London campus income advantages ‘outweigh increased costs’

The income benefits of running a university campus in London have been highlighted in a report on the large regional variation in costs and student recruitment in England.

The study, carried out for the Higher Education Funding Council for England by the professional services firm Deloitte, looks at the costs of university staff in different regions after allowing for other factors that can influence wages, such as an individual’s experience and an institution’s performance.

It shows that academic staff cost between 12 per cent and 14 per cent more than the national average in inner London, while for administrative staff the difference can be even higher.

The report quotes figures on the differences in estates costs, which, although not controlled for other factors, show that London institutions can face paying three times more than the national average.

Despite this and the extra staff costs, it is estimated that institutions in the capital recruit about 40 per cent more overseas students and 50 per cent more postgraduate students than the national average, even after allowing for factors such as perceived quality and reputation.

The report does not attempt to directly compare monetary costs and benefits as data on fees are not included.

But figures from the Complete University Guide’s comprehensive survey of overseas and postgraduate fees, published by Times Higher Education last summer, suggest that London overseas student fees can be up to 12 per cent higher than the national average while postgraduate fees can be up to 27 per cent greater.

Given that universities in the capital already receive London weighting in their Hefce funding – and may get extra funding from research council grants to compensate for their location – the report suggests that institutions based in the city will benefit overall in terms of income.

The figures might explain why there has been an explosion in the number of London branch campuses in recent years.

Phil McNaull, chair of the British Universities Finance Directors Group and finance director of the University of Edinburgh, said that it was “reasonable” to ask whether there was a “competitive advantage in a low-cost, northern region university setting up a branch campus”.

However, he said, universities from outside the capital had to first think about whether a London offshoot could “replicate” the student experience of the parent institution.

Meanwhile, the data also suggest that some universities might derive more of an advantage from the regional variations in costs and student recruitment than others.

For instance, the figures on student enrolment suggest that the East of England tends to recruit more students than the national average even though its costs – for both staff and estates – are closer to the average than other regions.

At the same time, areas such as the North West appear to struggle to attract postgraduate and international students while not necessarily being compensated to the same degree by lower costs.

This might raise the question of whether regional weighting in funding should be considered across the board and not just in London.

However, Karel Thomas, executive director of the BUFDG, cautioned that regional adjustments had the potential to cause “some strange results” and that funders would need to be clear about their goals.

“If adjustments could lead to genuinely enhanced student choice and opportunity, or join up the government’s industrial strategy with strategies for higher education teaching and research, then [they] could work. However even with good intentions, unintended consequences are inevitable,” she said.

simon.baker@timeshighereducation.com