UK education still a world leader with a key economic role

Richard Robinson, Head of Education, discusses a sector returning to ‘normality’, the potential of edtech and the funding and investment challenges ahead for schools, colleges and universities.

Richard Robinson

Head of Education, Barclays Corporate Banking

A look back at 2022

2022 was the year when education providers largely returned to something approaching ‘normality’, with students back on campus and learning face-to-face.

However, it also became clear the sector is definitely not the same as it was pre-pandemic: the challenges of Covid-19 have not only validated online learning platforms but have also massively accelerated the rise of education technology and I feel sure the next few years are going to be a real boom time for edtech businesses as they enhance the learning that is delivered in the classroom or lecture theatre.

Despite concerns raised during the pandemic, higher education (HE) in the UK bounced back well and remains the destination of choice for international students, second only to the US. I believe we still have a world-class HE system and people want to come and study here, which is positive.  

Another ongoing positive around our universities that I want to briefly spotlight here is the critical role they play in supporting the UK entrepreneurial ecosystem. A new Barclays report looks at how academic institutions support founders and help to unlock their potential to create start-up companies.  

For further education (FE), it was a year of relative stability. In a sector that's been through a huge amount of stress because of restructuring, it was telling that there were no new colleges in difficulty referred to the FE Commissioner during 2022.

Impact of recession on funding

Education will be directly impacted by decisions on public spending as the government tries to balance the books and battle inflation. 

Right now, it doesn’t look like there is going to be a huge amount of increased funding for education, although that doesn't mean a funding cut. For schools and colleges, with no independent control over funding, if costs continue going up, those jaws will really bite.

Funding for colleges is now out of their hands because of the decision in November 2022 to reclassify the FE sector in England as public sector, meaning institutions are no longer able to enter into their own financing transactions.

Exactly what this change of status means is unclear and I’m sure that uncertainty will be making colleges nervous about their future – but we are keen to continue supporting our clients through this period of change.

On the positive side for colleges, times of recession usually lead to some people retraining to find employment and FE should have a really important role to play in providing people with the right skills, such as those needed in green and digital technologies, that are going to provide jobs for people whose industries have been disrupted or replaced. 

For the time being, HE can supplement its public funding by recruiting international students. However, the debate around how the UK controls immigration has thrown up concerns around restricting where international students can study. If that idea becomes policy, some universities will lose substantial income from international students, potentially creating acute cost pressures.

Challenges ahead

While that issue is still in the balance, I think universities have four big challenges looking ahead. The first is to invest in the student experience – quality of lecture theatres, labs and so on – to help to persuade students to continue to choose their university rather than a rival or the jobs market. 

Tied into that is universities having more control of student accommodation after several allowed private providers to take over responsibility for this key part of every student’s university experience. During the pandemic, when some providers refused to refund rent for accommodation that couldn’t be used, many students blamed their universities – even though the institutions had no part in the decision.

Thirdly, universities must continue to invest in technology, including general systems infrastructure, digitisation of admin processes, use of artificial intelligence and the high salaries that technology staff posts often attract. Increasing investment in big data is bringing benefits in everything from student wellbeing to identifying energy efficiencies on campus. 

The final challenge is delivering on net zero promises. With climate change being so important to students, universities can’t afford to get this wrong and should ensure they have robust plans to achieve the 2030 targets that many have put in place.   

The latest Government energy support package will see the Price Cap removed at the end of March for businesses in England, Scotland and Wales, replaced by a new discount mechanism based on wholesale prices. All businesses are likely to see a rise in costs although energy-heavy sectors will see higher discounts available with the impact in the education sector varying depending on when fixed deals expire.

Growing demand for education 

For the 2,500 or so independent schools in the UK, a big talking point in 2023 will be the Labour Party’s plans to apply VAT to student fees as this would obviously make them more expensive and pose a potentially existential threat to some.

It may be some years before that proposal becomes law, if it does at all, but in the meantime, HE, FE and schools will continue to benefit from the fact there's simply more people needing to be educated. Demographic predictions show most age groups under the age of 18 will see rising numbers from now until 2031 so there’s growth expected for everyone.

Institutions will need to plan and budget accordingly for that and, of course, we want to continue our support in helping to do just that. Education providers are efficient in treasury management, but there are always ways to improve it and, in turn, deliver better services and outcomes for students. 

Summing up, while there’s uncertainty around how much of the funding pie education will get in a return to austerity, the UK education sector is still a world leader and will continue to have a vital role to play in our economy through reskilling and retraining.

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