The future size and shape of HE - Universities UK

Index of tables6 Table 1 Demographic-based projectionsof full-time undergraduatestudent numbers, 2019/2020 and2026/202710 Table 2 Key areas of uncertainty and axesof uncertainty17 Table 3 Demographic-based projectionsof full-time and part-timeundergraduate student numbers18 Table 4 Demographic-based projectionsof full-time and part-timeundergraduate student numbers,2005/06 to 2019/2019 Table 5 Age-related populationprojections for the English regionsfor 202020 Table 6 Comparison of projected studentnumbers by student market in UKhigher education using the GAD2006-based and 2004-basedpopulation projections21 Table 7 Uncertainties in the demographicbasedprojections of studentnumbers by 2026/27 arising frommigration and the changing socioeconomicmix of the population22 Table 8 Full-time undergraduateenrolments by domicile:1999/2000 to 2005/200623 Table 9 HEFCE estimates of number offull-time equivalent studentsaffected by potential withdrawal ofELQ funding25 Table 10 Estimated impact on studentnumbers from common trendsand policies against the centraldemographic projection by2026/2730 Table 11 Key areas of uncertainty and axesof uncertainty38 Table 12 Comparison of the three scenarioson key characteristics44 Table 13 Summary of projected home andEU full-time undergraduateenrolments in the UK highereducation sector under differentscenarios in 2026/2745 Table 14 Summary of projected part-timefirst degree and otherundergraduate enrolments in theUK higher education sector anddifferent scenarios in 2026/2746 Table 15 Summary of projected home andEU postgraduate enrolment in theUK higher education sector underdifferent scenarios in 2026/2747 Table 16 Projected international (non-EU)students by 2026/27 by mode andlevel48 Table 17 Summary of projectedinternational (non-EU) studentenrolments by level in the UKhigher education sector underdifferent scenarios in 2026/2748 Table 18 Student numbers in 2026/27 bylevel and mode under the variousscenarios19 Figure 1 Projected change in 15- to 19-year-old and 25- to 49-year-oldpopulations, 2006 to 2020 byEnglish regions and the countriesof the UKUniversities UKThe future size and shape of HE3

SummaryNature and purposes of this study1 This report takes forward the assessment of thefuture size and shape of the higher educationsector 1 in the UK in twenty years’ time, buildingon the demographic projections in the firstreport on this study 2 . It is essential to emphasisefrom the outset that this is not an attempt toforecast the future, but rather an attempt toprovide higher education institutions with somewarning of the possible challenges that lie aheadthrough the development of scenarios thatreflect possible futures for higher education sothat they are well placed to anticipate thosechallenges.2 The experience of the last twenty years showswhy it is so difficult to forecast developments sofar ahead. In 1987 demographic decline in thenumber of 18- to 20-year-olds was about to hitthe higher education sector. However, acombination of factors served instead to producea very rapid expansion at least up until the mid-1990s particularly in full-time undergraduatenumbers, which has resumed subsequently,mainly as a result of a demographic upturn.These factors included:p the introduction of a common qualification at16+ (GCSE) leading to increased numbersstaying on in education beyond the age of 16 inEngland and Wales;p the desire on the part of the National HealthService that new entrants to nursing and otherprofessions allied to medicine should beexpected to gain an initial higher educationqualification and to enter into partnership withhigher education institutions to deliver thisrequirement;p a significant change in the expectations ofyoung women and their families that theywould participate in higher education(partially fuelled by the developments in nurseeducation);p the introduction of a new public fundingmethod for full-time undergraduates, whichprovided a real incentive to institutions torecruit additional students.3 Apart from the obvious point that significantchange to the environment in which institutionsoperate can and does happen sometimes veryrapidly, the main conclusion from the experienceof the last twenty years is that the mostimportant factor is how well placed institutionsare to recognise the potential threats andopportunities posed by significant externalchanges and to respond to these changes inorder to grasp the opportunities and manage thethreats.4 It is also important to emphasise that this studyhas been predominantly concerned with thefuture of teaching and learning and, inparticular, the prospective level of demand forthe various student markets with which thepublicly funded higher education sectorengages. The study is only concerned withresearch activity to the extent that it is for someuniversities the primary determinant ofinstitutional reputation, which in turn is asignificant determinant of student demand,especially for students from outside the UK andat postgraduate level. Research activity is also,for some institutions, a major source of incomethat can serve, other things being equal, tomitigate the impact of any fall in income arisingfrom a reduction in demand from students forteaching programmes. The same argumentsapply to knowledge transfer activities whichoverlap with both teaching and research and canserve as an alternative source of income.5 Our approach has built on the demographicprojections and consideration of the mainstudent markets presented in our first report. Ithas included:p an assessment of the level of uncertainty inthe demographic projections arising fromuncertainty in the key assumption about netinward migration over the next twenty yearsand from changes in the socio-economic mixof the population;p an assessment of the impact of current andprospective policies (such as the introductionof the new diplomas alongside A-levels, andthe requirement for young people to remain ineducation and training up to the age of 18) andkey drivers of student demand, bearing inmind that policies can and do change inresponse to changes of government orevidence that policies are not delivering;p the development of three scenarios for thehigher education sector in 2027 based on keyuncertainties and the drivers underpinningthem (in particular the level of public andprivate investment in higher education, thelevel of competition from new non-traditionalproviders into the different higher educationstudent markets and the level of engagementby employers with the higher educationsector).Universities UKThe future size and shape of HE5

6 This analysis incorporates an assessment of thethreats and opportunities presented to thesector by each of the scenarios and is broughttogether to provide an overall assessment of thesize of the higher education sector by 2026/27under the three scenarios broken down by thedifferent student markets. We also provide ananalysis of how, under each of the scenarios, thepattern of institutions might be expected tochange.7 The final section of the report examines the wayin which universities might, individually andcollectively, be expected to seek to anticipatethese threats and opportunities, building on thestrategic planning and monitoring of theexternal environment that they alreadyundertake.Demography8 As our first report demonstrates, highereducation faces significant demographic changeover the next twenty years amongst the agegroups from which it traditionally recruits fulltimeand part-time undergraduates. Inparticular the number of 18- to 20-year-oldswho make up over 70 per cent of entrants to fulltimeundergraduate programmes is projected tofall sharply from 2009 to 2019 before rising againup to 2027. The older age groups, from whichpart-time undergraduates are mainly drawn,will, on the other hand, experience modestgrowth over the same time period.9 Table 1 below summarises the demographicbasedprojections for full-time undergraduatesfor 2019 and 2027 compared to current numbersfor the UK as a whole and the four countries ofthe UK. It should be noted that these projectionsassume no change in the current flows ofstudents between the different countries of theUK.Table 1Demographic-based projectionsof full-time undergraduatestudent numbers 2019/2020 and2026/20272005/06 20019/2020 2026/2027Students Students percentage Students percentage(000s) (000s) change (000s) change2005/06 to 2005/06 to2019/2020 2026/27England 976.8 930.1 -4.8 1,004.7 +2.7Wales 64.8 59.3 -8.5 61.6 -4.9Scotland 125.5 111.8 -10.9 115.0 -8.4Northern 31.7 27.5 -13.2 27.5 -13.2IrelandUK 1,198.8 1,128.7 -5.9 1,208 +0.8Source: Universities UK (2008) The future size and shape of thehigher education system in the United Kingdom: demographicprojections and GAD 2006 projections.10 These figures demonstrate both the sharpdecline to 2019 across the UK and also reflectthe different pattern of demographic change forthe key 18- to 20-year-old age groups across thefour countries of the UK. Demographicprojections for the nine English regions are notavailable on the same basis. However, the 2004-based projections for the English regionsshowed a variation in the decline of the numberof 15- to 19-year-olds from over 15 per cent inthe North East and the North West regions toreductions of only 4.7 per cent in the Easternregion and 7.1 per cent in London over the sameperiod. Although the pattern of recruitmentwithin England is complex, these differences arelikely to impact significantly on institutions thatrecruit most of their undergraduates locally orregionally.11 The 25- to 50-year-old-age groups from whichmost part-time undergraduates are drawn showa more favourable demographic pattern over thenext twenty years and the demographic-basedprojections consequently show a modestincrease in part-time undergraduates over thenext twenty years for the UK as a whole,although for Scotland the projection is for adecline in part-time undergraduates. SomeEnglish regions are also projected to experiencea decline in the number of 25- to 50-year-olds atleast up to 2020, which may produce a reductionin part-time undergraduate enrolments that ispredominately local.6

12 There are two major sources of uncertainty inthe demographic-based student numberprojections:p the uncertainty in the projected rate of netinward migration; andp the social class mix of the relevantpopulations.13 The student number projections also assumethat migrants and their children will behave inthe same way as UK-born citizens in relation toparticipation in higher education. There is no wayof testing out this assumption in the short termand we have therefore assumed throughout thatthere will be no marked behavioural differencesbetween new migrants and others.14 The 2006-based population projections preparedby the Government Actuary’s Department (GAD)and published by the Office for NationalStatistics (ONS) showed a sharp increase in theprojected rate of net inward migration comparedto the previous projections prepared in 2004.Given the political sensitivity of migration rateswe have prepared an alternative studentprojection using the 2004 GAD projection ofmigration, which was significantly lower. Overall,using this basis, student numbers in highereducation would be around five per cent lowerthan using the 2006-based populationprojections and full-time undergraduates 6.5 percent lower or nearly 80,000 across the UK as awhole.15 One of the major factors affecting the propensityto enter higher education is social class. It isknown that those from higher socio-economicgroups are more likely to achieve five GCSEsgrades A-C at the age of 16 and have a higherpropensity to stay on in education post 16 andgain level 3 qualifications at the age of 18 andhence progress to higher education.16 The Higher Education Policy Institute (HEPI), inits reports on projections of changing studentnumbers in England, has drawn attention to thechanging social class balance within the Englishpopulation and its possible impact on full-timeundergraduate demand 3 . There is a shift in thebalance between socio-economic groups asbirth rates in England have been declining fasteramongst those from the lowest socio-economicgroups. The changing balance in the socioeconomicmake-up of the young population istherefore one of the major uncertainties aboutfuture numbers gaining level 3 qualifications andentering higher education.17 Although it is unclear how far this analysis ofchanges applies to the socio-economic make-upof the population of the UK as a whole, weestimate that such changes could increase fulltimeundergraduate numbers by around 30,000by 2026/27, leaving a net uncertainty of around50,000 within the demographic-based projectionof full-time undergraduates.18 An important factor in the size and shape of thesector in twenty years time will be the way inwhich institutions respond to the decline indemand for full-time undergraduate placesimplied by these projections. One would expectthat competition for full-time undergraduatestudents would increase, but some institutionswill probably be able quite readily to maintaincurrent enrolment levels, although notnecessarily in every subject. It is interesting tonote in this context that, since 1999, during aperiod of demographic increase, full-timeundergraduate numbers have risen by over 18per cent across the UK as a whole. Over thisperiod not all institutions have, however,increased their full-time undergraduate places.Furthermore, a significant element within theincrease has been a 77 per cent growth in thenumber of full-time undergraduates fromoutside the EU, while numbers from the EU haveactually fallen, notwithstanding the newaccessions in May 2004.19 Other options for institutions as they respond toa reduction in full-time undergraduate numbersinclude:p seeking out new markets;p increasing the level of activities in areas otherthan provision for full-time undergraduates;p concentrating on niche markets;p increased collaboration to engage the marketbetter as with some current initiatives oninternational marketing and recruitment.Universities UKThe future size and shape of HE7

Factoring in current trends and policies20 We have identified and analysed four main areasof policy relevant to future student demand:p The government’s policies for 14- to 19-yearoldswhich aim to increase the proportion ofyoung people gaining level 3 qualifications andprogressing to higher education through theintroduction of diplomas and the requirementon young people to remain in education ortraining until the age of 18. The impact ofthese policies is uncertain but it should benoted that participation rates have scarcelyincreased since 2000. If these measures were,together, to achieve a three percentage pointincrease in participation in undergraduateeducation, the overall increase in entry wouldbe about 25,000 or 70,000 across all years,predominantly in full-time undergraduatenumbers.p The government’s decision to withdrawfunding for students studying for aqualification at an equivalent or lower level(ELQ) than one they already have willparticularly affect enrolments on part-timeundergraduate programmes by as much as40,000 students in total.p The trend for more young entrants to highereducation selecting to study part-time. This ismodest and from a low base. On currenttrends we would not expect a change of morethan about 3,000 students choosing part-timerather than full-time study over the nexttwenty years, particularly in the absence ofchanges in the pattern of student support.p The impact of the increasing level of studentloan debt on demand for postgraduate study.This could act as a disincentive to study atpostgraduate level immediately followinggraduation, but this effect is also likely to besmall, representing a reduction in demand forpostgraduate study from home students ofaround 5,000 a year.21 Outside of demographic factors we have notbeen able to identify any other current policies ordrivers of demand that are likely to lead tosignificant changes on their own.Scenario planning22 It is important to emphasise that scenarios aredevices for exploring a range of possible futuresin the context of significant uncertainties in keyareas. They are not forecasts of what willhappen.23 We used a two-stage process in developing thescenarios based on key uncertainties and drivers– a series of three seminars on key drivers ofdemand (funding for students and institutions;increased competition in student markets; andincreased employer engagement) and afacilitated scenario planning event based aroundaxes of uncertainty – essentially providing ameasure of the ranges of the key uncertainties.24 However, we also considered briefly, as iscustomary in scenario planning, the majorinternational and national developments thatcould have an enormous impact on the UKhigher education sector. These included climatechange, increased international terrorism, thebreak-up of the United Kingdom and theaccession of Turkey to the EU. All could have amajor impact on demand for higher education inthe UK, particularly on engagement withinternational student markets, but we judgedthat in the first instance these were issues andrisks for governments to manage rather than forinstitutions directly.25 The main conclusions from the seminar onfinance and funding issues were that over thetwenty year period:p in the face of increased competition for publicfunding (within generally less benigneconomic conditions than had been the case inrecent years) and in the absence of significantadditional funding from employers, anincreased contribution to the costs of highereducation would be expected from individuals– graduates and students from well-offfamilies – and these conditions were likely toapply across the whole of the UK. This shiftwas likely even with the possibility ofsuccessive changes of government;p higher education institutions faced asignificant challenge to manage performanceand secure long-term sustainability in the faceof increased staffing costs and pressures onincome;8

p public funding would continue to be availableto support widening participation and certainsubjects judged to be of national strategicimportance or to meet the manpowerrequirements of key public services. Certaintypes of part-time undergraduateprogrammes might gain access to publicfunding on a pro rata basis.26 The main conclusions of the seminar onassessing the potential impact of externalfactors on demand were as follows:p there were some downside risks to the UK’sposition in the international market, not leastthe desire of other countries to increase theirshares. The maintenance of the UK’sreputation and those of individual institutions– as well as the quality of service delivered –were key to minimising the risks;p there was likely to be some modest increase inprivate providers over the next twenty years,but falling short of a full opening up of the UKhigher education market;p the full application of digital technology to thedelivery of the curriculum and assessmentremained uncertain even on a twenty-yeartimescale because, so far, the investmentrequired had not been forthcoming in the UK.Nevertheless, the current generation ofundergraduates were the first to be fullydigitally savvy. Pressures from students couldprove to be a touch paper for the requiredinvestment. This together with developmentsin the technologies themselves such as handhelddevices accessing the internet wirelesslywere likely to drive developments of increasedapplications of technology in the learningprocess and the management of learning.27 The main conclusions from the seminar onemployer engagement were as follows:p notwithstanding the evidence to date oflimited engagement, there was a small butreal chance that over the twenty-year periodemployer engagement with the highereducation sector would have increased basedon the pioneering efforts of a few institutionswhich had recognised the possible synergiesfrom working with employers on severalfronts – enterprise, innovation, research andtraining and staff development. However, evenby the end of the period it would be limited to asubset of institutions;p the co-funding approach being adopted by theHigher Education Funding Council for England(HEFCE) carried inherent financial risks forinstitutions if employers did not keep thebargain or preferred more fully subsidisedprovision;p increased employer engagement required theemergence of a system of part- qualificationsbased on a properly articulated creditaccumulation and transfer system;p the demographic decline in the number of 18-year-olds might cause employers to competewith higher education institutions for youngpeople with level 3 qualifications.28 In the development of the scenarios a series ofkey drivers and their associated axes ofuncertainty were identified. These are set out inTable 2.Universities UKThe future size and shape of HE9

