and “golden handcuff” schemes, to be offered by particular industries and sectors. This last idea could, for example, see engineering graduates in the North East paid a welcome bonus to fill vital roles at major regional employers such as Nissan and Hitachi.

The second recommendation relates to something that I suspect the chancellor, George Osborne, will have a specific announcement about in his Autumn Statement on 3 December. We suggested that our regional universities should work together to set up a new research-driven entity for advanced manufacturing, building on many of their individual strengths, such as graphene at the University of Manchester and advanced nuclear materials at the University of Sheffield. The chancellor’s ambition to create a “Northern Powerhouse” is closely aligned with these ideas, and a number of vice-chancellors have moved swiftly to respond his call for a “northern answer to the Crick Institute”, so I hope I am right.

For too long, brilliant initiatives have come out of our universities and then been picked up and commercialised outside the UK. It is also striking how few major companies in Britain are based outside London. The situation only exacerbates a damaging brain drain in which talent flows into universities around the country but then funnels into London after graduation. This in turn means that our own and global businesses tend not to look beyond the capital, with the result that transport and other links are not properly developed elsewhere, either.

By building on the strengths of our great centres of learning, we will give our other urban areas a chance and encourage a more buoyant economy around the country. If we get this right, we will achieve not only more balanced growth, but a higher level of growth – and that will benefit us all.

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