Can the higher education sector increase the nation’s human and intellectual capital, and put it in the right hands?

How universities can expand the nation’s 'stock and flow'

The Government’s plan

The Government published its productivity plan last Friday. Rather than universities having a bit part to play on the large economic stage, the Government emphasised their role in terms of graduates and skills, research and business links.

This is a challenge which should rally partners across the higher education sector. For HEFCE, this includes Government, other higher education, research and innovation funders, and the National Centre for Universities and Business. But most important we need to work with universities and colleges through their partnerships for productivity – with businesses, cities and places, students and graduates.

The essence of the Government’s plan is to increase the nation’s long-term stock of high-quality knowledge, ideas, expertise and skills – our intellectual capital – and to improve its spread and flow, so that it reaches the most dynamic parts of our economy and areas of need.

The Government’s plan sets out why productivity matters. The UK has the strongest growth in GDP and the fastest-rising levels of employment of all G7 nations.  However, our productivity – the effort we need to put in to produce GDP – is 17 per cent behind the G7 average. This affects our competitiveness and ability to trade and export, but also affects our wage levels and hence living standards and quality of life.

So we need not just more jobs, but more good jobs – and to do this, we need to help businesses and public services improve their productivity so they can create these better jobs.

Funding quality research

We have some of the foundations for the Government challenge in place. The introduction of the Research Excellence Framework (REF) has shown us where excellent and impactful research lies throughout the higher education system.

Applying REF assessments to our funding ensures it supports high-quality research. It also places research funding in the hands of universities who can form the best partnerships for productivity. This drives funding to wherever excellence is found, and towards opportunities for productivity gain in public and private sectors.

The Government’s plan reflects the importance of HEFCE role’s through its commitment to the dual support system in research.

Strategic investment

The UK Research Partnerships Investment Fund (RPIF) is similarly flagged in the plan as an important vehicle, addressing both ‘stock’ and ‘flow’ challenges.

RPIF helps build critical mass of research, facilities and equipment for public and private use. It also increases flow of expertise in the use of specialist equipment, of knowledge into productive parts of the economy (which are committed to investing in research and development, and innovation), and of very highly qualified people.

The fund also demonstrates how long-term public investment in stable institutions such as universities as part of innovation systems can increase confidence in the private sector to invest.

Similarly HEFCE’s funding for knowledge exchange, through HEIF, praised by the Dowling Review, has increased the stock of capabilities at universities – professional, entrepreneurial and leadership and management – to develop further partnerships and increase co-investments.  But these capabilities will be tested. The plan sets a new challenge to universities to add a further £1 billion to the present £4 billion in knowledge exchange income by 2025.  The UK already ranks fourth in the world for its university-business links, so this aim starts from a strong track record of success.

Skilled graduates

The Government’s evidence suggests that a 1 per cent increase in the share of the workforce with a graduate qualification raises long-run productivity by 0.2 – 0.5 per cent. Increasing the stock of graduates in the economy added 20 per cent to GDP between 1982 and 2005.

The plan references a number of changes to higher education teaching funding, and the challenge will be to address key issues to serve productivity better.

To build on the nation’s fund of talent, we need to ensure that all who can benefit from higher education do so. To increase the stock of well-skilled graduates, we need to develop excellent teaching and engagement with employers, particularly across science technology, engineering and maths. To support long-term productivity gain, we also need to improve the flow of graduates and postgraduates into the right areas, including critical public professions.

The challenge ahead

Clearly all of this is a big challenge and HEFCE needs to do more, working with partners.

The Government has praised the main focus of UKRPIF on excellent research, but wants us to think more about locational benefits and increased collaborations.  Silicon Valleys are very rare – what kinds of locational benefits could we seek out of research infrastructure investments?

Our Catalyst Fund has supported a wider range of infrastructures to deliver technical skills and innovation, as well as collaborations and clusters. Where should this fund focus to help further productivity partnerships, including building on the vital anchor role?

How do we map and measure these types of partnerships and benefits from our capital investments?

Can higher education do more to help with the challenges of improving technical skills pipelines, flagged as critical to productivity?

How do we balance increasing co-investments in knowledge exchange with increasing flow, such as into SMEs?

How can we develop our local growth programme to help  further the critical productivity partnerships with cities, places, local businesses and public services, and enable universities to play a lead intelligence role in science and innovation audits?

And how are the various balances in changes to teaching struck?

This article is the second in what we hope will be a series of articles exploring the puzzle of productivity, and we would like to invite experts to contribute answers to these questions – and pose their own.


To propose an article on the subject of productivity please contact us.