Table 2Key areas of uncertainty and axes of uncertaintyDriverLevel of economic growthPublic funding ofhigher educationGovernment regulationof fees and qualityCost pressureson institutionsQuality of provisionChanges in pre-18education and trainingStudent and employerdemandChanging aspirationsInternationalisationImpact of technologyon learningLevels of flexibilityThe nature of the highereducation workforce andhuman resourcesmanagementThe future of highereducation institutionsas we know themDivergence of the fourUK systemsAxes of uncertaintyHigh levels of economic growth across the period enable high levels of public and private investment in highereducation to be sustained.Overall, historically low level of economic growth over the next twenty years with two significant periods of recessionslead to a reduced level of public and private investment in higher education.Maintenance of the status quo with current degree of regulation of fees.Reducing the public contribution with greater targeting of public funding on key groups, increased privatecontributions.Government regulation is reduced.Government regulation is increased.Costs outstrip income, threatening sustainability.Costs are brought more into line with prospective income.Institutions reduce quality to sustain demand and/or reduce costs.Institutions sustain quality of provision.Increased propensity to enter higher education – higher proportion of the age group achieves level 3 and chooses toenter higher education.Lower propensity to enter traditional higher education because of the development of a more prestigious vocationalroute through Foundation degrees offered in further education colleges – similarities with the historic Scottish position.UK higher education remains individually driven.UK higher education becomes more employer driven.Three markets – 18+, people in work (or seeking to re-enter the workforce) and the retired; greater or lesserdevelopment of these markets.International demand dependent on reputation and quality. UK sustains its position in the international market with theexception of a limited number of high prestige institutions. UK higher education institutions lose substantial marketshare. An increasing proportion of UK students attend overseas institutions. Incremental increases in trans-nationalprovision but remaining modest.Revolutionary – global, online independent study with little or variable institutional affiliation.Evolutionary – increased use of information and communications technology (ICT) in delivery and learningmanagement but without threatening institutional patterns.The full-time three/four year undergraduate degree remains the norm.Learning becomes entirely personalised and flexible re time and place with more widespread recognition of partqualifications.Inflexible system of national pay bargaining with few links to business and performance.A flexible dynamic higher education labour market with rewards linked to performance and movement betweenacademia and other sectors coupled with increased flexibility and casualisation.Much more diverse (like the United States only more so).Less diverse – more homogeneous, merging missions.Increasing diversification and competition between the four nations (and perhaps increasingly between differentEnglish regions) with real impact on student behaviour.Systems become more similar under similar external pressures.29 The three scenarios were constructed usingthese axes of uncertainty. There were a numberof common assumptions:p all start from the baseline demographicprojection to 2026, recognising variationacross the regions and countries of the UKand the uncertainties arising from net inwardmigration rates. All also incorporate thecorresponding impact of demographic changeacross the EU and the impact of the Bolognaprocess on competition within Europe;10

p all assume that the British Councilassessment of international student demandpublished in 2004 is soundly based, although itis currently under review on a country bycountry basis;p none of the assumptions assumes an increasein the level of public funding for teaching andlearning because of other pressures on thepublic purse from services to meet the needsof an ageing population. However, all assumea continuing commitment to invest in highereducation;p all the scenarios assume that the delivery ofhigher education will have been changedsignificantly by developments incommunication and digital technologies but toa different degree in each scenario;p there will be some increase in theengagement of employers with highereducation teaching and learning although itwill vary in extent and kind across the threescenarios;p all the scenarios assume a common trajectoryfor the development of the different highereducation systems that have emerged in theUK under devolution.30 The first scenario, ‘Slow adaptation to change’has the following key characteristics:p student demand changes in line withdemography and few significant new sourcesof demand are identified. Total public fundingfalls in line with student numbers.Governments retain the current degree ofregulation of quality and fees;p institutions seek to increase their share oftotal numbers through changes to theirportfolios leading to increased competition,but in some markets institutions collaborate.There is only modest investment in e-learningso that it remains a relatively small part of thetotal learning experience for most students.p retrenchment will occur with the possibility ofreductions in quality coupled with institutionalreconfiguration and merger.31 The opportunities and threats associated withthis scenario include:p the development of new programmes tocapture new markets;p increased demand for part-time andpostgraduate programmes;p the priority to compete for students may temptsome institutions to reduce entryqualifications and reduce the standards forqualifications;p loss of reputation of the UK system; andp low demand subjects face closure despiteenhanced public support.32 The second scenario, ‘market driven andcompetitive’ – i.e. non-traditional providersidentify market opportunities and essentiallycherry pick in those areas with low entry costs –has the following features:p increased competition in all student markets –UK and international – both betweentraditional higher education institutions andwith new providers;p more widespread investment in e-learningparticularly by larger institutions inpartnership with private sector organisationswith a much increased requirement on staff toprovide academic support for students on aflexible basis;p increased competition drives a majorreconfiguration of the sector with fewer largemulti-mission institutions and a much largernumber of small specialist or niche marketinstitutions; andp increased competition with employers for wellqualified 18-year-olds.33 The opportunities and threats of this scenarioare:p increased capitalisation on strengths in nichemarkets;p identification of lower cost approaches to thedelivery of quality programmes;p increased demand for employer-supportedpostgraduate provision;p damage to the reputation of the UK highereducation system through allowing privateproviders to access degree awarding powers;p long-term financial sustainability remainselusive for the publicly funded sector;p the publicly funded sector proves lessattractive to students and employers than theprivate sector leading to unfilled fundedplaces; andp a small number of elite institutions seek tosecede from the publicly funded sector.p increased international student numbersthrough marketing collaboration;p some institutions become unviable;Universities UKThe future size and shape of HE11

34 The third scenario, ‘employer-driven flexiblelearning’ is characterised by the comingtogether of a serious squeeze on funding forhigher education with increased regulation ofthe purposes of the public funding element; thefull development of technologically basedlearning through significant public and privateinvestment; and the triumph of employer-leddemand for part qualifications. It has thefollowing main features:p technologically-based and managed learningand the availability of a full credit andaccumulation system coupled with reductionsin public funding mean that most studentsstudy part-time on a virtual basis while theycontinue to work;p co-funding between the funding councils andemployers is a major funding route subject tosignificant regulation;p the distinction between full-time and parttimestudy for the purposes of student supporthas been abolished;p despite restrictions on public funding, fulltimeundergraduate study remains asignificant feature of the system; andp a much greater stratification of the highereducation sector than now.35 The opportunities and threats of this scenarioare:p the development of strategic alliances byinstitutions with groups of employers andtheir supply chains;p institutions establish themselves as majorregional providers through strategic allianceswith local further education colleges andsome private providers;p institutions develop partnerships with majorcommercial players to become leaders on thetechnologically-based learning field;p use of the credit accumulation and transfersystem and the wide availability oftechnologically based learning open up highereducation to a much wider group of people,including, in particular, older people;p private providers cherry-pick lucrativevocational provision;p the take over of failing institutions by theprivate sector;p extreme stratification of the higher educationsector leading to little opportunity forinstitutional development and reducedopportunities for many young people; andp increased employer support fails to matchreductions in public funding leading to suboptimalmergers, including with furthereducation colleges, and a loss of reputation forthe sector.Future size of the sector36 The analysis in this study leads to the conclusionthat the most vulnerable market segments arefull-time undergraduates and internationalstudents from outside the EU, especially underscenarios 2 and 3. This conclusion is ofparticular importance because very manyinstitutions depend for their financialsustainability on a combination of these twostudent markets.37 Part-time undergraduate and postgraduatetaught numbers on the other hand are expectedto increase in all the scenarios driven in part by amore helpful demography and at postgraduatelevel the increasing demand for people with thehighest level of skills by employers. Overallnumbers would be broadly similar on all threescenarios, but the mix between full-time andpart-time would shift substantially towards parttimeunder scenarios 2 and 3 in particular. Thiswould lead to a significant reduction in full-timeequivalent numbers. Furthermore, part-timenumbers do not always deliver the same pro rataincome as full-time students and have similarfixed costs. Replacement of full-time numbersby part-time numbers may not of itself help tosecure increased viability and, currently, mostpart-time provision is concentrated in arelatively few specialist part-time providers.Future shape of the sector38 In the development of the scenarios the futurepattern of higher education institutions wasidentified as a key uncertainty rather thansomething that simply emerged from theanalysis.39 Under scenario 1 the pattern of institutions wasseen as being largely as now, but with a reducednumber of institutions as some have been takenover or merged in the face of increasedcompetition. Scenario 1 also envisagesincreased transnational provision with overseasuniversities.12

40 Scenario 2 envisages a significantreconfiguration of the higher education sectorwith a much greater variety of institutions thannow, including many more private providers. Thevariety would include fewer large broad-missioninstitutions than now, a much larger number ofsmall and medium-sized institutions operatingin niche markets and a range of non-traditionalproviders, including overseas universitiesoperating in the UK, further education colleges,private providers with degree-awarding powersand e-learning and borderless providers.41 Scenario 3 envisages a much more stratifiedsystem with:p a small number of elite institutions with highfees, strong research and high numbers ofinternational students;p some major regional centres;p some predominantly virtual institutions;p some access institutions providing face-tofaceteaching as now; andp assessing the threat posed by the emergenceof a greater range of competitors with theirown degree-awarding powers;p identifying and accessing new markets;p keeping abreast of prospective developmentsin the international student market;p keeping under review the institution’sengagement with technologically-basedlearning and its wider implications, includingthe deployment and management of staff andthe development of the estate – this may alsoinclude the possibility of partnership with theprivate sector to develop the technology in themost appropriate way; andp increased collaboration to mitigate someaspects of increased competition through thedevelopment of a range of academicpartnerships which may lead to considerationof wider collaboration or even merger toensure the sustainability of teaching over thelonger term.p further education colleges operating at lowerunit costs and offering programmesfranchised from the regional centre orcentres.Institutions’ responses to the threats andopportunities42 Higher education institutions already have asophisticated understanding of the studentmarkets that they operate in and theircompetitive position in those markets. In thelight of the prospective demographic changes indemand they will need to assess the extent towhich their traditional markets will be affected,the impact of increased competition on thosemarkets and their capability and capacity toenter new markets. Sector bodies, likeUniversities UK, working with the Departmentfor Innovation, Universities and Skills (DIUS) inEngland and the devolved governments in theother countries of the UK, can provide the sectorwith well-informed and up-to-date advice inorder materially to assist institutions in dealingwith the demographic uncertainties.43 The scenarios demonstrate, however, thatinstitutions will also need to develop theircapability to identify and anticipate lesspredictable developments through continuing tomonitor developments. This will need to include:p bringing together consideration ofinstitutional and student funding;Universities UKThe future size and shape of HE13

1Introduction44 This is the second report of the research projectcommissioned by Universities UK on the size andshape of the higher education sector in the UK intwenty years time. It is essential to emphasisefrom the outset that this is not an attempt toforecast the future, but rather an attempt toprovide institutions with some warning of thepossible challenges that lie ahead so that theyare well placed to anticipate those challenges.45 It is also important to emphasise that this studyhas been predominantly concerned with thefuture of teaching and learning. In particular, itexamines the prospective level of demand for thevarious student markets with which the publiclyfunded higher education sector engages. It isonly concerned with research activity to theextent that it is for some universities the primarydeterminant of institutional reputation, which inturn is a significant determinant of studentdemand, especially for students from outside theUK. Research activity is also, for someinstitutions, a major source of income that canserve, other things being equal, to mitigate theimpact of any reduction in demand fromstudents for teaching programmes.46 Our approach has combined four interlinkedelements.p a projection of student demand based on adetailed analysis of current demographictrends which formed the major part of the firstphase of the project. The report on this phaseof the work was published in March 2008. 4 Thisprovides projections of student numbersbroken down between mode of attendance andlevel of study for the four countries of the UKand for the UK as a whole for 2026/27. Itincludes international as well as homestudents. For UK-domiciled students it isbased on the latest (2006 based) projectionsfrom ONS and GAD 5 but assumes no policychanges;p an assessment of the extent of uncertainty inthe pure demographic projections arisingfrom uncertainty about future net inwardmigration rates and changes to the socioeconomicmix of the population;p an assessment of the potential impact ondemand from current and prospective policiesand from existing or anticipated changes inkey drivers. It also includes an assessment ofhow the sector is likely to respond to thechallenges of the demographic decline in thenumber of 18- to 20-year-olds between 2010and 2019, bearing in mind the significantincrease in undergraduate numbersexperienced since 1999/2000 largely driven byrising numbers of 18-to 20-year-olds; andp the development of three scenarios for highereducation in 2027. This involved a two- stageprocess:p the analysis through a series of seminars ofthree drivers identified through initialdiscussion as the key ones – first, futurefunding levels, second increasingcompetition in traditional higher educationmarkets from outside the current sector,and third increased employer engagementwith the higher education sector; andp an externally facilitated event both todevelop and to assess the implications ofthe scenarios based around the three keyuncertainties and others identified withinthe process.47 This report brings together the four elements toprovide a view of how the major student marketsare likely to change under the three scenariosand how the pattern of higher educationproviders might be expected to respond in theface of these market changes. Finally, weconsider how institutions can preparethemselves to anticipate the kind of changes,threats and opportunities presented by the threescenarios.14

2Background48 This study was commissioned by Universities UKto provide a basis for it members to consider thepotential impact on their operations of longertermtrends relevant to the demand from themain student markets in which they operate.49 The study has to be seen in the context of theuncertainties arising from the significant fall inthe number of 18- to 20-year-olds in the nextdecade, the uncertainties arising from theplanned review of the operation of variabletuition fees in England in 2009, and the impact oninstitutional costs of the implementation of thenew higher education pay framework.50 The timeliness of this review has beenunderscored by the decision by the Secretary ofState for Innovation, Universities and Skills toundertake a state of the nation review of highereducation in 2008 in advance of the review of theoperation of variable tuition fees. In particular,he has invited Universities UK to look into theimplications of the projected demographicchanges and the policies it might call for toassist institutions as they manage their studentmarkets in the face of those demographicchanges.51 However, the overall aim of this study remains toassist universities so that they are well placed toanticipate and adapt to major changes which arenot readily predictable and may occur veryrapidly if some tipping point is reached in theframework within which higher educationoperates.Universities UK The future size and shape of HE 15

3Methodological approach52 Our approach has had three main elements:p an analysis of demographic change over thenext twenty years for the UK and the EUpresented in our first report, to include anassessment of how the sector might respond todemographic decline in the numbers of 18- to20-year-olds and of the degree of uncertainty inthe projections arising from uncertaintiesabout rates of net inward migration;p uncertainties in demand arising from theimpact of current participation trends andfrom relevant public policies; andp the development of scenarios for highereducation in 2027- there were two stages inthe development of these scenarios:p a series of three seminars based on adetailed analysis of three key drivers of thehigher education system (funding,competition and employer engagement); andp an externally facilitated scenario planningevent.Why simple forecasting is not a realisticapproach53 The experience of the last twenty years showswhy it is so difficult to forecast developments sofar ahead. In 1987 demographic decline of 18- to20-year-olds was, as now, about to hit the sector.However, a combination of factors served insteadto produce a very rapid expansion at least up untilthe mid-1990s particularly in full-timeundergraduate numbers. These factors included:p the introduction of a common qualification at16+ (GCSE) leading to increased staying on ineducation beyond the age of 16 in England andWales;p the desire on the part of the National HealthService that new entrants to nursing and otherprofessions allied to medicine should beexpected to gain an initial higher educationqualification and to enter into partnership withhigher education institutions to deliver thisrequirement;p a significant change in the expectations ofyoung women and their families that theywould participate in higher education(partially fuelled by the developments in nurseeducation);p the introduction of a public funding method forfull-time undergraduates that provided a realincentive to institutions to recruit additionalstudents, taken up mainly by the newlyindependent polytechnics and colleges.54 Thereafter, as these changes worked through,demand levelled off again.55 There were also significant concerns twenty yearsago on two other areas of policy development:p the possible reduction in demand fromstudents from lower income families if aportion of student maintenance support wereto be in the form of a loan rather than a grant;p the dilution of research funding for traditionaluniversities from the extension of theresearch assessment exercise to coverresearch activity in the polytechnics andhigher education colleges.56 In the event, both concerns proved unfounded.57 The extension of a university title to a largenumber of institutions and the recent rapidgrowth in international student numbers werenot foreseen.58 While some of these changes have presentedreal opportunities for the sector they have notbeen without their difficulties: institutions havesought to operate at a substantially higher levelof activity with declining levels of public fundingper student for much of the period and modestlevels of public investment in the highereducation infrastructure.59 Apart from the obvious point that theenvironment in which institutions operate canand sometimes does change very rapidly, theexperience of the last twenty years suggests thatthe most important factor is how well placedthey are to recognise the potential threats andopportunities posed by such changes and howthey respond in order to grasp the opportunitiesand manage the threats.60 It is for this reason that scenarios which identifya small number of relatively unlikely changeswhich, were they to happen, would have a highimpact, are important. They provide a tool whichthe sector – and individual institutions – can useto assess how such changes would impinge onthem and how they could better positionthemselves to be able to access theopportunities and manage potential threats fromsuch changes as they develop.61 The simple forecasting approach, which appliescurrent trends, including demography, to thebaseline position is not appropriate because itfails to take account over the longer term ofmajor drivers of demand leading to unforeseendevelopments. Looking forward from theposition of the sector in 1987 towards thepresent day provides ample evidence of this.16

