Dear Secretary of State for Education,

Congratulations on your recent win! We are hoping that you are settling into your new role and that you manage to hang around slightly longer than some of your predecessors (10 in the last 14 years must be something of a record).

As you may know, we act for over 100 higher education institutions in the UK. Given that sector expertise, we thought it would be helpful to let you know the top 6 things which we think our clients would like to see from an incoming government to help them navigate the challenges ahead.

1. Allow universities to be the engine room for growth

We know that growth is high on your government’s agenda. For all the financial headwinds that universities have been facing, and continue to face, the ability of universities to translate their research into commercially viable businesses is one of the massive success stories of the sector.

Higher education spin-out companies can bring to market cutting-edge research and technology and, in so doing, create jobs and contribute to economic growth. Your government will want to work with universities, funders and other key stakeholders to grow the sector’s capacity to create spin-outs, and to improve outcomes for university research.

2. Support universities in recruiting international students

The economic and cultural benefits brought by international students are considerable.  While you will no doubt want to undertake a wider review of higher education funding, we would remind you of the simple economic truth that, in the absence of an increase in the undergraduate tuition fee, cross-subsidy from the uncapped fees on international students is an entirely understandable response to the declining value of the unit of resource.

3. Make an improved regulatory and financial model a priority

Back in September last year, the House of Lords Industry and Regulators Committee said: “It is vital that the Government urgently puts in place a stable, long-term funding model for the sector”. That remains an urgent priority. Alongside the review of the funding model, the government needs to consider the future powers and role of the Office for Students. As the OfS itself said in its recent report on the Financial sustainability of higher education providers in England: “we do not have the powers or remit to intervene to preserve provision or providers in support of sustaining the system as a whole”. For the good of the sector, you will need to think about how best the regulator can support providers and the higher education system as a whole and the powers it would need to do this.

4. Give universities some breathing space

The last few years have been difficult ones for the sector, coping with a variety of policy challenges against a backdrop of increasing economic headwinds. However, it’s an incredibly resilient sector involving some fantastic people, ranging from committed staff and senior management through to some amazing external volunteers who, as governors and trustees, provide invaluable experience, expertise and scrutiny. Given the turmoil of recent years, one of the most important things an incoming government can do is to give the sector some breathing space and allow institutions to get on with the job in hand.

5. Recognise that our universities are a world class asset

You won’t need to be reminded of how UK higher education punches above its weight on the international stage, whether that’s viewed by reference to academic league tables, research impact, international collaborations or by its popularity with international students. However, there is another sense in which universities are a world-class asset: as a sector, they attract significant investment from institutional investors and bank lenders both at home and abroad. Whether it is a UK life assurance company supporting a long-term student accommodation project or a US pension fund providing funds for capital investment, UK higher education has long been seen as a stable “asset class” by those seeking to put their money to work. While the financial challenges of the last few years have undoubtedly increased the risk profile of the sector, the desire of banks and institutional investors to support the sector remains strong.

6. Universities need help with lumpy cashflows

One of the most common concerns we hear from clients is the lumpiness of UK tuition fee payments. While we are sure that there are good reasons for payments in October (25%), February (25%) and May (50%), it means that September and April are always low months in cash terms. Anything you could do to smooth out the payments would be welcome. While September may be a bit of a struggle, as students won’t necessarily have signed up then, clients tell us that even 10% in April and 40% in May would be a big help. Anything you can do in this regard, while you are looking at the funding model more generally, would make a positive impact.

Good luck with your new role. It is a fantastic sector and one we are very proud to support.

Yours sincerely,

Mills & Reeve

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