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As the government considers devolving public expenditure powers to nations and metros, radical new incentives should be put in place to ensure our universities play a bigger role in promoting local economic growth, according to the RSA City Growth Commission.

In its final interim report, UniverCities: The knowledge to power UK metros, the Commission argues that with the higher education sector receiving £7bn of public funds, universities have a responsibility to power metro growth and align themselves more closely with local economic priorities. Some of the report's key recommendations include:

  • New metro investment funds to support universities in making a local economic impact

  • New graduate clearing scheme and Refreshers’ week to retain talent locally

  • Golden handcuffs deals for graduates who stay

  • More flexibility in Graduate Entrepreneur visas to increase take-up in UK’s ‘core cities’

View the UniverCities: The knowledge to power UK metros report

With 72 of the UK’s 123 universities based within our 15 largest metros, the UK is well placed to ensure their global competitiveness is reinforced through their metro contribution, the Commission concludes. The report argues that maximising the growth potential of universities will require strong local leadership, new incentives to reward their contribution towards their local metro area and overcoming barriers to working together.

The report specifies three factors that will bring greater investment and growth to the UK’s metros: Optimising research and teaching for metro growth The Commission concludes that the financial and performance incentives by which universities are governed are largely agnostic to the location of their impact.

Nor do higher education institutions (HEIs) have strong incentives to orient the content of teaching and research – the core activities of all universities – to the demands of the metro economies in which they are located. Given the importance of tertiary education and the global standing of our leading universities, mainstream funding for HEIs should continue to be based on standards of excellence for research and teaching.

However, to respond to growth opportunities related to workforce skills and industrial innovation within the local metro area the Commission recommends: The establishment of “Metro Investment Funds for Higher Education” (MIFHE) by Combined Authorities or through collaboration between local authorities and LEPs. The objective of this fund should be to provide support for research and teaching that deliver an impact on local growth.

This will usually be delivered by HEIs physically located within the metro, and would top up the funding provided by the funding councils and RCUK. Metro authorities would be free to invest non-ringfenced funding in the MIFHE, including adult skills budgets, which the Commission proposes should be devolved. Promoting graduate retention and utilisation The Commission finds that efforts to integrate graduating students into the labour market vary greatly, with strong graduate migration flows presenting a challenge for metros to match supply and demand for skilled labour.

New incentives led by metros should provide local graduates every opportunity to find employment in the metro labour market. The report recommends: Introducing ‘ReFreshers weeks’ with universities campaigning for graduates to stay in the local area by offering advice, matching them to employment and volunteering opportunities, and helping them find housing. Developing a centralised ‘graduate clearing’ system which pools rejected graduate recruitment applications and recycles them to local firms with vacancies.

The scheme would be similar to the UCAS clearing scheme with graduates who have not found a place in corporate schemes being connected to other firms, including SMEs, looking to recruit. Enabling ‘golden handcuffs’ arrangements to reward commitments from graduates to work locally. Industry associations, start-up incubators, or university careers services could attract subscriptions from firms to support a student loan repayment bonus, made after a loyalty period ends. Encouraging enterprising students, graduates and faculties. 

Key recommendations

  • New graduate clearing scheme and Refreshers’ week to retain talent locally

  • Golden handcuffs deals for graduates who stay

  • More flexibility in Graduate Entrepreneur visas to increase take-up in UK’s ‘core cities

There is broad support among universities, businesses and government authorities to encourage entrepreneurial culture and activity in the UK. However, many interviewees referred to cultural concerns such as the faculty “being fearful of being seen to back something that isn’t a winner” and articulating that “discussing business applications cheapens the theory” of what they teach. There was consensus from the Commission’s interviewees that a stigma still surrounds enterprise – students see it as a “minority sport” compared to employment. To combat this, the Commission recommends universities build networks between students, businesses and others organisations. This should be encouraged by:

  • Partnering with business networks across the metro. HEIs should co-invest with BIDs and industry partners to support start-up incubation and acceleration space located in innovative urban districts.

  • Allowing ‘Core Cities’ to pilot a flexible ‘graduate entrepreneur visa’ which would encourage more international students to start a business in the UK after graduation.

  • Investing in the Entrepreneur First model of seed investment programmes, selecting on the basis of technical talent in STEM subjects.

  • Expanding flexible course provision. University courses should, by default, allow sandwich years for employment and enterprise. Students should have access to an enterprise module as suggested by the Young Review.

Commenting on the report, Chair of the RSA City Growth Commission, Jim O Neill said: 

“Relatively low numbers of graduates stay in the cities where they graduate, with many either disappearing back overseas or down to London to employ the fruits of their enhanced minds elsewhere. Surely it would be sensible to consider pursuing a number of initiatives to either help or encourage graduates to stay in the metro areas where they graduate, as a key ingredient to helping these cities prosper? We feel it would certainly help to deliver on the Commission’s goal of trying to recommend interventions that raise the economic activity of all metro areas, thereby boosting the long term growth potential of the UK.”

Report co-author, RSA Senior Researcher, Jonathan Schifferes said:

“Higher education is precisely the kind of knowledge industry which benefits from and contributes to the agglomeration economies that drive the logic of metro growth. Universities are key economic assets in every major UK city: our objective should be that their global competitiveness is reinforced through their metro contribution. The UK’s university system is already world-leading, but we can continue this excellence whilst becoming metro-focused, drawing on the opportunities which our great cities bring to universities, their students and faculties.”

View the UniverCities: The knowledge to power UK metros report

 Notes to editors

  1. For more information contact RSA Head of Media Luke Robinson on 020 7451 6893 or 07799 737 970

  2. Substantial public investment - over £7bn annually – is made to maintain the quality and competitiveness of teaching and research in the UK. In 2014/15, the Higher Education Funding Council for England (HEFCE) will allocate over £4bn in UK government funding, of which £1.9bn will be for teaching and £1.6bn for research. An additional £3bn will be distributed by the Research Councils of the UK (RCUK).


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