4DemographicsLatest projections62 Demographic change, nevertheless, remains thebedrock. As our first report demonstrates,higher education faces significant demographicchange over the next twenty years amongst theage groups from which it traditionally recruitsfull-time and part-time undergraduates. Inparticular the number of 18- to 20-year-oldswho make up over 70 per cent of entrants to fulltimeundergraduate programmes is projected tofall sharply from 2009 to 2019 before rising againup to 2027. The older age groups from whichpart-time undergraduates are mainly drawn,will, on the other hand, experience modestgrowth over the same time period.63 Table 3 below summarises the projections offull-time and part-time undergraduate numbers– those most sensitive to demographic change –presented in our first report for the UK as awhole and for the four constituent countries.These figures include international and homestudents.64 These demographic projections show significantvariations between the four countries of the UK:Scotland and Northern Ireland are projected toexperience much sharper declines in thenumbers of young people over the next twentyyears than England or Wales. Furthermore inEngland, unlike Scotland, Wales or NorthernIreland, by the end of twenty years the numbersof young people aged from 18 to 20 are projectedto have returned to current levels.65 There are, however, two important factors thatare directly relevant to the size and shape of thesector in twenty years time and which we havesought to factor into all three scenarios. Theseare:p the projected level of undergraduate demandat the demographic minimum in the numberof 18- to 20-year-olds in 2019/2020; andp the uncertainty in the projected numbers of18- to 20-year-olds arising from theuncertainty about future levels of net inwardmigration.66 Table 4 shows the projected change inundergraduate numbers between 2005/06 and2019/2020 arising from pure demographicchange. As with Table 1, the figures includeinternational students and home students. Thetable shows the marked difference betweenEngland and the other countries of the UK in thesharpness of the projected decline in full-timeundergraduate numbers based solely ondemographic change. It also shows that purelyon the basis of demographic change there will,apart from in Scotland, be some compensatingincrease in part-time undergraduate numbers –although these figures are headcounts not fulltimeequivalents.67 The figures in Table 4 reflect the sharpness ofthe demographic decline in the numbers of 18-to 20-year-olds between now and 2019 across allfour countries of the UK, before the numbersstart to build up again in the early 2020s.Table 3Demographic-based projectionsof full-time and part-timeundergraduate student numbers(Home, EU and international),2005/06 to 2026/27Full-time undergraduates (000s)Part-time undergraduates (000s)2005/06 2026/27 percentage 2005/06 2026/27 percentagechangechangeEngland 976.8 1,004.7 +2.9 473.6 504.4 +6.5Wales 64.8 61.6 -4.9 52.7 52.8 +0.2Scotland 125.5 115.0 -8.4 48.8 45.5 -6.8Northern Ireland 31.7 27.5 -13.2 14.7 14.9 +1.4UK 1,198.8 1,208.8 +0.8 589.8 617.8 +4.7Source: Universities UK (2008) Thefuture size and shape of the highereducation system in the UnitedKingdom: demographicprojectionsUniversities UKThe future size and shape of HE17

Table 4Demographic-based projectionsof full-time and part-timeundergraduate student numbers,2005/06 to 2019/20Full-time undergraduates (000s)Part-time undergraduates (000s)2005/06 2019/2020 percentage 2005/06 2019/20 percentagechangechangeEngland 976.8 930.1 -4.8 473.6 499.7 +5.5Wales 64.8 59.3 -8.5 52.7 54.0 +2.5Scotland 125.5 111.8 -10.9 48.8 47.0 -3.7Northern Ireland 31.7 27.5 -13.2 14.7 15.3 +4.1UK 1,198.8 1,128.7 -5.9 589.8 616 +4.4Source: Brian Ramsden, NigelBrown Associates, based on 2006ONS/GAD population projections68 While the loss of 70,000 full-time undergraduateenrolments may appear to be relatively modestand the differential loss in the numbers in thefour countries of the UK may be significantlyoffset by increased cross-border flows out ofEngland, the demographic projections on whichthese figures rest are subject to much greateruncertainty than is usually the case. Theprojections rest on much higher rates of netinward migration to the UK than hitherto and, forexample, if the rate were at the 2004 projectedlevel rather than the 2006 projected level, theprojected fall in the number of full-timeundergraduates by 2019 might well be twice thefigure presented here.69 In addition, nearly all higher educationinstitutions have significant numbers of full-timeundergraduates so that a significant decline inthis market would be expected, other thingsbeing equal, to increase competition betweenthem. This would have significantly differentimpacts on different institutions, depending ontheir ability to compete effectively and the shareof total income generated by full-timeundergraduate students.70 Part-time undergraduates, on the other hand,are currently concentrated in a relatively smallnumber of institutions – twenty institutions(some of them specialist part-time providers)account for over 50 per cent of part-timeundergraduate numbers. As a result, increasesin part-time undergraduate numbers may notoccur in the same institutions that are subject tosignificant decline in their full-timeundergraduate numbers. Furthermore, inEngland at least, the decision to end fundingcouncil support for most students studying for aqualification at a level equivalent to or lower thana qualification they already possess may have asignificant impact on part-time undergraduatenumbers.71 However, there is also substantial variation inthe population projections between the differentEnglish regions. The Office of National Statistics(ONS) has not yet published populationprojections by age for the 2006-based nationalprojections. Data are available for the 2004-based projections broken down by Englishregion, but the breakdown by age does notenable robust analysis by individual year of age,and therefore cannot match precisely that whichwe used in our first report to produce theprojections of full-time and part-timeundergraduate numbers for the four countries ofthe UK. In Table 5 below we present as the bestproxy available the 2004-based projectedpopulation of 15-19 year olds and 25-49 yearolds for 2020 against a 2006 baseline. These dataare also presented graphically in Figure 1 below.18

Table 5Age-related populationprojections for the Englishregions for 2020 6 15-19 year olds (000s) 25-49 year olds (000s)2006 2020 percentage 2006 2020 percentagechangechangeNorth East 172 140.7 -18.2 852.2 780.1 -8.5North West 470.9 396.1 -15.9 2,340.8 2,303.8 -1.6Yorkshire and Humberside 353.1 308.3 -12.7 1,743.5 1,780.8 +2.1East Midlands 293.7 264.2 -10.0 1,485.9 1,483.4 -0.2West Midlands 365.3 318.4 -12.8 1,814.1 1,760.4 -3.0East of England 353.1 336.7 -4.7 1,939.5 1,968.8 +1.5London 444.3 412.8 -7.1 3,228 3,392.5 +5.1South East 537.4 493.7 -8.2 2,865.9 2,850.3 -0.6South West 332.8 302.1 -9.2 1,668.9 1,693.9 +1.5Wales 202 172 -14.9 960 961 +0Scotland 329 271 -17.6 1,792 1,598 -10.8Northern Ireland 132 127 -17.4 600 597 -0.5Total 3,986.6 3543.0 -11.1 21,291 21,177.2 -0.5Percentage Change1050-5-10-15-20Figure 1Projected change in 15- to 19-year-old and 25- to 49-year-oldpopulations, 2006 to 2020 byEnglish regions and thecountries of the UKNorthEastNorthWestYorks &HumbersideEastMidlandsWestMidlandsEast ofEnglandLondonPercentage Change in 15-19 year olds 2006 to 2020Percentage Change in 25-49 year olds 2006 to 2020SouthEastSource: ONS/GAD 2004-based projectionsSouthWestWalesScotlandNorthernIreland72 The observed variation in the demographicprojections for these two age groups by Englishregion is significant. It is consistent with theseparate country projections which indicate thatthe further north and west the region thesharper the impact of the demographic declineis likely to be and that even for the age groupsmost relevant to demand for part-timeundergraduate study numbers will declinerather than increase over the period to 2020.While the absolute level of the projectedpopulation decline will be lower on the 2006-based projections, one would expect a similarpattern of variation across the English regions.However if the projected increase in net inwardmigration is concentrated in the regions close toLondon, the observed differences betweendifferent regions could be even more marked.73 These variations will be reflected in variations inthe level of demand from students wishing tostudy full-time locally or within their homeregion, but will have much less impact on thoseinstitutions that are predominantly nationalrecruiters. However, they will be of greatersignificance in the demand for part-timeundergraduate study.Universities UKThe future size and shape of HE19

Sources of uncertainty74 There are two major sources of uncertainty inthe demographic-based student numberprojections:p the uncertainty in the projected rate of netinward migration; andp the social class mix of the relevantpopulations.75 The student number projections also assumethat migrants and their children will behave inthe same way as UK-born citizens in relation toparticipation in higher education. There is no wayof testing out this assumption in the short termand we have therefore assumed throughout thatthere will be no marked behavioural differencesbetween new migrants and others.Uncertainty in net inward migration76 As we noted in our first report, we started thisresearch using the 2004-based governmentprojections, but were in the event able to use thelatest 2006-based projections, published inOctober 2007, to complete the work. There aremarked differences between the two sets ofprojections. In particular, the 2006-based set ofprojections posits a much greater level of netinward migration to the UK year-by-year over theperiod in question than the 2004-based projections.Broadly, the 2006-based projections assume asteady state net inward migration rate of 190,000persons, compared with 145,000 in the 2004-basedprincipal projection. (It should be noted in passingthat the net inward migration rate also has aneffect on the assumed fertility rate, so that anyerror in this projection is potentially multiplied.)77 The Government Actuary’s Department (GAD)also publishes variant projections including onethat is based on a low migration assumption. Thatis based on a long-term assumption (2006-based)of net migration of only 130,000. We have thoughtit wise to consider a lower variant projection ofinward migration rates since it is not clear that UKpoliticians will be able to resist public pressure forstronger immigration controls indefinitely.Furthermore, much of the recent increase ininward migration is from countries admitted tothe EU since 2000 and that source of supply maydecline. Because we had already developedstudent number projections using the 2004-basedcentral population projections we have used thoserather than the low migration variant issued in2006. Table 6 shows the difference in projectedhome and EU student numbers across the fourcountries of the UK in 2026/27 for the twopopulation projections.Table 6Comparison of projected studentnumbers (000s) 7 by studentmarket in UK higher educationinstitutions using the GAD 2006-based and 2004-basedpopulation projections2006-based 2004-based Differencesprojections projectionFull-time undergraduate 1,208.8 1,130.3 -78.5Part-time undergraduate 214.3 204.9 -9.4(first degree)Part-time undergraduate 403.5 387.1 -16.4(other qualifications)Part-time postgraduate 108.5 107.5 -1.0Full-time postgraduate 218.9 215.3 -3.6Total 2,154 2,045.1 -108.9Source: GAD 2004 and 2006-based projections78 The comparison in this table provides a veryclear indication of the high level of uncertainty incurrent population projections and theconsequent uncertainty in demand whichinstitutions face over the next fifteen to twentyyears, especially in respect of demand for fulltimeundergraduate places.Changes in the social class balance within theUK population79 One of the major factors affecting propensity toenter higher education is social class. It is knownthat individuals from higher socio-economicgroups are more likely to achieve five GCSEsgrades A-C at age 16 and have a higherpropensity to stay on in secondary education andgain level 3 qualifications at 18 and henceprogress to higher education.80 The Higher Education Policy Institute, in itsreports 8 on projections of changing studentnumbers in England, has drawn attention to thechanging social class balance within the Englishpopulation and its possible impact on full-timeundergraduate demand. There is a shift in thebalance between socio-economic groups asbirth rates in England have been declining fasteramongst those from the lowest socio-economicgroups. The changing balance in the socioeconomicmake up of the young population is,therefore, one of the major uncertainties aboutfuture numbers gaining level 3 qualifications andentering higher education. The student numberprojections in our first report assumed nochange in participation rates resulting from thischanging balance in the socio-economic makeupof the population.20

81 We have considered whether it is possible toassess the extent to which such changes in thesocial mix of the population (whether arisingfrom relative birth rates or from social migrationby virtue of changing occupations), in the UK as awhole, might affect achievement at level 3 andenrolment rates in higher education. It needs tobe recognised here that a movement of familiesfrom one social group to another does not initself necessarily imply that the behaviour ofyoung people from those families in relation toparticipation in higher education would change.82 We also have to recognise that there is not asubstantial and comparable body of researchevidence to enable us to project the effects ofsocial change consistently among the fourcountries of the UK. There is evidence that, forexample, the effects of social change in Scotlandon higher education participation have been lesssignificant than in England, for example,Lannelli 9 notes that “Scotland has highereducational attainment rates, but also highersocial inequalities than England. Moreover,while in England social class inequalities atupper secondary and tertiary level have declinedover time; in Scotland no such trend has beenfound.”83 In the absence of a more robust method formaking such calculations, we have posited a fourper cent increase in the young (aged under 21)enrolments at full-time undergraduate level,and a smaller increase among part-timeundergraduates arising from changes in thesocial class structure of the UK. We have carriedover these estimates into postgraduateprojections. Our figures are not inconsistent withthe HEPI projections for England. Table 7summarises the levels of uncertainty within thedemographic projections by mode and level ofstudy arising from uncertainties in net inwardmigration and in the impact of the changingsocio-economic mix of the UK population.Table 7Uncertainties in thedemographic-based projectionsof student numbers by 2026/27arising from migration and thechanging socio-economic mix ofthe populationReduced net Changes to the Netinwards socio-economic uncertaintymigration mix of theto the UK populationFull-time -78,500 +30,150 -48,350undergraduatePart-time -9,400 +4,000 -5,400undergraduate(first degree)Part-time -16,400 0 -16,400undergraduate(other qualifications)Full-time -1000 +2,500 +1,500postgraduatePart-time -3600 0 -3600postgraduateInstitutions’ responses to demographic decline84 Before considering possible responses from thesector to anticipate the impact on demand of theprojected demographic decline, especially forfull-time undergraduate programmes, in theperiod up to 2019 it is important to bear in mindthe impact on demand of the demographicincrease since the late-1990s and the expecteddemographic increase after 2020 at least inEngland and Wales. The sector is part-waythrough a long-term roller coaster ride.85 Table 8 demonstrates changes in full-timeundergraduate enrolments over the last sixyears of the current ‘up’ phase which is due toend by 2010. The observed increase in full-timeenrolments since 1999 has almost all beenattributed to demography since there has beenat most a two to three per cent increase inparticipation rates.Universities UK The future size and shape of HE 21

