Cost of drop in students estimated at £6bn

A new report has concluded that a drop in student numbers – estimated at 30,000 this year – could cost the UK economy £6 billion over the next forty years.

The report was produced by consultancy firm and University Think Tank London Economics. Its findings also included the fact that the Treasury gains £94,000 for every student that is educated to Bachelor's degree level. This is mainly due to the taxes that these higher income earners will contribute.

London Economics took into account all the costs and concluded that the Treasury secures a 10.8% net return on its initial investment in funding an undergraduate degree.  A Master’s degree ensures an even higher haul, the report claims: the Treasury gains a 25% net return, with the average Master’s student providing a £62,000 return in future taxes.

The report is titled ‘What's the value of a UK degree?’ and was published by Million +, which represents a number of post-92 universities.

The report states that the impact to the UK economy of the fall in student numbers this year would be severe.  A reduction of 30,000 undergraduate students, it says, would cost the UK economy at least £6.6 billion over the next 40 years.

Patrick McGhee, Chair of the University Think Tank Million+ and Vice-Chancellor of the University of East London, said the report showed why ‘government investment in higher education remains a remarkably good bet, even in these challenging economic times.

‘As well as opening up new opportunities for individuals, the Treasury reaps exceptionally high returns from its investment. If efforts to increase access to university are not sustained, these significant benefits could be eroded with longer-term consequences for the economy as well as individuals.’

The report also focused on the impact for individuals going into higher education. It estimates that the average net earnings benefit for graduates was £115,000 over a working lifetime. A Master's education gives, on average, an additional premium of approximately £59,000.

It also identifies other ways in which universities benefit the UK economy. For example, higher education exports are valued at £8.8 billion, of which approximately £7.6 billion is related to international students coming to study UK universities.