Impact of the Financial Crisis on
Universities and Business Schools
Professor Angus Laing
Dean of Business and Economics – Loughborough
University
Chair – Association of Business Schools
Welcome to ‘Laboratory UK’
 “Reforms undertaken by the coalition government in the
UK following the Browne Report, including the raising of
tuition fees – even if contested and controversial – will
probably be replicated in other European countries where
the gap between the cost and the price of higher education
is much wider and the sustainability of the public university
system is in doubt.” (Santiago Iñiguez de Onzoño THE
22/12/11)
 The private reflections of a reluctant lab rat …
A perfect storm?
 Public finances in crisis and reappraisal of role of the state:
 Withdrawal (or at least reduction) of state funding of higher
education
 Transferring cost of higher education to ‘consumers’ and creating
demand-led university system
 Declining returns on institutional and charity endowments
 Global market opportunities but also increasing competition:
 Immigration, visas and balancing political and economic reality
 High staff and infrastructure cost structures in western economies
 English as the academic lingua franca … and Bologna
But no perfect policy responses?
 Markets, quasi-markets or central control:
 Demand-led = consumer interests paramount
 Planning-led = national interests paramount
 Role of universities … and business schools?
 UK - a kingdom divided:
 England – fees and ‘managed’ (mis-managed?) quasi-market
 Scotland – no fees and strong central funding control
 Wales – fees and strong central planning control
 Australia – parallel policy direction:
 Demand–led and shared payment
If fees … how to price and who pays what
 Determining relative costs of teaching across disciplines:
 Impact of institutional context leading to variability
 Determining relative contributions of students and state:
 Student demand and strategic importance
 Australian approach:
Student %
State %
Law and business
83
17
Engineering
33
66
Science
19
81
And you can’t rely on the banks to bail you out …
 Spread in the price of borrowing for UK universities has
widened.
“… this has to do with the perceived risks to student demand of higher
tuition fees” (Stewart Ward – RBS)
 Historically universities have secured low interest rates on
the assumption that the government would bail out failing
universities.
 Uncertainty about the role of the government and
regulators in supporting institutions.
Initial evidence of risk in student demand
 Limited overall decline:
 2.5% compared to 2011/12
 4% compared to 2010/11
 Variability by institution and discipline:
 Lower league table universities – decline of up to 25%
 Vocational subjects – increase of up to 20%
 Impact on non-UK students:
 EU students – decline of around 12%
 UK ‘Fee migrants’ – Europe, US and UK ‘branch campuses’
So where does that leave us?
 De facto (re)privatisation of the university sector?
 Increasing divergence in institutional focus?
 Stratification of sector - networks and ‘federal’ structures?
 Disciplinary mix and research concentration?
 Student expectations and ‘rights’?
 Consumerist students (and parents)
 Changing regulatory systems and information
 Evolving degree formats and pathways – lifelong learning
 Desperately seeking ranking – building market credibility

New financial dependencies
 Institutional(ised) dependence on the public purse:
 Oriented around requirements public policymakers
 Strong relationships with public sector stakeholders
 Ongoing regulatory burden and declining funding:
 Role of regulation in demand-led system
 Opting out of government funding/loan schemes
 Increasing dependence on non-public funding:
 Reorientation around requirements of consumers and companies
 Requirement for new skills and new relationships
Weaning ourselves off the state - mixed economy of funding
 Increasing divergence in institutional funding
 Key new financial relationships:
 Financial institutions – university specific loan schemes
 Business community – scholarship and programme sponsorship
 Alumni – scholarships and infrastructure
 Danger of pursuit of income –“money making operations with
no connection with the rest of the University”
 And the state?
 Research funding? Regulator?
But that’s the university not us
 Business schools to a significant degree already operate in
this new world:




Range of non-public funding relationships
Deliver full-time, part-time, corporate programmes etc
Familiar with delivering to consumerist students
Requisite skills – business development, marketing, alumni
relations
 Likely beneficiaries of evolving undergraduate student
choice – albeit at expense of other disciplines …

… so you think we can escape …
 Major impact will be indirect – the impact of changes on other
parts of university:
 Increased need for cross-subsidisation to preserve discipline mix
 Stressed relationships - ‘The rich baron, the poor king and poor rival
barons”
 Place and role of business schools within universities
 Need to evolve further to thrive in this brave new world:
 Threats to income streams – corporate sponsorship and alumni giving
 Position business schools as’ strategic’ with policy makers – STEM(M)
 ‘Age of austerity’ – rationalisation, efficiency and mergers
REM … “Everybody Hurts” or “Shiny Happy People”?
 Rationalisation:
 Programme provision and institutional specialisation/positioning
 E.g. – LMU “focus on high demand courses such as business”
 Efficiency:
 Models of delivery –technology, staffing mix and lifelong learning
 Shared services – back office and student facing
 Mergers:
 Reactive to safeguard ‘failing’ institutions (forced marriages?)
 Proactive to create ‘super’ institutions e.g. Sweden/Netherlands
There are new kids on the block
 Mixed economy of provision
 Non-profit – For profit – Corporate universities/schools
 National and multi-national universities/schools
 Standalone schools and university based schools
 Emergence of BRIC economy universities/schools
 Private equity interest in sector – BPP in UK and multiple
emerging PE backed institutions in Asia
 Looking outside the box – possibilities engendered by the
Wikipedia and Facebook world
So where does that leave us …
 Challenging of assumptions about the organisation, operation
and financing of universities
 Globalised university (and business school) environment
undergoing seismic change
 Responsibility of business schools to support the academy
and limits of cross-subsidisation
 But …
 these are not challenges, they are opportunities waiting to be
discovered …
 and where have you heard this type of thing before …
From the same people who said “this really won’t hurt” …