Table 8Full-time undergraduateenrolments 10 by domicile:1999/2000 to 2005/2006UK EU Non-UEdomiciled domiciled domiciled Total1999/2000 814,546 49,158 42,779 906,4832005/2006 952,536 45,454 75,873 1,073,773Percentage change +16.9 -7.5 +77.4 +18.5Source: HESA: Students in highereducation institutions 1999/2000and 2005/0686 It is of interest that the increase in the number ofUK-domiciled full-time undergraduates since1999 is greater than the projected decline in fulltimeundergraduate numbers between 2010 and2019 even on the more pessimistic projection ofnet inward migration presented above. Thedecline in the number of full-timeundergraduates from other EU countries overthe same period is also notable, given theenlargement of the EU in May 2004, as is thesubstantial increase in undergraduateenrolments from outside the EU. The last mayreflect in part the increased number ofpartnerships with overseas universities todeliver the UK institution’s undergraduateprogramme at the partner university.87 Over the same period some institutions havegained a substantial increase in their marketshare while others have grown their full-timeundergraduate numbers either significantly lessquickly (or in some cases hardly at all) than theoverall increase in full-time undergraduatenumbers. This applies especially to many smallspecialist institutions where demand for placeshas been and continues to be very high.88 Individual universities will undoubtedly seek tosustain and if possible increase their share of adeclining market, but increased competition willbe inevitable and some institutions will face adecline in full-time undergraduate recruitment.This is particularly likely for those institutionsthat are predominantly local recruiters and arelocated in regions where the decline in thenumber of young people is expected to beespecially sharp.89 There are a number of options for institutionsfacing this prospect to seek to ensuresustainability in the longer term, including thefollowing.90 Seeking out new or expanded markets – it is notclear from where new full-time undergraduatemarkets might emerge. Potential new marketsfor higher education study, such as older peoplequalified to enter higher education, who havenever participated in work-related training, tendto go for part-time rather than full-time study.Furthermore, there is not a great deal thatinstitutions on their own can do to secure asignificant increase in full-time undergraduateparticipation from existing markets. Forexample, increased participation by boys mightbe seen as a major source of additionalnumbers. However, the low level of participationby boys relative to girls in higher education is notconfined to the UK and is related to relativeperformance at age 16 and attitudes to schooleducation. The widespread use of digital andcommunications technologies to deliver learningmaterial might be more attractive to boys thanthe traditional approach, but their motivationwould need to be sustained during theirsecondary education.91 Possibilities for institutions to consider include:p concentrating on activities other thanundergraduate teaching – for someinstitutions it may be possible to compensatefor a reduction in full-time homeundergraduate student numbers byincreasing income from research andenterprise activities and from recruiting morepostgraduate and international students. Thisis a strategy, however, that is open only torelatively few institutions.p concentrating on niche markets – this is thestrategy already adopted by small specialistinstitutions and more institutions may decideto concentrate on those areas of provisionwhere they have greatest market strength.p increased collaboration – this includesincreasing franchising operations with furthereducation colleges or other local providerswith the aim of accessing more local marketsas well as working with other highereducation institutions to offer more attractiveprogrammes than could be provided on theirown. An emerging example is the increasedcollaboration between institutions inmarketing UK higher education tointernational students.22

5Factoring in current trends and policies92 The assessments below are based onassumption of current policies continuing. Notall policies enjoy cross-party support. Thesepolicies may change as a result of a change ofgovernment in the UK or in the devolvedadministrations or in the face of evidence thatthey are not securing the desired ends. Theuncertainties we present below thereforerepresent the maximum level of uncertaintyfrom the trend or policy alone.Proposed changes to post-16 education andtraining93 In addition to established policies aimed atincreasing participation amongst underrepresentedgroups, there are two policydevelopments in England now in train that couldhave a significant impact on the proportion ofyoung people obtaining level 3 qualifications andon higher education participation rates. Theseare:p the introduction of the new diplomaqualifications aimed at widening the scope oflevel 3 qualifications and offering a moreattractive curriculum for many young people;p the requirement that young people shouldremain in education or training up to the ageof 18.94 With achievement at GCSE level currently on aplateau, there is no guarantee that theintroduction of diplomas will secure asubstantial increase in the number of 18-yearoldswith level 3 qualifications unless theavailability of these programmes leads to asignificant increase in participation in educationup to the age of 18.95 The second policy proposal is explicitly aimed ataddressing the problem of low staying-on ratesin education after the age of 16 by young peoplein England, particularly in comparison withthose in most other European countries. Whilethis change may be seen as necessary toimprove qualification rates at the age of 18, itmay well not be sufficient unless more youngpeople can be motivated to seek thesequalifications. Moreover, the policy will not comefully into effect before 2015 when the 18-yearoldpopulation will be approaching its minimum.At that point, employers may be competing morestrongly with higher education for well qualified18-year- olds and be willing to offer incentivessuch as financial support through part-timehigher education.96 Overall, we consider that the changes insecondary education might increaseparticipation rates by about two to threepercentage points or around 25,000 additionalyoung entrants in England equivalent to some70,000 additional students, predominantlyfull-time undergraduates.Effect of the withdrawal of funding forequivalent or lower level qualifications (ELQs)97 The Westminster government has announcedthat it is requiring HEFCE to withdraw funding forinstitutions that is supporting individualsstudying for qualifications at an equivalent orlower level to one they already posses. We haveconsidered whether this decision is likely to havean effect on the projected number of studentenrolments in twenty years’ time. While the policyis aimed at redirecting funds from students whoalready hold a qualification at a particular level toothers who do not, it is clear from figurespublished by the HEFCE 11 that the major impactof the policy will be to reduce the numbers ofstudents currently on part-time undergraduateand postgraduate courses, and on full-timepostgraduate taught courses that are eligible forHEFCE funding. Table 9 shows HEFCE’s estimateof the full-time equivalent student numbersaffected by the withdrawal of funding.Table 9HEFCE estimates of numbers offull-time equivalent studentsaffected by potential withdrawalof ELQ fundingMode Level HEFCE funded Affected by percentagefull-time the ELQ changeequivalents rulingFull-time Postgraduate 46,799 -4,767 -10.2%taughtPart-time Postgraduate 49,544 -10,241 -21.0%taughtFull-Time Undergraduate 731,699 -10,598 -1.4%(excludingFoundation degrees)Part-time Undergraduate 121,537 -26,718 -22.0%(excludingFoundation degrees)Source: Modelling released withHEFCE consultation onimplementation of withdrawal offunding for ELQs. HEFCE,September 2007/27Universities UKThe future size and shape of HE23

98 As these are all market-driven programmes, it isnot to be expected that lost numbers would bereplaced within the full-time undergraduatearea, within which the demand, as a result ofdemography, will be weak during the next twentyyears, as is shown in our first report.99 We have therefore posited that perhaps a third ofthe student numbers for which ELQ fundingwould be withdrawn might not be replaced. Wehave also assumed that the ELQ funding policy inEngland will be implemented and will continueduring the next twenty years. However, thedemographic decline may itself call into questionthe policy in due course as the re-training ofindividuals with existing (inappropriate)qualifications is recognised as a major source inmeeting skill shortages as the number of youngpeople graduating falls.100 In calculating the potential effects on studentnumbers, the HEFCE’s estimates of reductionsamong part-time students arising from ELQfunding withdrawal, which are expressed in fulltimeequivalents, have been adjusted by thefollowing factors, to convert them to headcounts:Postgraduate taught 34.9 per centFirst degree47.4 per centOther undergraduate 31.8 per cent101 The result of these broad-brush calculations onthe impact of the withdrawal of funding for ELQsis that, potentially, the total number of studentsin higher education institutions might bereduced by 41,000 (entirely within England andNorthern Ireland) by 2026/27 compared with thepure demographic projection.Shift to part-time undergraduate study amongyoung people102 It has been noted in recent years that there hasbeen an increase in the numbers andproportions of part-time undergraduatestudents coming from the younger age groups(from a very low base). We have projected thatthis will continue to increase from its presentlevel of approximately six per cent to eight percent by 2027. The effect of this scenario would beto increase part-time student numbers, but alsoto have a negative effect on young full-timeenrolment: however, the two might balance out.We have projected an overall net increase ofsome 3,200 students as a result of this trend.Effects of increased undergraduate loan debton enrolments at postgraduate level103 We have considered whether, potentially, thegreater indebtedness of graduates as a result ofthe changes in undergraduate student funding inEngland, Wales and Northern Ireland during thelast two years may deter them and subsequentgraduates from study at postgraduate level.104 It seems to be likely that, if this is the case, it willhave an effect on those who typically enrol forpostgraduate study (perhaps principally ontaught courses) at an early age soon aftergraduation. We have, therefore, posited thatroughly ten per cent of those home-domiciledstudents who might enrol on full-time taughtpostgraduate degree programmes within theage range of 21 to 25 might be discouraged fromdoing so, along with five per cent of those whomight enrol on part time taught postgraduateprogrammes within the same age range. Thismay be an overestimate, and students mightsimply defer their enrolment into postgraduatecourses; but we have made no assumption ofeither increase or decrease among those agedover 25.105 Nor have we considered the possible impact ofincreased graduate indebtedness on demand forpostgraduate research places. In terms of theoverall student numbers any effect would bemodest, but the impact of even a smallpercentage reduction in the numbers of homegraduates undertaking research could furtherreduce the main source of supply for UK bornacademic staff and further increase the need torely on foreign nationals.106 The effect of this set of assumptions about theimpact of increased loan debt would be a totalreduction in postgraduate students ofapproximately 5,000 by the year 2026/27.Summary107 The overall potential effects of the factorsdescribed above are summarised in Table 10. 1224

Table 10Estimated impact on studentnumbers from current trends andpolicies against the centraldemographic projection by2026/27Current trends/uncertainties Full-time Part-time Part-time Full-time Part-time Totalundergraduates undergraduates undergraduates postgraduates postgraduates(first degree) (other qualifications)Revised policies for post-16 education and training +70,000 +70,000Withdrawal of funding for ELQs -3,800 -16,700 -8,400 -1,600 -10,100 -40,600Response to short- to medium-term 0 0 8,070 0 4,180 12,250decline in young populationShift from full-time to part-time undergraduate study -3,200 6,430 0 0 0 3,220Reduced demand for postgraduate study from loan debt 0 0 0 -3,600 -1,500 -5,100108 This table shows that, of the factors consideredhere, the biggest question in relation to demandfor full-time study arises from the uncertaintyabout the impact of changes proposed or in trainfor post-16 education and training policies.However, any increases from this source arelikely to be offset to some extent by a reduction indemand for part-time study as a result of thewithdrawal of funding support for ELQ students.Universities UKThe future size and shape of HE25

6Scenario planningIntroduction109 It is important to emphasise at the outset thatscenarios are not forecasts of what will happen.Rather they are an approach to describingpossible futures in the context of significantuncertainties so that institutions can recognisekey developments and respond proactively inorder to anticipate change.110 As noted above, we used a two-stage process indeveloping the scenarios based on keyuncertainties and drivers. However, we alsoconsidered briefly, as is customary in scenarioplanning work, the major international andnational developments that could have anenormous impact on UK higher education.Major global and national politicaldevelopments111 We have recognised that global issues such asclimate change, energy and food costs andpossible major escalation of terrorist activityworldwide could have huge impacts on demandfor higher education, especially frominternational students. However, for thepurposes of this study we have set those kinds ofdevelopment on one side because themanagement of such changes lies beyond thepowers of individual higher educationinstitutions. The recognition and management ofsuch global threats will require national andinternational political leadership of the highestorder, but institutions will need to keepthemselves abreast of these politicaldevelopments and to assess how they mightimpact on their operations. Current events suchas the sudden and very rapid rise in the price offood staples and the associated unrest in poorercountries are clearly harbingers of the kind ofchange which the human race might face. Thenext twenty years may be critical in producing anadequate global response to the challengespresented by global warming, energy and foodsupplies.Policy seminars113 The first stage in developing the scenarios was aseries of seminars based around three sets ofissues that had been identified from the outsetas likely to be of especial relevance in developingthe scenarios. The issues were:p funding institutions and students within thecontext of the prospects for the UK economy;p increased competition from outside the UKhigher education sector in all studentmarkets;p employer engagement, including public sectoremployers, and the skills and innovationagenda.114 Participants in the seminars included ‘expert’representatives from the countries of the UK andmembers of the project steering group.115 The aim of the seminars was to provide a firmbasis derived from current trends and policydevelopments in these three areas to help toidentify changes which:p were relatively unlikely;p would if they occurred have a major impact onstudent demand in the higher educationsector; andp could potentially be managed by institutionseither individually or working in partnershipwithin a helpful policy framework.116 Although a range of views was expressed aroundthe issues raised in the papers for the individualseminars a number of key points did emergefrom each of them.112 We have similarly set on one side possible localpolitical developments such as the break up ofthe United Kingdom precipitated by Scotlandachieving independence or the furtherenlargement of the EU to include Turkey, whichhas a population that is not only larger than anyof the current member states, but also has amuch younger age profile. For these issues alsoit is in the first instance for political leaders toprovide the framework for managing change andfor institutions to plan accordingly.26

117 The main messages from the seminar onfinance and funding issues were as follows:p the UK economy was likely to be subject to atleast one significant recession over the nexttwenty years (and the position was alreadytightening substantially in the light of recentdevelopments in the banking sector). Suchrecessions put overall public expenditureunder pressure. Moreover, public expenditureon higher education was likely to come underparticular scrutiny in the light of the decline inthe 18- to 20- year-old age group and thecompetition from other services. Theseincluded pensions, health and social care(with an ageing population) and schools in thelight of increased migration of people withyoung families. The impact of pressures forreduction in public expenditure on highereducation might bear most strongly on fulltimeundergraduates with some increase evenin support for certain types of postgraduatestudy and perhaps part-time. While theremight be pressure, outside the highereducation budget, for investment in lifelonglearning to reduce the impact of ageing on thehealth and care services, budgets for initialand continuing training of public sectoremployees might come under pressure withconsequences for those institutions mostengaged with that work;p public expenditure pressures over the nexttwenty years will be similar across the UK andwill tend to halt or even reverse the recentlyobserved divergence in full-timeundergraduate student funding policybetween the four countries. Nevertheless, itwill be important that each country, bearing inmind its own circumstances, seeks to learnthe lessons from experience elsewhere in theUK;p pressures on funding and the imperatives ofsustainability will drive increaseddistinctiveness with institutions protectingand promoting their niche markets. This couldlead to much more overt political recognitionof different types of higher educationinstitution;p institutions will need to increase further thepriority given to performance management –getting the optimum outcome educationallyfrom the balance between income, resourcesand costs – to demonstrate value for publicand private investment. This was a short-termissue for many institutions as a result of theadditional costs of implementing the new payframework for the sector;p it remained very doubtful that employerswould substantially increase their share offunding higher education, except for bespokepostgraduate programmes, over the nexttwenty years in the absence of tax incentivesfor training and their introduction wouldsimply transfer public expenditure from onehead to another;p individuals, predominantly as graduates,would therefore be expected to meet anincreased share of the total costs of highereducation. This could come about in a numberof ways – reduced subsidies on student loansthrough charging interest at the government’scost of borrowing, allowing institutions tocharge higher fees but capping thegovernment’s contribution or means testingmore sharply access to public support. Forsome institutions there would beopportunities to increase alumni giving;p governments would, however, continue to beconcerned about increasing participationamongst under-represented groups andwould always seek to use its funding to thatend. Any freedom to charge higher fees wouldalmost certainly be accompanied by morestringent bursary requirements;p there would be increasing pressure for at leastsome types of part-time undergraduates toreceive pro rata financial support to full-timestudents, especially if a universal creditaccumulation and transfer system wereadopted in England. Wales already offered prorata financial support for some part-timestudents through Assembly Learning Grants.118 The main conclusion was that it was likely that,over the twenty year period, the public subsidy toindividuals towards the costs of their full-timeundergraduate study would be reduced. In theabsence of any significant increase in employerinvestment this would imply an increasedcontribution from graduates and perhaps alsofrom undergraduates from better-off families.The latter could arise for example, if differentialfees emerged for full-time undergraduates, butwith a continuing cap on the public contributionto fee loans. Nevertheless, public support wouldstill be available for widening participationinitiatives and institutions would fund bursariesfor less well-off students to meet the nonpubliclyfunded element of the fee.Universities UKThe future size and shape of HE27

