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The Kerslake Collection | Local economies and politics

Universities and business collaboration

Estimated Read time: 12 Mins

I have always felt it to be a cruel irony that the United Kingdom is blessed with high-performing universities in each and every part of the country, but suffers from such stark and deeply embedded economic disparities. Many of the UK’s universities are landmark destinations – attracting domestic and foreign students to their local areas – yet some parts of the towns and cities in which they are located face enormous and enduring problems of deprivation, worklessness and lack of opportunity. 

But this state of affairs merits deeper consideration than simply judging it to be an irony and moving on. How can these dual phenomena simultaneously exist? What does that tell us about the role that our universities play (or perhaps don’t play) within their local economies? And what are the levers at a university’s disposal that they can pull to support the jobs, growth and economic prospects of the places in which they are located?

A short essay of this sort does not allow us to explore all these issues in the sort of depth that is required. But it is my view is that many universities have not been ambitious or deliberate enough in their attempts to play a role in developing their local economies. 

Often, when universities are asked about their contribution to local economies, they point to their status as anchor institutions. As large employers, significant purchasers of local goods and services and, often, potential developers of local land, there is an important story to tell here, no doubt. But their actual impact as anchor institutions is clearly not sufficient to radically enhance the economic performance of a local place – not if one accepts the underlying contradiction at the heart of this essay, at least. 

So how might universities play a more active and effective role in working with local businesses, to support local economic outcomes? 

The starting point must be to treat this as an explicit and organisational priority. Increasingly, universities are thinking about their local stakeholders, including schools, communities and other local groups. That is an important element of the civic-university agenda – though it was being thought about before the Civic University Commission was established, of course. But the local business community still remains something of an afterthought for too many institutions (or, if it is front of mind, a number of these institutions are not being particularly effective). 

Universities might argue that they support the business community through the general educational function they provide – but there are legitimate questions as to whether students are consistently gaining an education that equips them for the modern workforce. Estimates from the Institute for Fiscal Studies suggest that a fifth of undergraduates would have been better off had they not chosen to go to university. Quite aside from the implications for individual students, this is hardly a sign that universities are serving the business community as well as they might. 

But even if one accepts, as I do, that the vast majority of university degrees are helping students gain valuable skills and become more employable, this does not necessarily mean that universities are having the positive impact on local businesses and their local economies that they might. 

Those in universities can point to all manner of useful activities they undertake, which serve to drive economic growth, deliver prosperity and support businesses. Many offer Business Studies classes or MBAs, and there are business schools around the country whose primary purpose is to help those who attend them to secure positive business outcomes in the future. But the fact that, despite these various activities taking place, we are left with such stark disparities and anaemic growth in so many parts of the country proves the point: too few of the benefits that these activities generate accrue to the area in which the university is located. 

So how might universities go about supporting local business and enterprise? There are two broad areas that need to be considered. Firstly, universities need to think about how they can ensure that more of the graduates they produce stay in their area in the short, medium and long term. Secondly, they need to consider how they might work more closely and effectively with businesses in their local areas. 

These broad areas are two sides of the same coin. Tackling the brain drain from local areas will almost certainly rely on a close working relationship with the local business community. And if universities can help local businesses succeed then it seems inevitable that more students will stay in the area. Their overlapping and mutually reinforcing nature strengthens the case for focusing on these topics.

At the moment, far too much of our university talent is drawn to London and the South East, as Office for Students statistics show. A pre-pandemic report suggested that around 70 per cent of London graduates planned to stay in the capital after they finished studying – but no other region in England had more than 30 per cent of its students planning to stay there upon graduating. When asked about motivations, unsurprisingly, most students talk about wanting to base themselves where the jobs are – a reasonable position to take. This makes it clear that the only way to break this self-fulfilling prophecy is to create and promote employment opportunities in local areas. 

Self-evidently, it is not for universities themselves to create the vast majority of employment opportunities that would be needed to significantly enhance the economic prospects of a local area. But they have an essential role to play in working with the local business community to help ensure that those opportunities are recognised, understood and captured. There are good examples of where this has taken place – for example, Queen’s University, Belfast worked closely with Citibank to ensure that there were graduates well trained for future employment with the international bank when it chose to locate in Northern Ireland. 

Beyond training students for specific local jobs, there are a number of other steps that universities might take to drive local employment opportunities. As last year’s independent review of university spinout companies made clear, many UK universities have supported the growth of local spinouts and the development of the ecosystems they operate in – but, as the report itself concluded, there is further to go. If we want to turn these spinouts into scale-ups – and we want them to retain their local links – then the ecosystems in which they operate need to develop around them. As the review also made clear, this will rely on ‘universities playing a vital role in establishing the public-private partnerships that mature the ecosystem’. 

Spinouts come from within the university, of course, but if a university is serious about securing positive local business outcomes – and is in the process of developing an ecosystem designed to support entrepreneurship – universities could do more to support entrepreneurial activity in that local place. 

In particular, they could consider providing the same facilities and level of guidance to local entrepreneurs as they do their existing spinout companies. Offering entrepreneurship programmes, where local residents can access resources, training and perhaps the opportunity to collaborate with students, would support a local economy, but might also expand a university’s spinout portfolio. Providing business incubators or accelerators can also help local businesses to grow –through offering mentorship, office space and networking opportunities. 

