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Tilden Watson, Head of Education at Zurich Municipal

How the HE sector can manage the risk of Brexit

Brexit will mean a lot of changes for UK universities. Here are some tips to help survive them

Posted by Stephanie Broad | October 31, 2016 | International

By Tilden Watson, Head of Education at Zurich Municipal

The UK’s vote to leave the European Union (EU) has created an environment of uncertainty for higher education. Uncertainty means that there is no clear direction, and major questions remain over the future of funding and migration of staff and students.

Part of the reason for this is that UK universities have close ties with Europe. Hundreds, if not thousands, of research partnerships exist between British universities and European institutions. The Higher Education Statistics Agency puts the number of EU students currently studying at UK universities at roughly 125,000. The 32,000 EU academics currently in post are said to make up 17% of UK university teaching and research positions.

It’s therefore clear that Brexit will pose a number of significant risks for universities.

According to Zurich Municipal’s report, ‘New world of risk: life outside the European Union’, the loss of EU funding will land a particularly damaging blow. Each year, UK universities receive significant funding from EU institutions. EU research grants alone account for around 2.6% of UK universities’ total income, and 16% of their research funding. In fact, British universities have been some of the most successful at attracting EU funding. Loss of access to EU funding sources is likely to lead to a black hole in budgets and reduced interest in UK universities from prospective students and staff. In short, UK universities will be less competitive.

Attracting students and staff is another key concern for universities – and one that is exacerbated by the other risks. For example, loss of research funding and greater barriers to conducting cross-border projects will ultimately affect research activities. Research quality is of fundamental importance for league table rankings, and is also a major factor in deciding whether to work or study at a particular institution. Brexit is also likely to increase barriers to EU citizens working or studying in the UK, for example via more stringent visa requirements or higher course fees. Fees are an area of particular concern, as they are a primary funding source, and it is presently unclear what EU students will be charged when the UK exits.

This inability to plan for the future means that decisions are being made that could harm universities in the long term

Another key concern is the diminished organisational agility of higher education institutions. Given the significant uncertainty, universities are struggling to take informed key business decisions and plan for the future. This is in part as universities have to plan far in advance. For example, if a department suffers a large drop in applicants or a loss of key staff, the institution cannot simply take the decision to close that department, forcing it to potentially run certain operations at a loss for several years until it can phase them out. This inability to plan for the future means that decisions are being made that could harm universities in the long term.

Changes to laws and regulations will also have a negative impact and bring about new risks. A large amount of work has been carried out since the creation of the EU to harmonise laws and regulations across member states. This benefits universities, making it easier for them to employ staff, conduct cross-border research, establish procurement contracts abroad and recruit international students. Brexit is likely to lead to a growing divergence between the UK and EU countries, increasing the cost of doing business and potentially acting as a barrier to attracting both EU students and staff.

Regulatory passporting, the exclusion of Britain from the Erasmus programme, reduced access to finance and a pensions black hole, brought about by the post-Brexit vote turmoil in the financial markets, are some of the other major risks on the horizon.

 

It is possible for universities to prepare for and manage some of the risks

Fortunately, it is possible for universities to prepare for and manage some of these risks.

First, all universities should conduct a risk audit to establish their own risk landscape. This should involve looking at all of the areas discussed above as well as evaluating the risks by its likelihood and severity. Universities should also test their resilience against particular scenarios, such as a dramatic fall in international student applications, in order to fully understand their risk landscape. Experts such as Zurich Municipal have dedicated teams that can help advise on risk audits and scenario planning within higher education.

Once universities have established their risk landscape, they should take steps to deal with the uncertainty. Universities should, for instance, consider ways to dampen or manage the financial impact of Brexit, whether that’s from the cuts in funding or the impact of Brexit on student numbers. This could include planning ahead for a hike in EU student fees and the impact on student numbers that this could have, or diversifying to protect the bottom line.

Universities should also investigate ways to attract student and staff, despite Brexit. Boosting teaching could help institutions attract funding and convince EU (or other foreign) students to pay higher fees or academics to pursue a career in the UK.

It’s also crucial that universities continue to invest in their international ties. As ties with Europe risk getting weaker, UK institutions should do all they can to engage with their European colleagues but also continue to invest in their wider networks, such as the many campuses set up by institutions in China, the Middle East and elsewhere. Universities should also look to developed further successful and popular exchange schemes.

It’s also worth noting that in any complex risk landscape there will also be new opportunities. Whilst Brexit will no doubt mean hard times ahead for UK universities, institutions should also look for ways to use the situation to their advantage. For instance, recent changes in currency values have made existing EU funding worth more – and course fees relatively cheaper for many foreign students. 

The uncertainty following the EU referendum has been significant, and universities are likely to face significant hurdles going ahead, but managing or dampening risks can help most institutions deal with a post-Brexit world of academia.  

 

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