28119 For institutions the impact of these changeswould depend on their reliance on full-timeundergraduate income and their ability toincrease activity and associated income in otherareas including research and knowledgetransfer to ensure financial sustainability.120 The main messages on the seminar onassessing the potential impact of externalfactors on demand were as follows:p higher education institutions in the UK hadbeen very successful in increasing overseasenrolments over the last twenty years, butsome of the advantages they enjoyed such asrelatively short courses with high retentionrates, teaching through the medium ofEnglish, and the attractiveness of the UK as asafe and attractive place to study were beingtaken up by competitors or were under threat.In particular, the Bologna agreement, basedon the recognition that European universitieswould not be recognised globally until theirqualifications were reformed, with itscommon suite of Bachelors and Mastersqualifications, common quality assuranceprocedures and credit transfer could increasethe competition faced by UK institutions in theglobal market place from other Europeancountries;p competition for international students waslikely to increase, especially as China andIndia moved to becoming net importers ofstudents. Although the UK continued to have alarge number of universities in the top 100internationally, other countries were set tochallenge this position;p part of the recent substantial increase in fulltimeundergraduates from outside the EUalmost certainly reflected collaborations withoverseas universities to provide the UKinstitutions’ qualifications overseas;p the UK had been a particularly attractivedestination for international postgraduatestudents. Much of this demand has beenfuelled by research reputation or institutionalreputation more generally; however,reputations for high quality built up over anumber of years could be lost very quickly;p the projected increase in the number ofinternational students coming to study in theUK over the next twenty years in our first report– itself based on a projection for 2020 producedby the British Council – was not unrealistic,given the projected overall increase in the sizeof the international student market. However,institutions in the UK would need to ensure thatthey provided good value for the fees charged,especially when some countries were waivingfees to international students;p in addition, the degree of competition betweeninstitutions in the UK was generally unhelpfulto the recruitment of international students;p there were some doubts about the emergenceof large numbers of private providers within thequalifications market. Undoubtedly a few wouldgain degree-awarding powers from the QualityAssurance Agency (QAA) and would tend tocherry-pick. The possibility of some furthereducation colleges obtaining their ownFoundation degree-awarding powers was alsoa potential threat to some higher educationinstitutions. However, as the Scottishexperience demonstrates a division of labour indelivering different types of higher educationbetween further education colleges and highereducation institutions can work very well witheffective articulation between them;p the emergence of new, non-traditionalproviders may provide a fertile basis forconstructive partnerships if traditionalinstitutions recognise that the private sectorpartner can deliver provision more costeffectively;p the full application of digital technology to thedelivery of higher education throughattractive, educationally sound andcommercially viable systems, even on atwenty- year timescale, remainedproblematical. As the examples ofentertainment and gaming demonstrated,take-off requires substantial investmentdriven by the expected returns. That kind ofinvestment based around the particular needsof higher education for curriculum coverageand assessment had not been forthcoming inthe UK where it was possible that the marketwas too small to justify the investment.Successful developments in this area could,however, increase the possible scale ofdelivery and the reach for particularprogrammes and, in particular, form part of aborderless offering. Some educationalpublishers are known to be keen to expand inthis area ideally in partnership with traditionalhigher education institutions;

p on the other hand the current pace of changein the development of the underlyingtechnologies, particularly the rapid spread ofwireless connection to the internet and thechanging uses of the internet for socialcommunication, seem likely to drive significantchanges in the expectations of young peopleabout the use of these technologies foraccessing learning materials and forcommunicating with their peers and teachers.This could in principle lead to a completebreakdown of the traditional three-year fulltimedegree. However, the rite of passageelement of full-time higher education foryoung people has proved remarkably resilient.121 The overall conclusion was that there were somedownside risks to the UK’s position in theinternational market and both institutionalreputation and the actual quality of serviceprovided were key factors in minimising thoserisks. There was likely to be some modestincrease in private providers in particular fieldsover the twenty-year period, but a wholesaleopening up appeared unlikely except throughpartnerships with existing publicly fundedinstitutions. The impact of technological changewas a key uncertainty, but past predictions ofmajor change had so far proved to be exaggerated.122 On the issues around increased employerengagement with higher education thefollowing messages emerged:p the higher education markets would by andlarge continue to be individually driven ratherthan employer driven;p the Leitch scenario of a substantial increase indemand for highly skilled people driven byemployers seeking to be world class wasseen as at best a partial guide to the futureand at worst positively misleading. All theevidence was that most UK employers werepoor at investing in people and that demandfor high level skills was driven mainly byinnovation on which UK employers had asimilarly poor record;p if there was a decline in the supply ofgraduates fuelled by demographic changes,employers would seek to fulfil their needs forhighly skilled manpower either by up-skillingtheir existing workforces or seeking to recruitfrom outside the UK. Another possibility wasthat employers might seek to compete for ashare of 18-year-olds with level 3qualifications, especially if an increasedproportion of them had well regardedvocational qualifications;p employers were looking for modules or smallelements of programmes that provided theparticular skills their employees neededrather than whole qualifications. In particular,if institutions wished to engage successfully inpostgraduate level continuing professionaldevelopment (CPD) they would need to bemuch more flexible in the way programmeswere constructed and offered. A fewinstitutions already operated in this way;p the current approach being adopted by HEFCEof providing part-funded additional studentnumbers appeared highly risky, but a fewinstitutions had decided to test the water andwere building on existing strengths to developpartnerships with employers. There werepotential overlaps and synergies with ‘thirdstream’ activities;p strong relationships had been built upbetween some institutions and public sectoremployers such as the NHS and schools.However, these relationships had served todemonstrate the risks involved for the highereducation partner as wider budgetary needscould lead to withdrawal of promised support.123 The overall conclusion was that there was asmall but real prospect of increased employerengagement by the end of the twenty-yearperiod, but spread over a subset of institutions.This increased engagement would be driven bylinking a significant part of public fundingsupporting this objective and to the wideravailability of part-qualifications within aproperly articulated credit accumulation andtransfer system.124 Many of the features of the three scenariosdescribed below reflect the issues identified inthe seminars and also the possible outcomesfrom the twenty-year demographically drivenroller coaster of student demand described inour first report and reviewed above.Scenario development125 The final stage in the process was a facilitatedscenario development exercise at Future Focus,part of the Department for Business, Enterpriseand Regulatory Reform (BERR). The approachadopted has already been described in themethodology section above.126 The starting point of the exercise was theidentification of a set of key uncertainties (andassociated drivers) leading to the identificationof a series ‘axes of uncertainty’ as a basis forconstructing the scenarios.Universities UKThe future size and shape of HE29

127 Twelve sets of issues were identified with whichwe have incorporated three others as being ofparticular relevance – the degree of governmentregulation; the maintenance of quality in the faceof reduced demand; and increased cost pressuresthrough the divergence of costs and income. Wehave also grouped the issues in a slightly differentfashion to bring out the strong interconnectionsbetween them, which were incorporated in thescenarios. The full revised list of issues togetherwith the associated axes of uncertainty, whichprovide a measure of the range of possibleoutcomes, is set out in Table 11.Table 11Key areas of uncertainty and axes of uncertaintyDriverAxes of uncertaintyLevel of economic growth High levels of economic growth across the period enable high levels of public and private investment in highereducation to be sustained.Overall historically low level of economic growth over the next twenty years with two significant periods of recessionslead to a reduced level of public and private investment in higher education.Public funding of higher Maintenance of status quo with current degree of regulation of fees.educationReducing public contribution with greater targeting of public funding on key groups, increased private contributions.Government regulation Government regulation is reduced.of fees and quality Government regulation is increased.Cost pressures on Costs outstrip income, threatening sustainability.institutionsCosts are brought more into line with prospective income.Quality of provision Institutions reduce quality to sustain demand and/or reduce costs.Institutions sustain quality of provision.Changes in pre-18 Increased propensity to enter higher education – higher proportion of age group achieve level 3 and choose to entereducation and training higher education.Lower propensity to enter traditional higher education because of development of a more prestigious vocational routethrough Foundation degrees offered in further education colleges – similarities with historic Scottish position.Student and employer UK higher education remains individually driven.demandUK higher education becomes more employer driven.Changing aspirations Three markets – 18+, people in work (or seeking to re-enter the workforce) and the retired; greater or lesserdevelopment of these markets.Internationalisation International demand dependent on reputation and quality. UK sustains its position in the international market.With the exception of a limited number of high prestige institutions UK higher education institutions lose substantialmarket share. An increasing proportion of UK students attend overseas higher education institutions. Incrementalincreases in transnational provision but remaining modest.Impact of technology Revolutionary – global, online independent study with little or variable institutional affiliation.on learningEvolutionary – increased use of information and communications technology in delivery and learning management butwithout threatening institutional pattern.Levels of flexibility The full-time three/four year undergraduate degree remains the norm.Learning becomes entirely personalised and flexible regarding time and place with more widespread recognition ofpart qualifications.The nature of the higher Inflexible system of national pay bargaining with few links to business and performance.education workforce and A flexible dynamic higher education labour market with rewards linked to performance and movement betweenhuman resources academia and other sectors coupled with increased flexibility and casualisation.managementThe future of higher Much more diverse (like the United States only more so).education institutions Less diverse – more homogeneous, merging missions.as we know themDivergence of four Increasing diversification and competition between the four nations (and perhaps increasingly between differentUK systemsEnglish regions) with real impact on student behaviour.Systems become more similar under similar external pressures.30

7The scenariosCommon assumptions128 All the scenarios start from the baselinedemographic projections to 2026 set out in ourfirst report. These are further elucidated above(see sections 4 and 5) in terms of the 2019minimum in the projection of 18- to 20-year-oldsin the population and the variations in the size ofthe decline across the English regions as well asthe four countries of the UK. All also recognisethe uncertainty in those projections arising fromthe forecast of net inward migration to the UK.This demographic pattern and howgovernments, employers and institutions mightrespond to it in the period from now until 2019will be key determinants of the size and shape ofthe sector in 2027.129 All the scenarios also incorporate the projecteddecline in the number of 18- to 20-year-olds inthe other countries of the EU between now and2027. They all also assume that the Bolognaagreement will have a continuing effect throughthe development of a comparable range ofqualifications across the EU. This coupled withthe more widespread use of English as themedium of delivery in other European countrieswill lead to increased competition between EUcountries in the international student market.130 As with the demographic projections all thescenarios also assume that the British Council’sprojections of global student demand, issued in2004, are a sound starting point. However, weare aware that the British Council is undertakinga further series of reviews on a country-bycountrybasis working with the EconomistIntelligence Unit. The first of the reports fromthese studies on China has already beenlaunched. Each of the scenarios assumes avariation around the British Council figurerelated to developments within the UK highereducation system.131 While each of the scenarios assumes a differentitinerary for the UK economy over the nexttwenty years, none assumes any real increase inthe level of public funding support for teachingand learning in higher education (see paragraph117). This is principally because of the pressuresfor increased public expenditure in other areasarising mainly from the ageing population.132 All the scenarios assume that, even with thepossibility of successive changes of government,a broad commitment to high levels ofparticipation will be maintained. However, thethree scenarios are distinctive in the level ofregulation of degree awarding powers and feesthat are assumed. Furthermore as noted insection 5 some of the current policies that giverise to uncertainties over future numbers may bechanged or abandoned with a change ofgovernment.133 All three scenarios assume that the delivery ofhigher education will change significantly inresponse to developments in the digital andcommunications technologies and the changingexpectations of young people in how theycommunicate and engage with learning. Inparticular, this will involve the exploitation of thepotential of wireless connection through theinternet for remote communication withindividual students and groups of students. It willalso involve the use of the internet for themanaged delivery of learning materials. This allimplies changes in the way academic staffengage with students and will, therefore, requiresignificant re-skilling. It also implies significantre-thinking of how the university plant is usedand developed.134 However, it remains the case that for somestudents and some aspects of learning face-tofaceteaching and learning assessment willcontinue to be the preferred approach.Furthermore, where virtual learning is the mainmode, students will almost certainly needadditional support in taking key decisions abouttheir learning programmes.135 Each of the three scenarios assumes a differenttrajectory for the development oftechnologically-based learning across the nexttwenty years with consequential differentimpacts in each of the scenarios.136 Increased employer engagement, although indifferent forms and to different degrees in thethree scenarios, is also a common theme (seeparagraph 123).137 All assume a different pace of development ofincreased competition from non-traditionalproviders of higher education, includingoverseas providers and for-profit providers.138 The different combinations of these factorswhich form the basis of the three scenarios willlead to significant, but different in each case,change in the pattern of higher educationinstitutions in the UK.Universities UK The future size and shape of HE 31

32139 All the scenarios assume implicitly a commontrajectory for the development of thedifferentiated higher education systems in thefour countries of the UK, but short of the breakupof the United Kingdom the differences in thesystems will be sustainable and not be materialin the face of broader external developments. Itseems likely that the biggest driver for furtherchanges in the differentiation of the four systemswill be the differential pattern of demographicchange in the four countries over the next twentyyears.

Scenario 1: slow adaptation to changeAssumptions140 Student demand broadly follows the demographicprojection with a reduction of around six per centor 70,000 full-time undergraduate students acrossthe UK by 2019, with substantially largerreductions (over ten per cent) in Scotland andNorthern Ireland. As from 2002-2006, there will beno significant increase in the proportion of suitablyqualified young people entering higher education.However, as young people are required to remainin education or training up to the age of 18, moreenter employment with a level 3 qualification. Withan upward trend in older age groups, there will bea small increase in the number of part-timeundergraduate students (4.7 per cent) andpostgraduate students (one to two per cent).141 From 2019 to 2026, demography leads to a smallincrease (of some three per cent) in full-timestudents. Some additional development ofacademic programmes should then be possible.142 There will be a small further increase (say twoper cent) in part-time undergraduate studentsand a reduction in full-time students, reflectingthe reluctance of some younger applicants totake on substantial loans and to enter paidemployment instead to help them finance theirstudies – especially as tuition fees increase.143 The number of international students studying inthe UK will increase by between four and five percent in line with global trends in the numbersentering higher education but with the increaseskewed to fewer institutions.144 Total funding (public and private) per studentremains broadly constant overall, with a modestincrease in the cap on tuition fees leading tohigher private contributions. On average, totalfunding for institutions will fall as a result of thereduction in total numbers until at least 2020.Government regulation of fees and requirementson quality assurance arrangements will remainas they are now.145 There will be some greater differentiation in theacademic programmes offered by institutionsaimed at securing a higher proportion of qualifiedapplicants with increased niche marketing andthrough the use of blended learning, combiningdistance learning and traditional face-to-faceapproaches and the use of wireless technology tomanage groups of learners. However, thetraditional three or four-year degree will remainthe main undergraduate qualification.146 There will be some further increase in theconcentration of research funds allocated by thehigher education funding councils based on therevised approach to research assessmentadopted from 2008.Scenario 1 – slow adaptation to change147 The combination of increased cost pressures,continued government regulation of fees and thesharp demographic decline between 2010 and2019 limit the ability of many institutions to adaptrapidly enough to change. Universities will seekto develop new academic portfolios, some withe-learning elements (although in the absence ofsignificant public investment these e-learningelements remain a modest proportion of thetotal academic provision), in order to attractmore students as the total number of youngpeople qualified for admission to full-timeundergraduate programmes falls. Someincrease in engagement with employers willform an element of this approach.148 There will also be some further development oftwo year degrees. Some research-activeuniversities, especially those receiving lowerlevels of funding for research, will seek toexpand their student market share to ensureadequate total funding. There will be greaterfocus on recruiting part-time students andinternational students.149 Increased competition amongst UK institutionsto attract more international students will befollowed by the development of more cooperationbetween individual universities inmarketing and recruitment for these students.150 More UK institutions will develop transnationalhigher education to benefit from increasingdemand in other countries as well as from anincrease in the number of international studentsat postgraduate level coming to the UK. Thedevelopments in e-learning although relativelymodest will enable institutions to enter the massborderless higher education market.151 Some institutions that recruit predominantlylocal students (particularly in Scotland andWales, but also in some English regions) notsucceeding in securing either a higherproportion of available UK students or moreinternational students will need to retrench(including possibly reducing quality andstandards to reduce costs and fees) oramalgamate (including possibly with privateinstitutions) to survive. In Northern Ireland,which currently exports substantial numbers ofstudents to the rest of the UK and the Republic ofIreland, the government will negotiate a specialagreement over tuition fees with the Republic toensure that its institutions remain viable.Universities UK The future size and shape of HE 33

Scenario 2: market-driven and competitive34Assumptions152 As young people are required to stay in educationor training up to the age of 18 there is asignificant increase in the proportion of 18- to20-year-olds, especially boys, attracted to stay inlearning by the innovative application of digitaland communications technology, gaining level 3qualifications. Much of this increase is in theform of diplomas rather than A-levels.153 Employers, driven by the impact of demographicdecline between 2010 and 2020, recruit a higherproportion of 18- to 20-year-olds with level 3qualifications than now and fund part-timehigher education for these individuals. This,together with the increase in the numbers of 25-to 50-year-olds and of people aged over 60, leadsto a significant increase in the demand for parttimeundergraduate higher education.154 There is increased demand for postgraduatestudy (mainly part-time) to meet the increasingrequirement in many jobs for the highest level ofskills.155 After a short-term recession, economic growthis largely sustained across the period at the levelachieved in recent years. This is sufficient tosustain public funding for higher education atcurrent levels per student in real terms againstthe pressures for increased funding for servicesfor the ageing population and for increasednumbers of migrants. Fees are largelyderegulated but with a cap on the publiccontribution leading to a differentiated feesystem for full-time undergraduates in line withfees for other students.156 Government regulation is reduced and there is inplace a more open and liberal quality assuranceregime for taught provision. This together withemergence of market fees encourages morespecialist private providers to enter the market.The UK brand of higher education is, however,diminished as a result and overall internationaldemand falls except for the internationallyrecognised elite institutions.157 A universal (UK-wide) credit accumulation andtransfer system for undergraduate andpostgraduate qualifications is in place.Scenario 2: market-driven and competitive158 There is a more generally agreed and wellunderstoodcomplementary participation by theprincipal partners in higher education – thestate, higher education institutions, individuals,and employers than there is now:p state involvement being more stronglystrategic with public funding for highereducation targeted upon specific parts of thepopulation (Foundation awards, underrepresentedgroups, the unemployed, etc),particular subjects (especially those judged tobe of strategic importance or linked to publicsector employment) and changing needs ofthe national economy and with a cap on thelevel of public contribution to fees. Otherwiseless intervention and regulation than now;p highly innovative providers, including manymore private providers than there are now,with a greater awareness and commitment todevelop and exploit their particular strengthsand bring new products combining newtechnological approaches to enhance thestudent learning experience to new betterdefined market;p empowered individuals recognising their ownself-interest, embracing the new technologiesand accepting responsibility to achieve ‘lifeworth’ awards from credits acquired andfunded from a variety of different sources;p employers looking to satisfy their humanresource requirements according tocommercial priorities and with less regard tofinal awards, national boundaries andwhether the provider is public, private orjointly funded. Increased assumptions that itis the responsibility of individuals to ensuretheir own ‘employability’ but with anincreasing trend to pick people at the age of 18and manage and support their highereducation rather than wait until they graduate.159 Despite an economic slowdown in the short term,continuing strong economic growth in the latterpart of the period facilitates increased total(public plus private) investment in highereducation. Public investment, which comes understrong pressure from expenditure on the healthservice and services for the elderly moregenerally, is maintained at current levels perstudent. However, it is more targeted on enablingunder-represented groups to participate and onparticular courses, especially those seen as ofstrategic national importance, those leading tojobs in public sector professions and continuingprofessional development for those professionsand some postgraduate programmes.

