Sector brings in £45bn to UK

Universities add more cash to the economy than aviation and drug firms, finds Anna Fazackerley

Universities contribute £45 billion to the UK economy, placing them above the pharmaceutical and aircraft industries in the financial league table.

Universities UK, the vice-chancellors' umbrella group, this week published the latest data on the economic impact of higher education institutions.

The report is designed to promote universities as economic powerhouses before the Government begins its comprehensive spending review, which is widely expected to be tough.

Drummond Bone, UUK president, said: "The growth of the higher education sector now puts it among the UK economy's major industries.

"In the past, we tended to focus purely on the general economic impact of higher education institutions on the rest of the economy. But this latest report provides evidence of their impact as independent business entities."

The study, which uses data from the Higher Education Statistics Agency compiled by researchers at Strathclyde University, calculates that the sector's total economic output for 2003-04 was £45 billion - up from £35 billion five years earlier.

It attributes much of this growth to higher than average "knock-on" effects from the sector.

The sector's direct annual turnover in 2003-04 was £16.9 billion.

But, according to the calculations, for every £1 million of higher education output, a further £1.5 million was created indirectly in other areas of the economy. Thus, £25.6 billion was generated outside universities as a result of their expenditure. On top of that, £2.6 billion was generated from overseas students and visitors.

The report concludes that higher education is a larger contributor to the UK economy than the drug industry or the aircraft industry and only slightly smaller than UK legal activities and auxiliary financial services.

It states that in 2003-04 universities employed more than 330,000 people - which would equate to 280,000 full-time jobs, or 1.2 per cent of the total UK workforce. For every 100 university jobs, 99 more are created by knock-on effects, it says.

The report emphasises the need for a mix of public and private investment.

It says that income from private sources amounts to per cent of all higher education income, and it predicts that this figure will rise with the introduction of variable fees.

Sir Digby Jones, director-general of the Confederation of British Industry, said: "The university sector already has strong links with the business community. (But) we need improved partnerships between universities and business to deliver the graduates that employers want and, where businesses work with universities, to exploit the innovation, research and development that universities provide."

anna.fazackerley@thes.co.uk