‘Invest in regional universities to rebalance UK economy’

Study of the economic impact of graduates recommends universities should be placed at the centre of strategies to boost regional growth

March 27, 2014

Source: Alamy

Impact: North retains graduates

Last December, Vince Cable, the business secretary, memorably described London as “a kind of giant suction machine, draining the life out of the rest of the country”.

But at least when it comes to universities, new research suggests that the city is not so much a suction machine as a geyser, drawing in students and then hurling them back out after graduation.

In fact, the North retains a greater proportion of the graduates who have studied there than the capital and the South and East of England, and so keeps more of the economic impact of universities, according to a report titled Smarter Regions, Smarter Britain: Boosting Regional Growth Through Universities.

Investment in higher education could therefore help to rebalance the UK economy and stimulate growth outside London, according to the research by Million+, which represents a number of post-92 universities.

Million+ commissioned the consultancy London Economics to track students who graduated in 2011-12 and were employed in England six months later, to see where they were working. Their economic impact was calculated by looking at how much they were earning and the taxes they were paying.

Eighty per cent of the economic impact from graduates of universities in the North East stayed in the region, it finds. Overall, these graduates produced an impact worth £1.73 billion across England; just £20 million of that was in London.

Yet only 43 per cent of the economic impact of London graduates stayed in the capital, with the remainder distributed across the rest of England, particularly the South and East.

The North West retained 76 per cent of the economic impact of its graduates, according to the report, while Yorkshire/Humber (68 per cent), the East Midlands (60 per cent) and the West Midlands (60 per cent) also held on to the majority of their graduates’ earning power.

In contrast, the East of England kept just 41 per cent of its graduates’ economic impact, and the South East 49 per cent.

“London doesn’t retain as many people as you think,” said Alan Palmer, head of policy and research at Million+, who was the lead author of the report. Many go to the capital to study but return home to other parts of the UK when they graduate, he said. The cost of living in the capital is another deterrent to staying.

On the other hand, “students who attend [universities in] the North East are more likely to stay there”, meaning that “investment [in] universities in the regions will have a return for those regions”, he said, for example by providing local companies with highly skilled graduates.

However, the £11.8 billion total economic impact of London graduates dwarfs that of other regions – it is more than the North West, South East and South West combined – meaning that even a minority share of this is substantial.

Separate data released by the Office for National Statistics this month also clearly show that London is still way ahead of the rest of the country on the proportion of people with degrees (see map, left).

The Million+ report calls on the government to set targets to raise rates of higher education participation in regions outside London. In the capital, the participation rate for 18-year-olds is 43.5 per cent, but it is 30.3 per cent in the South West.

It argues that the government should also invest part of the proceeds of the sale of the student loan book into 50,000 new postgraduate places over a five-year period, although it stops short of calling for extra places to be given to universities in specific regions.


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