160 Increased private contributions are requiredfrom full-time undergraduate students frommore well-off families through a differential feeregime that requires them to finance theelement of the fee above the public fee capwithout subsidised public loan support.Increased contributions are required also fromall graduates through charging a real rate ofinterest on publicly funded student loans.Nevertheless full-time undergraduate provisionremains the major part of the publicly fundedhigher education sector’s provision.161 By 2026, the higher education landscape looksquite different than it is now. It is a much moredifferentiated system driven by institutions’search for financial sustainability and the needto compete effectively with new entrants to themarket that are much fleeter of foot inresponding to new opportunities than highereducation institutions have traditionally been.Sharing some features with the current highereducation systems in the United States andAustralia but more diverse with UK publiclysupported higher education institutionsoperating in partnership with overseasuniversities or major private providers. Some ofthese partnerships will be with publishingcompanies able to make a major investment intothe development of e-learning. This enables thelarger institutions in particular to continue tocompete in the UK market and in the borderlesseducation market.162 This diversity will encompass the following:p a smaller number of institutions with widerangingdiverse missions which strive toincrease their size by acquisitions andmergers. Their aim is both to support theiroverhead costs and to enter new markets sothat this group of institutions may be, onaverage, 50 per cent larger than they are now;p a much larger number of small and mediumsized institutions that are specialist or operatein niche markets;p a much larger number of private providersthan now encouraged by a more liberal qualityassurance regime and the opportunity todemonstrate the feasibility of reducingdelivery costs without sacrificing quality forcertain aspects of teaching delivery. Most ofthese will be small to medium nicheproviders, but some may be offshoreoperations of overseas universities or largeborderless e-learning providers such as majorpublishing companies. Some of these privateproviders will be in partnership with publiclyfunded institutions and may gain access topublic funding.163 This differentiation within the sector leads to thedevelopment of two streams of academic staff:one undertaking research and teaching in thelarge broad mission institutions; the other insmall niche providers mainly undertakingteaching, both in publicly funded highereducation institutions and non-traditionalproviders.164 However, this increase in the diversity of thesector leads to a loss of the clear brand identityof UK higher education with some fall in demandfrom international students especially at thelower end of the market where mostopportunities for collaboration might arise. Onthe other hand, niche markets are exploited withthe result that there is greater diversity ofpostgraduate provision related to employmentneeds and, in particular, more shorterprogrammes and more part-time and e-learningstudy within a universal credit accumulation andtransfer system.Universities UK The future size and shape of HE 35

Scenario 3: employer-driven flexible learningAssumptions165 Demographic trends to 2019, with a near six percent reduction in numbers of young people,coupled with an ageing population and financialpressure for those in employment to remain inwork after the age of 65, lead to an increasedneed for high-level skills training and retraining.There is stronger political commitmentto (and funding for) lifelong learning, andcompetition between employers to recruit, andparticularly to retain, high quality staff,especially younger staff.166 Competing pressures for public funds (especiallyin areas such as health, social care services andpensions) result in higher education receivingsignificantly less public investment than it doesnow. Tuition fees for full-time home/EU studentson first degree programmes are deregulated,bringing them into line with part-time andpostgraduate programmes for home/EUstudents and all international students.167 Under these funding pressures, public funding ismore heavily rationed and regulated than nowbeing limited to the following:p a ‘train to gain’ model is put in place in whichpublic funding allocated by the highereducation funding councils is dependent onexplicit evidence of employer support for theprogrammes. This develops from bringingtogether the HEFCE pilot programme in whichadditional student numbers are partly fundedby employers and the Learning and SkillsCouncil’s train to gain programme in a singleUK-wide programme;p tax incentives for employers are introduced toencourage investment in training/learningundertaken by their employees;p supporting fees and providing other financialsupport for students on traditionalundergraduate programmes are provided on ameans-tested basis to students from lowincomehouseholds or low-participationbackgrounds, including access to publiclysubsidisedloans. Otherwise publicly providedloans are not subsidised;p a limited number of state scholarships areprovided in order to sustain subjects deemedto be in the national interest but wherestudent demand is insufficient to supportsustainable provision;p supporting capital investment in institutionsthrough the funding councils.168 Driven by the availability of this public fundingroute through employers and employers’expressed preferences, England joins the rest ofthe UK in introducing a full credit accumulationand transfer system (CATS), enabling thedistinction between full-time and part-timestudy to be abandoned and empoweringstudents to move in and out of higher educationas their lives, careers and circumstances dictate.Full higher education awards can be constructedfrom a series of modular pathways, enabling“bite sized” learning (ten credit modules) to formthe building blocks for first degree and otherprogrammes.169 The current distinction between student supportsystems for full-time and part-time students isabolished, with a pro rata entitlement to meanstested student support dependent upon theintensity of study (in terms of the number ofcredits) completed in each academic/calendaryear.170 Significant upfront capital investment is provided(from public funds) to assist institutions eitherworking alone or in partnership with privateinvestors to adopt high quality virtual learningsystems as a major method of deliveringteaching and learning provision at highereducation level. This enables learning to betailored to individual student needs and to meetthe increasing pressure for a 24/7 operatingenvironment. This also facilitates the move to afull CATS system which allows part-timelearning, work-based learning, and ’bite-sized’learning to become as mainstream as ’full-time’programmes.Scenario 3: employer-driven flexible learning171 Serious and continued investment in digitallearning systems and wireless technology allowsan increase in the scale and reach of highereducation programmes and provides 24/7/365opportunities for learning at this level. The scaleof operation and the ability for students andteachers to communicate remotely significantlyreduces unit delivery costs, making highereducation more affordable to students who haveto meet the cost of their own fees. This scenarioimplies a significant reduction in the size of thetraditional higher education sector across theUK, compared with today, in terms of thenumber of institutions, total student numbers (infull-time equivalents although not in headcountterms) and total funding per student (both publicand private).36

172 Employer influence over a significant part ofpublic funding coupled with the emergence of afull credit accumulation and transfer systemleads to an expansion of ten and twenty creditmodules. This, in turn, provides a basis forindividuals to obtain a much closer integration ofperiods of employment and periods of study butprobably over a more protracted period thannow. Student progression is less certain than it istoday (planned and costed on the basis of tencredit modules) so that the total funding receivedby an institution for each student a year becomesless easy to plan.173 The system rests on a much more flexibleacademic workforce. As well as increasedmovement between academia and business orthe professions, a significant number ofspecialist academic and technical staff wouldbecome self-employed. They would contractemployment with a number of institutionsaccording to their teaching and learning orresearch requirements rather than being fullyand exclusively employed at one institution.(Analogous models for self-employedprofessionals might include doctors andbarristers.)174 Apart from a few elite institutions UK highereducation is less well-placed to compete intraditional international student markets.However, the investment in technologicallybasedlearning provides the basis for successfulengagement in borderless higher education, butthis generates lower surpluses than traditionalprovision for international students.175 Changing demands and very limited availabilityof public funding leads to a much greaterstratification of the sector with the following:p a small group of elite institutions with highfees, strong research and significant numbersof international students. Although homeundergraduate students in these institutionsno longer receive public tuition fundingsupport (except for those receivingscholarships for subjects deemed in thenational interest), full-time study continues tobe the norm here (unlike all otherinstitutions);p some institutions will act as major regionalcentres, serving the needs of their localcommunities including both business andpublic sector employers. Predominantly thesewill be those located in major conurbations;p some institutions will be largely virtual butwith very large numbers on a wide range ofprogrammes;p some access institutions will continue toprovide a significant element of face-to-faceteaching;p much first degree provision will be offered infurther education colleges (boosted by thesuccess of the empowerment of colleges toaward their own Foundation degrees)operating at lower unit costs and runningprogrammes franchised from a regionalcentre. Typically this might be the pattern fortraditional higher education delivery in ruralareas (lower populations and/orgeographically remote).Universities UK The future size and shape of HE 37

Comparing the scenarios176 In seeking to assess these scenarios it is helpfulto examine where they lie in relation to a seriesof key characteristics. Table 12 sets out thiscomparison.Table 12Comparison of the threescenarios on key characteristicsKey characteristicScenario 1Slow adaptation to changeScenario 2Market-driven and competitiveScenario 3Employer-driven flexible learningEconomic growthIn line with the long-term growthrate, but with at least one majorrecession.Sustained at recent high levels aftershort–term slowdown.As with scenario 1.Levels of publicinvestmentSustained at current levels perstudent.As in scenario 1 but much moretargeted than now.Reduced level of public investmentper student with much greatertargeting than now and more cofundingwith employers.Government regulationAs now with regulation of full-timeundergraduate fees and sustainedquality assurance arrangements.Reduced regulation of full-timeundergraduate fees. More liberalquality assurance regime toencourage the emergence of newproviders.Increased regulation of publicfunding related to employerrelevance and student need.Individual contributionsto tuition costsIncreased.Increased.Reduced/not increased.Employer contributionsto tuition costsLittle change.Increased but not necessarily topublicly funded institutions.Substantially increased.Participation of youngpeopleAs now but with some switch fromfull-time to part-time study.Reduced proportion of qualifiedyoung people in full-timeundergraduate provision, but withan increased proportion achieving alevel 3 qualification by age 19increasing numbers in part-timeundergraduate provision.Removal of the distinction betweenfull-time and part-time study leadsto a substantial reduction in thefull-time equivalent of initialundergraduate higher education,but on a headcount basisparticipation may match currentlevels.Participation of olderpeopleModestly increased.Substantially increased.Substantially increased.Employer engagementModest change from now, mainlythrough increased influence on thecurriculum.Increased but not necessarilyprimarily with publicly fundedinstitutions.Substantially increased so thatemployers are the primary driversof significant proportion of publicfunding for higher education.Competition (UK)Increased competition amongstpublicly funded providers with amodest increase in the number ofprivate (mainly) niche providers.Significant expansion of the rangeof private providers with fiercecompetition for UK students(including from overseas).Highly stratified and polarisedsystem with only limitedcompetition.Competition(international students)UK institutions continue to competeeffectively for internationalstudents despite increasedcompetition from other countries.In part this is achieved throughincreased collaboration in theinternational student marketbetween UK higher educationinstitutions.UK institutions compete less wellthan now in the changinginternational student markets.With the exception of a small groupof elite institutions UK highereducation institutions compete lesswell than now in traditionalinternational student markets.However, they do engage with thelower value technology-based massborderless higher educationmarket.38

Key characteristicScenario 1Slow adaptation to changeScenario 2Market-driven and competitiveScenario 3Employer-driven flexible learningTechnology-based learningSome increase in e-learning, butface-to-face learning remains thepredominant mode of learning forfull-time students.Substantial increase in theapplication of virtual learning,especially at postgraduate level forthose in employment.Virtual learning is the predominantmode of delivery supported by astrong academic support service.Nevertheless the scale of operationreduces the unit cost.Academic staffingMuch as now with academic staffundertaking teaching and research.Development of two streams: oneundertaking research and teachingin the large broad missioninstitutions; the other mainlyundertaking teaching in small nicheproviders, both publicly fundedhigher education institutions andnon-traditional providers.The system rests on a much moreflexible academic workforce. Aswell as increased movementbetween academia and business orthe professions, a significantnumber of specialist academic andtechnical staff would become selfemployed,contracting employmentwith a number of institutionsaccording to teaching and learningor research requirements ratherthan being fully and exclusivelyemployed at one institution.Response of the supply sideIncrease range and flexibility ofprovision to secure increased shareof reduced numbers.Increased structured collaboration.Some reconfiguration and mergerto deliver sustainability.Reduce quality of provision toreduce costs.Modest increase in privateproviders.Increase in flexibility of provision.Reducing costs without reducingquality through applying lessonslearned from successful privateproviders.Major institutional rationalisationwith mergers and de-mergers tosecure sustainability, includingmergers with private providers.Move to offer teaching and learningon a 365/24/7 basis through majorpublic and private investment intechnology based learning systems.Much more rigid stratification ofinstitutions.Local provision much more stronglybased around collaborativeprovision with the further educationsector.Universities UK The future size and shape of HE 39

Threats and opportunitiesScenario 1: Perceived threats and opportunitiesScenario 2: Perceived opportunities and threats177 The perceived opportunities of scenario 1 are:p the development of new programmes tocapture new markets, influenced in particularby the articulated needs of employers;p increased demand for part-time programmes;p increased international student numbersthrough marketing collaboration and throughthe development of transnational provision.178 The perceived threats of scenario 1 are:p some higher education institutions may not bewell-placed to react quickly enough to thechanging pattern of student demand andcould become unviable in the period up to2019 leading to more proactive action onmergers by the funding councils;p the number of vulnerable institutions iswidened as demographic decline proves to besharper than now projected because politicalaction is taken to restrict inward migration tothe UK and/or a significant proportion of themigrants from the EU do not seek to pursuehigher education here;p there would be more widespread vulnerabilityshould the economy perform significantly lesswell than in recent years in the period up to2019 with perhaps a major recession betweennow and 2012, leading to additional downwardpressure on public funding in general;p the priority to maximise student admissionscould tempt some institutions to reduce entryqualifications below minimum levels withparallel reductions in standards;p loss of reputation through institutionalclosures or reductions in quality andstandards would be likely to inhibitinternational recruitment and the widerdevelopment of the sector;p too much emphasis on employers’ needs atthe expense of broader academicrequirements and opportunities offered bytechnological developments leads to furtherreductions in demand from individuals forhigher education and limited innovation in theeconomy. This reinforces threats toinvestment in the development of the nationalhigher education system from poor economicperformance and despite specific publicfunding support for students studying lowdemandbut strategically important subjectssuch as physical sciences more suchdepartments are forced to close.179 The perceived opportunities of scenario 2 are:p increased opportunities to capitalise onstrengths in niche markets;p identification of lower cost approaches todelivering quality programes throughincreased competition;p partnerships with non-traditional providers toincrease market share;p increased demand for postgraduate provision.180 The perceived threats from scenario 2 are:p potential damage to the reputation of the UKhigher education sector, especially from theextension of quality assurance systems toprivate providers leading to reducedrecruitment of international students;p concentration on dealing with the increasinglycompetitive home market restricts the abilityof many institutions to continue to competeeffectively in the international student marketas other countries develop their own highereducation systems and adapt better tomeeting the needs of the global learningenvironment;p the publicly funded sector continues to findlong-term sustainability elusive as it losescore business to private providers that areable to operate with fewer overheads and arefleeter of foot in recognising key changes indemand;p faced with an increasingly competitive privatesector offering more, students choose thatover the public sector offering leading tounfilled publicly funded places;p campus-based universities come underparticular pressure as more students studypart-time or from their home;p on the other hand, students, faced with amuch wider range of choice than now, areunable to judge what opportunity best meetstheir needs also leading to a significant oversupplyof places with consequential loss ofinstitutional viability;p employers make increased use of externalproviders for higher level training but chooseto use more accredited private providers thanthe publicly funded sector;p some elite institutions seek to secede fromthe publicly funded sector;40