If universities feel that opening up their facilities and programmes to local businesses is a step too far, they could instead offer continuing education and training programmes – helping businesses gain new perspectives and develop new skills. 

But perhaps the most effective way of supporting local businesses, directly addressing the brain-drain challenge and living up to the values of being a civic university, is through programmes that are predicated on student-business collaboration. 

What might this look like? Well, at its most simple level, it could be universities offering internship programmes or consulting services suited to local businesses (at cost or free of charge). The local businesses could benefit from business strategy, marketing, accountancy support or help across other business services, while students would gain valuable experience and a deeper insight into the opportunities available at the local level. 

Many of these ideas might be seen as obvious – and clearly many universities already have them in place. But where they are in place, can universities really say they are effective? If so, how do they explain the enduring disparities that affect our country so badly?

Perhaps they need to be implemented more effectively – or new approaches need to be taken. 

To give themselves the best possible chance of bringing their student body closer to the business community, universities would be well advised to take an even more deliberate approach – and one that focuses on the sorts of activities that are likely to lead to improved business performance. In particular, their efforts could be focused on a) research and innovation in the local area, and b) supporting local exports. 

Self-evidently, UK universities have a strong story to tell about research and innovation. The aforementioned success of UK spinouts is a part of that success story – but it is only one part. In the last Research Excellence Framework, 84 per cent of UK university activity was found to be world leading or internationally excellent, and UK publication and citation numbers rank among the highest in the world. 

There is no doubting the economic impact, either – with Higher Education Innovation Funding resulting in a 10:1 impact, and the Knowledge Transfer Partnership generating £8 of gross value added for every £1 invested. 

According to Universities UK, research activity is equally spread around the UK – but can the same be said for the economic outputs that stem from that research? Self-evidently not. Presumably that is because although ‘activity’ 

is spread throughout, the lion’s share of funding goes to London and the South East. Perhaps even more pertinently, the approximately £1.5 billion of contract research delivered by universities to businesses and other non-commercial organisations each year is not geographically balanced.

Universities clearly cannot collaborate with partners that don’t exist. But if universities can engage in more innovation partnerships and research collaborations at a local level, then they will draw more links and create more opportunities within their local economy. 

This is particularly true if universities are going to play a full part in developing clusters in areas of sectoral strength for local areas. Forming cluster innovation boards at a local level would provide a way for universities and local businesses to come together to discuss collaboration at scale. 

Universities could also do more to support export-led growth in local areas. Often, universities are the most international institutions in a local area – blessed with students from scores of countries, with language skills, cultural understanding and, occasionally, pre-existing commercial links into other markets. Yet too few universities capitalise on this resource – or help local businesses to do so – despite the fact that they are often looking for evidence to justify the large number of international students who now study at UK universities. 

Export promotion programmes should be established to connect international students with local businesses. These programmes could be run through a local council or a chamber of commerce, and would help students to gain valuable experience, as well as helping businesses to consider, enter or further develop international markets and helping to support economic opportunities in the local area. 

How might we encourage universities to engage in more activity targeted at local businesses? Typically, this comes down to a choice between carrot and stick. 

On the carrot side, new funding could be put in place, of course – additional Higher Education Innovation Funding could be provided to support more university activities focused on supporting local entrepreneurship or fostering local research collaboration. Support for export promotion programmes could come through the Shared Prosperity Fund – or new funding programmes could be established to support these and new cluster innovation boards. 

The more stick-like approach would be to judge universities on their achievements in these areas. The Higher Education Business and Community Interaction survey offers some helpful indicators, but new statistics would probably be needed to measure how universities perform in terms of improving local economic activity. If universities were not just measured on this, but if funding were tied to the results, we could expect most universities to improve their performances pretty rapidly. 

Personally, I’d prefer neither carrot nor stick – but for universities to regard this as a key part of their civic mission and to act accordingly. 

One final idea, which would most likely require new discrete funding, is a bold measure aimed at tackling the phenomenon of so many of our high-quality students heading to London almost as a matter of course. 

I recommend that central and local governments consider fiscal measures to retain graduates in those areas where there is a university and the local economy performs at a certain level (to be determined) under the national average. 

Measures such as varying student-loan repayments, or granting partial or full council-tax exemptions (which could be done by amending the Council Tax (Discounts Disregards) Order, 1992) could be introduced – and would serve as a sharp incentive for graduating students to stay in a local area. 

It would be both churlish and absurd to suggest universities don’t deliver positive outcomes for UK businesses. From their education of students to their world-leading research output, they’re a vital part of the UK’s economic story. But they can and should do far more to support local businesses and the local economy, as a key part of their civic agenda. 

Students, ultimately, are the engine room of tomorrow’s economic future. Many of the measures considered in this essay are, therefore, focused on helping students to become more exposed to local businesses and to build relationships between the student body and the business community. If we can draw these worlds closer together, from the time a student starts at a university to the day they graduate, we will have a far better chance of universities driving local economic performance in the future. 

Nick King

Estimated Read time: 12 Mins

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