The economic impact of UK higher education institutions

Abstract

The economic importance of higher education is now well recognised and the contribution that it can make to the development of both national and regional economies is attracting significant policy attention in the UK. Higher education is seen as being of key importance in the creation and transfer of knowledge to the UK economy through its teaching, research and other activities. Both the White Paper on 'The Future of Higher Education' (2003) and the Lambert Review of University-Business Collaboration (2003) envisaged the sector as playing a pivotal role in ensuring the country's economic competitiveness. Higher education can impact on the economy in a very wide range of ways. Increasing attention is being paid to the contribution of higher education to the stock of human capital, with continuing analysis of both private and social rates of return to graduates. Higher education is also considered to have an important impact on the social and cultural environment, and this in turn has an impact on the economic environment within which business operates. However higher education institutions are also independent business entities and the economic activity generated by institutional expenditure (the aspect of sector's economic contribution which is most readily quantifiable) is substantial. The extensive scale of higher education institutional activity across the UK also means that this can be of significant importance at the macroeconomic level. This study presents key economic features of UK higher education in the academic and financial year 2003/04 and those aspects of its contribution to the economy that can be readily measured. Analysis is made of the sector as a conventional industry, highlighting major economic characteristics of higher education institutions including their sources of revenue, employment created, output generated and export earnings attracted. Modelled estimates are made of the economic activity generated in other sectors of the economy through the secondary or 'knock-on' multiplier effects of the expenditure of the higher education institutions, their staff and that of international students and visitors attracted to the UK by the higher education institutions.

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