Scenario 3: Perceived threats and opportunitiesp the private sector grows at the expense of thepublicly funded sector not only by outcompetingin traditional markets andcapturing new ones but also through:p both national and international privatetakeover of some star niche players;p purchase and ‘turnaround’ of failinginstitutions;p existing higher education institutions‘hiving off’ separate niche provision thatappears unsustainable.181 The perceived opportunities of scenario 3 are:p the development by institutions of strategicalliances with groups of employers and theirsupply chains to include not only the provisionof training, but also business support servicesand collaborative research;p through strategic alliances or mergers withlocal further education colleges to becomemajor regional providers;p to lead the field in the development of effectiveand attractive digitally based learning deliveryin partnership with major commercial playerssuch as publishing houses or software firmsboth UK-based and international and to usethese developments as a springboard intoborderless higher education markets;p through providing strongly focused andtechnologically-based learning opportunitiesto make higher education more attractive toboys;p through the CATS system to open up highereducation to a much wider group of people,including older people in particular.182 The perceived threats of scenario 3 are asfollows:p private providers enter the market andcherry-pick vocational provision, driving outhigher education institutions which are unableto find alternative home markets and whichare forced to merge with local furthereducation colleges to provide hybridinstitutions akin to community colleges in theUnited States;p institutions that are unable to change theirculture to meet new demands are liable to’take over’ from the commercial sector, ormerger with other publicly funded educationalinstitutions (either successful localuniversities for ’asset stripping’ or withfurther education colleges as above);Universities UK The future size and shape of HE 41

p extreme stratification of the higher educationsector leads to the rigidity of a bipolar system.A small number of elite institutions continuemuch as now (full-time undergraduate andpostgraduate programmes based on face-tofaceteaching, research provision, charginghigh tuition fees) with the rest offering moreflexible modular teaching and learningprovision, linked to local further educationcolleges, and much less well funded. Becauseof the extremes of this bipolar system, itbecomes impossible for institutions to movebetween the two regimes, leading to longtermacademic stagnation (even threateningthe elite institutions), and resulting in UKhigher education losing its world class statusexcept for a very few institutions (perhaps nomore than ten);p overall, the UK is no longer perceived ashaving a single higher education system.Those unable to fund a full-time residentialeducation themselves (or to obtainemployer/scholarship support) are forced tostudy part-time at local institutions whichoffer an inferior experience, leading to asignificant loss of equality of opportunity formany/most young people;p student demand for vocational qualifications,including level 3 diplomas does notmaterialise, and re-creation of the distinctionbetween largely academic and largelyvocational institutions runs counter tointernational developments, reinforcing thestratification of a higher education sector witha very few elite institutions and loss ofreputation on the world stage. Institutions areforced to close or merge;p the significant reduction in public fundingsupport is not matched by an increase inemployer support, impoverishing manyinstitutions and encouraging mergers withfurther education colleges to produce morehybrid institutions such as the Thames ValleyUniversity or some of the larger current’mixed economy’ colleges. A large number ofhigher education institutions close. Campusbaseduniversities are particularly vulnerableand subject choice within individualinstitutions is significantly reduced, restrictingchoice for locally based students without theresources to study away from home. Overallthe UK higher education system becomesfragmented.42

8Future size of the sector: impact of the threescenarios on the principal student markets183 This section seeks to integrate the demographicanalysis (including the uncertainties), the impactof current trends and the impact for each of thethree scenarios for each of the main studentmarkets:p home and EU full-time undergraduates;p part-time undergraduates;p home and EU full-time postgraduatestudents;p home and EU part-time postgraduatestudents;p international undergraduate andpostgraduate students.184 In each market we have used the centraldemographic-based projection in our first reportas the benchmark.Home and EU full-time undergraduates185 Home and EU full-time undergraduates remainthe single largest student market for UK highereducation institutions 13 representing 45.3 percent of all students on a headcount basis in2006/07. Including students from outside the EU,full-time undergraduates accounted for over halfthe student enrolments recorded by the HigherEducation Statistics Agency (HESA) in 2006/07.186 The benchmark demographic projection of homeand EU full-time undergraduates in 2026/27 forthe UK as a whole was for enrolments to be 0.6per cent above the 2005/06 figure, following asubstantial fall between 2010 and 2019. Thismodest increase for the UK by 2026/27 wasmade up of significant reductions in Scotland,Wales and Northern Ireland offset by increasesfor England.187 The analysis of the uncertainties in thedemographic projections arising from migrationand the changing social mix of the population insection 4 above suggested that the baselineprojection might overestimate full-time homeand EU undergraduate enrolments by about50,000 or 4.5 per cent. The analysis in section 5above of the potential impact of current andprospective policies suggested that the baselineprojection might underestimate full-timeundergraduate enrolments by around 65,000 or5.8 per cent. Taken together these two sets ofanalysis suggest an inherent uncertainty in thebaseline projection of plus or minus five per centbefore taking account of any of the developmentssuggested in the three scenarios.188 Scenario 1 assumes that home and EU full-timeundergraduate numbers broadly follow thedemographic projections, but with a modestswitch from full-time to part-time study. Theanalysis of current trends indicates a very smallswitch of this kind. For the purposes of thisscenario we assume some acceleration of thistrend so that by 2026/27 around three per cent ofhome and EU undergraduates (some 30,000students) who would currently have chosen tostudy full-time choose to study part-time.189 Scenario 2 assumes that a modest proportion ofhome and EU full-time undergraduate studentswill choose to take up places in further educationcolleges or accredited private sector providersable to compete on price with universities in thepublicly funded higher education sector. Thisloss of enrolments would be separate from thedemographically-driven changes in demand.190 In practice this is likely to be limited todisciplines which attract large numbers ofapplicants and which have low entry costs suchas business studies, law and some aspects ofinformation technology and computing.Technology-based provision may help privatesector and other providers from outside the UKhigher education to compete on price because ofthe potential economies of scale, but willincrease the entry costs for private providerssubstantially. We estimate that the sector couldlose up to ten per cent (or 100,000 home and EUfull-time undergraduates) in this scenario.191 Scenario 3 assumes that a significant reductionand increased targeting of the public subsidiesfor full-time undergraduate provision, togetherwith much more widespread use of digitaltechnology to deliver and support learning, willlead to a sharp decline in full-time home and EUundergraduates in addition to the demographicbasedprojection of changes in numbers in thiscategory. It seems likely that a significantproportion of current higher education provisionwould be protected from such changes. Inaddition to subjects of strategic importance suchas engineering and the physical sciences thiswould include undergraduate provision whichprepares people for entry to professionallybasedpublic employment and preparation forthe professions more generally.192 On balance, we consider that around 20 to 25 percent of full-time undergraduate places might bevulnerable to loss of demand under Scenario 3given the increased requirement on individualsto meet the cost and the availability of morewell-funded part-time alternatives.Universities UK The future size and shape of HE 43

193 These assessments of the level of enrolments onfull-time undergraduate programmes fromhome and EU students in 2026/27 under thedifferent scenarios are summarised in Table 13below.Table 13Summary of projected home andEU full-time undergraduateenrolments in the UK highereducation sector under differentscenarios in 2026/27ScenarioCentral demographic 1,132projectionRange incorporating key 1,054 – 1,162uncertainties (migration andchanging social mix)Range incorporating current 1, 132 – 1,202trends and policiesScenario 1 1,024 – 1,172Scenario 2 954 – 1,100Scenario 3 769 – 915Projected home and EU full-timeundergraduate enrolments (000s)194 These figures are presented as ranges toillustrate the most optimistic and pessimisticunder each scenario combining the impact of thescenario with the projected demographicchange.195 Within the scenarios (and more generally duringthe period of demographic decline) there arecertain to be differential impacts at individualsubject level and this could pose seriousdifficulties for those subjects which haveexperienced difficulties in recruitment in recentyears.Part-time undergraduates196 As noted in our first report, the part-timeundergraduate market is in fact a series ofmarkets – part-time first degrees, vocationalqualifications other than first degrees and nonvocationalsub-degree programmes. In thebaseline demographic projections we estimatedseparately numbers of part-time first degreeenrolments and part-time other undergraduatesand we have therefore followed that practice inassessing the implications of the three scenariosfor part-time undergraduate numbers.197 The baseline demographic-based projectionshows an increase in part-time first degreestudents of five per cent from 204,000 to 214,000over the twenty-year period with a slightly lowerincrease in part-time undergraduates studyingfor qualifications other than first degrees from385,400 to 403,500.198 The part-time undergraduate projections areless sensitive than the full-time projections touncertainties in migration rates and changingsocial class mix within the population. Part-timefirst degree numbers could be around 5,500lower and part-time other undergraduates16,400 lower under the changed assumptionsconsidered in section 4 above. On the other hand,part-time undergraduate numbers are likely tobe significantly affected by the government’sdecision to withdraw financial support fromstudents studying for qualifications at equivalentor lower level than a qualification they alreadyhold. However, this decline is likely to be offset tosome extent by the trend for more young peoplechoosing to study part-time rather than full-timeand by the efforts of institutions to anticipatedemographic change by entering new part-timeundergraduate markets. The net effect of thesefactors is that the baseline projectionoverestimates part-time first degree numbers by15,000 and part-time other undergraduatenumbers by 16,000 before taking account of anyimpact of the scenarios. All assume growth inpart-time undergraduate study.199 Scenario 1 assumes some acceleration in theshift of young entrants from full-time to parttimestudy. In line with the change in full-timeundergraduate enrolments under this scenariodiscussed above, the increase in part-timeundergraduate numbers would be 30,000assumed to be all within undergraduate firstdegree numbers.200 Scenario 2 assumes a modest shift from fulltimeto part-time study driven by increasedsponsorship of young people enteringemployment at the age of 18 and beingsponsored by their employers to undertakehigher education part-time. We assume that thisproduces an overall increase of 50,000 part-timeundergraduates split between first degree andother undergraduate programmes compared tothe baseline. It is also assumed that there is anincrease of a further 25,000 part-time otherundergraduate from people aged 60 and overseeking higher education. The overall impact isan increase of 25,000 part-time first degreestudents and 50,000 other undergraduatestudents compared to the baseline.44

201 Scenario 3 assumes a very substantial growth inpart-time undergraduate numbers at theexpense of full-time undergraduate numbersdriven by employer demands, the withdrawal ofgeneral financial support for full-timeundergraduate study and the widespreadavailability of learning provided through digitaland communications technology. Consistent withthe projected reduction of 20-25 per cent in fulltimeundergraduate numbers we assume thatpart-time undergraduates might increase by upto 250,000 compared to the baselinepredominantly on other undergraduateprogrammes with an increase of 50,000 in parttimefirst degrees and 200,000 in part-time otherundergraduate programmes.202 These assessments of the level of enrolments 14on part-time first degree and part-time otherundergraduate programmes in 2026/27 underthe different scenarios are summarised in Table14.Table 14Summary of projected part-timefirst degree and otherundergraduate enrolments(000s) in the UK highereducation sector under differentscenarios in 2026/27Scenario Projected Projected Projectedpart-time part-time totalfirst degree other part-timeenrolments undergraduate undergraduateenrolments enrolmentsCentral 214.3 403.5 617.8demographicprojectionRange incorporating 199.3 – 214.3 387 – 403.5 586.3 – 617.8key uncertaintiesand current trendsand policiesScenario 1 229.3 – 244.3 387 – 403.5 616.3 – 647.8Scenario 2 224.3 – 239.3 437 – 453.5 661.3 – 692.8Scenario 3 244.3 – 264.3 587 – 603.5 831.3 – 867.8203 The increases projected here for part-timeundergraduate enrolments will be significantlylower in full-time equivalent terms.Postgraduates204 Although there are at least three separatemarkets for postgraduate study – full-timepostgraduate taught, part-time postgraduatetaught and postgraduate research – we considerthem together here. All the scenarios assumegrowth in the demand for postgraduate studydriven by the increased demand in the economyfor the highest level skills.205 Demand for postgraduate research places hasbeen assumed to be relatively insensitive todemography. Furthermore, the most able studentsare likely to be least affected by the changesassumed in the scenarios. Provided the UK highereducation retains its research reputation, it islikely that any fall off in demand from UK studentsarising, for example, from the pressures ofincreasing debt on graduation will be made goodby increased recruitment of international students– considered in more detail below.206 On the baseline demographic projection fulltimehome and EU postgraduate numbers areprojected to rise by around 2.5 per cent between2005/06 and 2026/27, to 108,500. Taking accountof the uncertainties in respect of migration andthe impact of current trends, we consider thatthis might represent an overestimate of around4,000 students.207 Scenario 1 assumes that full-time numbers willmove in line with the baseline projection. Underscenario 2 we assume some increase in homeand EU full-time postgraduates as highereducation institutions respond to increasingdemand from individuals and employers forhighly skilled manpower in a market wherealternative providers, other than overseasuniversities, will be less well-placed to compete.We have assumed a ten per cent increase(11,000) in home and EU full-time postgraduatesby 2026/27 compared to the baseline. One of thekey features of scenario 3 is the switch awayfrom full-time study and we consider that thischange would also apply to postgraduate study.We assume, therefore, a ten per cent reductionin home and EU full-time postgraduate numbersby 20026/27 compared to the baselinedemographic projection.Universities UK The future size and shape of HE 45

208 Home and EU part-time postgraduate numbersare projected to rise by three per cent between2005/06 and 20026/27 on the baselinedemographic projection to 218,900. This figure isrelatively insensitive to the uncertainties in thedemographic projection on migration rates andsocial class mix. As with part-timeundergraduate demand, the biggest uncertaintyarises for the decision by the Westminstergovernment no longer to support ELQ students inEngland (who currently represent a significantproportion of part-time postgraduate students).Taking into account the likely response byinstitutions in trying to make good this loss ofpublic support, we consider that the centraldemographic-based projection may overestimatehome and EU part-time postgraduate numbersby around 10,000 students.209 Scenario 1 assumes that home and EU part-timepostgraduate numbers will increase in responseto the increased demand in the economy for thehighest level of skills coupled with provisionbeing available on a more flexible basis throughe-learning and blended learning. We considerthat this increase in numbers will be around tenper cent above the central baseline demographicprojection or an additional 22,000 students.210 Scenario 2 assumes a similar pattern ofincreased demand from the economy for thehighest level of skills and correspondinglyincreased flexibility in the delivery of part-timepostgraduate programmes as in scenario 1.However, with a more successful UK economyand the increased competition in undergraduatemarkets, we assume that the growth in homeand EU postgraduate numbers will be higherthan in scenario 1 at around 15 per cent or32,000 additional students compared to thebaseline projection.211 Scenario 3 assumes that all of the growth inhome and EU postgraduate numbers, driven bythe demands of the economy, will be for parttimeflexible study that flows naturally from thechanged pattern of undergraduate study towardssubstantially more part-time and e-learningstudy. We assume that under this scenario homeand EU part-time postgraduate numbers wouldincrease by 25 per cent (55,000) compared to thecentral demographically driven baselineprojection.212 These assessments of the impact onpostgraduate numbers under the differentscenarios are summarised in Table 15.Table 15Summary of projected home andEU postgraduate enrolments inthe UK higher education sectorunder different scenarios in2026/27Scenario Postgraduate research Full-time postgraduate Part-time postgraduate Total postgraduatetaughttaughtCentral demographic projection 63,800 108,500 218,900 391,200Range incorporating key 63,800 104,500 -108,500 208,900 – 218,900 377,200 – 391,200uncertainties and current trendsand policiesScenario 1 63,800 104,500 -108,500 230,900 – 240,900 399,200 – 413,200Scenario 2 63,800 115,500 -119,500 240,900 – 250,900 419,200 – 434,200Scenario 3 63,800 94,000 -98,000 263,900 -273,900 421,700 – 435,70046

213 As with part-time undergraduate numbers theincrease in part-time postgraduate numbers willbe significantly lower on a full-time equivalentbasis.International students (other than EU)214 The central baseline projection of a four per centincrease in international students from outsidethe EU in UK higher education institutions by20026/27 is based on an assessment prepared bythe British Council in 2004 15 of the internationalstudent market and the UK’s share of thatmarket. The Council is currently working withThe Economist Intelligence Unit to update thoseestimates on a country-by country basis. (Thefirst report on China has recently beenpublished.)215 The distribution of international (non-EU)students by mode and level in the centralbaseline projection is shown in Table 16.Table 16Projected international (non-EU)students by 2026/27 by modeand levelMode and level of studyFull-time undergraduate 86,500Full-time postgraduate taught 69,900Part-time postgraduate taught 16,400Postgraduate research 25,800(full-time and part-time)Total 198,600Source: Table 17 Universities UK(2008) The future size and shapeof the higher education sector inthe UK: demographic projectionsNumber of international(non-EU) students216 We have assumed for the purposes of this studythat demographic changes outside the EU werefactored into the British Council estimates,which underpin the projected numberspresented above. It is clear that the currentcountry-by-country studies being undertaken bythe Council will take demographic change intoaccount as well as economic and socialdevelopment. Nevertheless, we assume thatthese projections are not subject to theuncertainties arising from the future level ofmigration into the UK or to current trends andpolicies.217 Scenario 1 assumes that the UK sector, througha combination of increased collaboration inmarketing and through increased transnationalprovision will succeed in recruiting moreinternational students than assumed in thecentral projection in all modes. We assume thatthis might be equivalent to a ten per centincrease above the baseline for all internationalstudents. There remains a downside risk that theUK higher education brand could be seriouslydamaged if a few institutions seek to maintainhome numbers by reducing quality.218 Scenario 2 assumes that the increased diversityof institutions, more liberal quality assuranceregimes and the emergence of a significantprivate sector lead to the loss of currency for theUK brand of higher education in internationalmarkets, except for elite institutions. We assumethat this might reduce the number ofinternational undergraduate students by up toten per cent compared to the baseline projectionand the number of international postgraduatestudents by five per cent given theirconcentration in elite institutions.219 Scenario 3 assumes that within a much morestratified system of institutions and with muchprovision employer-driven and offered on a parttimeflexible basis, many institutions will be lesswell-placed than they are now to engage withtraditional international student markets.However, the investment in technology-basedlearning will offer opportunities to provideborderless higher education. This is dependenton achieving a sufficient scale of operation tomake it financially viable. These two factors willtend to work in opposite directions atundergraduate level so we assume that thenumbers of international undergraduatestudents will be maintained, but the incomegenerated will be lower. At postgraduate level weassume a ten per cent decline in internationalnumbers because of the reduction in the numberof institutions retaining the reputation to bemajor players in the international postgraduatemarket.220 These assessments of the impact of the differentscenarios on international (non-EU) studentnumbers are summarised in Table 17.Universities UK The future size and shape of HE 47

Table 17Summary of projectedinternational (non-EU) studentenrolments by level in the UKhigher education sector underdifferent scenarios in 2026/27Scenario Undergraduate Postgraduate TotalCentral baseline 86,500 112,100 198,600demographicprojectionScenario 1 95,200 123,300 218,500Scenario 2 77,900 106,500 184,400Scenario 3 86,500 100,900 187,400222 Overall this suggests that the total studentdemand under the three scenarios may be verysimilar, although there is a significant shift, oneach of the scenarios, from full-time to parttimenumbers but especially on scenario 3.Financially this is very significant because on afull-time equivalent basis numbers overallwould be lower, and part-time students tend tobe more costly on a full-time equivalent basisthan full-time students. However, the reductionin the recruitment of international (non-EU)students on scenarios 2 and 3 would also have asignificant impact on the sector’s finances.221 Table 18 summarises these student numbers inthe main student markets for each of thescenarios.Table 18Student numbers (000s) in2026/27 by level and modeunder the various scenariosCentral demographic projection Scenario 1 Scenario 2 Scenario 3Home and EU full-time undergraduate 1,054-1,202 1,024 -1,172 954-1,100 769-915Part-time first degree 199.3-214.3 229.3-244.3 224.3-259.3 244.3-264.3Part-time other undergraduate 387-403.5 387-403.5 437-453.5 587-603.5Postgraduate research (home and EU) 63.5 63.5 63.5 63.5Full-time postgraduate taught (home and EU) 104.5-108.5 104.5-108.5 115.5-119.5 94-98Part-time postgraduate (home and EU) 208.9-218.9 230.9-240.9 240.9-250.9 263.9-273.9International (non-EU) undergraduate 86.5 95.2 77.9 86.5International (non-EU) postgraduate 112.1 123.2 106.5 100.9Total 2,215.8-2,409 2,257.6 -2,451.1 2,219.6 -2,431.1 2,209.1-2,405.648

9Future shape of the sector223 In developing the scenarios, the future pattern ofhigher education institutions was seen as a keyuncertainty in its own right. The scenariospresented above incorporate a view of thepattern of institutions that might emerge giventhe assumptions underpinning each of thescenarios. The pattern of institutions within thehigher education sector in twenty years’ time foreach of the three scenarios is presented below.Scenario 1: Slow adaptation to change224 The shape of the sector would be recognisablysimilar to now but with fewer institutions assome will have merged or been taken over in thelight of increased competition and the inability tosecure long-term financial sustainability. Therewill also be increased trans-national provisionwith overseas universities. Most institutions willhave increased their engagement with studentsthrough digital and wireless technologies, butface-to-face contact will remain a major part ofthe learning programme.Scenario 2: Market-driven and competitive225 There will be a much wider variety of institutionsthan now with:p fewer very large broad mission institutionsthan now;p a much larger number of small and mediumsizedinstitutions operating in niche markets;p a range of non-traditional providers, includinga much larger number of private providersthan now, overseas universities operating inthe UK, large borderless e-learning providersand major publishing houses. Some will be inpartnership with publicly funded institutionsand thereby gain access to public funding;p a more widespread application than now ofdigital and communications technology to thedelivery of courses and communication withstudents, especially by the larger providersable to secure the benefits of scale to competewith private sector providers.p a small group of elite institutions with highfees, strong research and significant numbersof international students. Although homeundergraduate students in these institutionswill no longer receive publicly subsidisedtuition funding support (except for thosereceiving scholarships for subjects deemed inthe national interest), full-time studycontinues to be the norm here (unlike all otherinstitutions);p some institutions will act as major regionalcentres, serving the needs of their localcommunities including both business andpublic sector employers. Predominantly thesewill be those located in major conurbations;p some institutions will be predominantly virtualbut with very large numbers of students on awide range of programmes;p some institutions whose principal mission iswidening access will continue to provide asignificant element of face-to-face teachingand receive significant support from publicfunds to support the mission;p much first degree provision will be offered infurther education colleges (boosted by thesuccess of the empowerment of colleges toaward their own Foundation degrees)operating at lower unit costs and runningprogrammes franchised from a regionalcentre. This might have some flavour ofcommunity college provision in the UnitedStates. Typically this might be the pattern fortraditional higher education delivery in ruralareas (lower populations and/orgeographically remote).Scenario 3: Employer-driven flexible learning226 The sector will be much more stratified than nowas institutions pursue the most financiallysustainable strategy given the markets withwhich they wish to engage. This range ofinstitutions will include the following.Universities UK The future size and shape of HE 49

10Institutions’ responses to the perceived threatsand opportunities50227 Higher education institutions, as part of theirstrategic and financial planning, already have ahigh level of understanding of the studentmarkets that they operate in and their competitiveposition in those markets. However, the projecteddemographic decline in the number of 18- to 20-year-olds nationally over the next ten years willrequire institutions to assess their degree ofexposure to this potential decline in the homeundergraduate market and the impact this couldhave on their long-term financial sustainability.228 To an extent this is for individual institutionsthemselves to monitor and address the potentialconsequences for them. However, as this exercisehas demonstrated, with much more volatiledemographic trends, sector bodies such asUniversities UK, working with DIUS in Englandand the devolved governments in Scotland, Walesand Northern Ireland, can provide highereducation institutions with a consideredperspective on the impact of demographic changeon the higher education sector as a whole that canin turn provide individual institutions with abenchmark for their own work.229 Individual institutions will in particular need to:p assess the extent to which they are national orlocal/regional recruiters and the impact of theexpected differential in the demographicdecline on demand in their region;p assess the extent to which increasedcompetition within the sector is likely toimpinge on their traditional markets;p consider alternative markets which they havethe capacity to enter that might offset anyprojected decline in their homeundergraduate recruitment, including parttimeand postgraduate markets;p consider opportunities that lie outside theircore teaching and research activities,reflecting their increasing involvement in adiverse range of business functions.230 The scenarios demonstrate, however, thatinstitutions will also need to develop theircapability to identify less predictable and moreuncertain developments if they are to be in aposition to anticipate them. This requires notonly the continual monitoring of developments ingovernment funding and other policies but alsothe ability to recognise the emergence of newcompetitors in traditional markets and newsources of demand. Here too collective action byUniversities UK to collect intelligence onrelevant developments could provide institutionswith a helpful starting point for their ownassessments.231 Increased competition for public funding fromthe need to cater for an ageing population andincreased immigration will limit the publicfunding available to higher education.Institutions will need increasingly to considerfunding for provision and funding for studentstogether if they are to be able to recruit studentsof the requisite ability from across socioeconomicgroups in a ‘needs-blind’ way.232 All institutions need to recognise where they maybe particularly vulnerable to competition fromsources other than the traditional UK highereducation sector. The extension of UK degreeawardingpowers to private providers and furthereducation colleges is a particular example of alonger- term threat which institutions will needto monitor closely.233 Higher education institutions have shown theirability in the past to identify and tap into new oremerging student markets. However, ascompetition increases and the number of potentialnew markets declines, the scope for this kind ofentrepreneurial response to a decline in traditionalmarkets may be limited. Increased demand forpostgraduate updating and postgraduateprogrammes more generally as a result of theincreased skills demand of some kinds ofemployment is one example; another is moregeneral engagement at undergraduate level withemployers, which some institutions are alreadyexploring with public funding support in England.234 The development of the international studentmarket over the next twenty years, both withinand outside the EU, is particularly uncertain.There are three distinct markets – internationalstudents coming to the UK to study; partnershipsbetween UK universities and overseasuniversities to offer UK higher educationqualifications overseas; and borderless delivery ofhigher education using wireless communicationto deliver higher education programmes digitally.UK institutions face potentially significant threatsby the development of expanded higher educationsystems in those countries that have traditionallybeen a major source of international students forthis country.There is a good deal of existingnational intelligence through the work of theBritish Council and others and it is important thatUniversities UK seeks to stay abreast of that workand acts as a source of advice for its members. Itis essential that institutions should make use ofthis intelligence in the context of the internationalmarkets they operate in or wish to do. However,as noted in the discussion of the scenarios, thecontinued success of the UK in internationalstudent markets is heavily dependent onmaintaining the reputation of the UK highereducation system for high quality.

235 Developments in digital and communicationstechnologies seem very likely in our view to havea significant impact on the pattern of delivery ofhigher education over the next twenty yearsdriven to a significant extent by the expectation ofstudents with their familiarity with using thesetechnologies in their everyday lives and the needfor many students to combine learning andearning in a flexible way. The precise impact ofthese technologies is uncertain and depends inpart on the degree of investment, whether publicor private, in their application in highereducation. Institutions need to consider theextent to which they engage with the applicationof communications and digital technologies tothe delivery and management of student learningif they are to continue to compete for students.However, these decisions will have majorimplications for the institution’s estate and theway in which staff are deployed and managed todeliver teaching and these issues will need to beaddressed together with decisions aboutapplication of the technologies to learning. It willalso be important for institutions to ensure thatthey strengthen their academic supportarrangements for students who are taughtpredominantly through virtual learning.236 Academic partnerships, for example throughfranchising arrangements with further educationcolleges, have been the traditional way in whichmany higher education institutions have sought toexpand or sustain student numbers. Collaborativeacademic partnerships, both with other existinghigher education institutions and other potentialcompetitors, will be essential if these institutionsare to be able to manage the threats of increasedcompetition from demographic decline and theemergence of new competitors. Suchcollaboration can provide a more cost-effectiveapproach to new or developing markets throughreducing unnecessary duplication of effort andprovide for more cost-effective delivery infragmented markets. It is worth noting in thiscontext that HEFCE is currently funding a study ofthe nature of partnerships between highereducation institutions and other providers withparticular reference to the funding and legalframework. Partnerships with individualemployers or groups of employers are oneexample of this approach which the Westminstergovernment is keen for institutions in England toexplore. If increased collaboration andpartnership are to be fully effective in offsettingthe impact of increased competition there needsto be a much greater degree of mutual recognitionof qualifications. A national credit accumulationand transfer system of the kind operating alreadyin Wales, Scotland and Northern Ireland wouldprovide such mutual recognition.237 Successful collaboration in limited areas couldin practice be the fuse for considering muchwider collaboration and even merger in order tosustain the institutions concerned in the longerterm. It will be of particular interest in thiscontext to see how the proposal from DIUS forestablishing up to 20 new higher educationcentres in ‘cold spots’ across England works outin the face of demographic change and, inparticular the nature of the relationship with theexisting higher education institutions that areinvolved in the development of these newcentres.238 For the sector as a whole, future viability (orhealth) is likely to depend in particular on thescope for reducing costs, especially staff costs,without seriously compromising quality; on thedegree of public funding support, not only forteaching but also for research; on the degreeand nature of market liberalisation; and on theextent and profitability of internationalrecruitment. The sustainability of individualinstitutions will depend upon existing reputationand status; the proportion of activities (teaching,research, knowledge transfer) which are inbuoyant or potentially buoyant areas (mode,level, subject, region); diversity of fundingsources; and underlying assets.Universities UK The future size and shape of HE 51

Notes1 As a starting point for the purposes of this exercise, the highereducation sector is defined as the set of institutions that currentlyreturns student number data to the Higher Education StatisticsAgency (HESA) and whose student numbers are included in the2005/06 data used as a starting point for the demographic projectionin our first report (see footnote 2). By and large this is the publiclyfunded system of higher education, but includes the University ofBuckingham. However, it excludes directly funded higher educationdelivered by further education colleges, which is of particularimportance in Scotland.2 Universities UK (2008) The future size and shape of the highereducation system in the United Kingdom: demographic projections3 Available at www.hepi.ac.uk4 Universities UK (2008) op cit5 The population trends across the twenty two year period 2006 to2027 have been mapped using the demographic projectionsgenerated by the Government Actuary’s Department which arepublished and maintained now by the Office for National Statistics(ONS). The projections used were those published by ONS in October2007.6 Derived from the 2004-based population projections published byONS.7 These figures include international students as well as home and EUdomiciled students. It is assumed that international studentnumbers are independent of the UK and EU demographicprojections.8 Available at www.hepi.ac.uk9 Cristina Lannelli (April 2008) ‘Expansion and social selection ineducation in England and Scotland’, Oxford Review of Education,Volume 34, Issue 2, pages 179-202.10 Excludes those institutions that have merged since 1999/2000.11 http://www.hefce.ac.uk/pubs/hefce/2007/07_27/12 Note: in the following table, part-time undergraduate students havein some instances been assigned arbitrarily between degree andother programmes.13 See Chart 1 in HESA (2008) Students in Higher Education Institutions2006/0714 These figures include a small proportion of international studentsfrom outside the EU which are assumed to remain unchanged underthe different scenarios.15 http://www.britishcouncil.org/eumd-information-research-vision-2020.htm52

100%This product has been manufactured on paper fromwell managed forests and other controlled sources.It is manufactured using the FSC Chain of Custodyand by a company employing the ISO14001environmental standard.

About Universities UKThis publication has beenproduced by Universities UK,which is the representative bodyfor the executive heads of UKuniversities and is recognised asthe umbrella group for theuniversity sector. It works toadvance the interests ofuniversities and to spread goodpractice throughout the highereducation sector.Universities UKWoburn House20 Tavistock SquareLondonWC1H 9HQtelephone+44 (0)20 7419 4111fax+44 (0)20 7388 8649emailinfo@UniversitiesUK.ac.ukwebwww.UniversitiesUK.ac.uk© Universities UKISBN 978 1 84036 179 4July 2008