BAM is a leading player in the university sector and so we take a keen interest in understanding the issues affecting our clients and how our expertise in the built environment can help them to plan for the future.  
 

I attended the ‘AUDE Big Conservation’ recently where university speakers were joined by financiers, consultants and contractors to discuss Brexit and other challenges ahead for universities.

I quickly learned two things:

- We are all still in the dark with Brexit - Andrew Burgess from Loughborough University summed this up humorously in his presentation title: “We haven’t a Scooby Doo”

- Brexit is just one of a number of challenges facing the HE (higher education) sector     

 

The session kicked off with a look-back at investment in the HE sector from the 1960s to the present day. A cycle of decade-long boom and bust became clear. The 2000s were considered the “golden age” with substantial Government funding, well thought through master-planning, and estate wide investment. This was a contrast to the 1960s when unstructured capital development resulted from a boom in numbers and led to estates that were not fit for purpose.

This past decade has seen considerable Government austerity measures resulting in significant public spending cuts. Universities are in strong competition with each other and overseas establishments to attract students. This has forced them to invest their own money and borrow from institutions to keep their facilities world class. They also have to justify the fees that students in England and Wales have to pay.
 
BAM recently completed the New Adelphi Building for University of Salford

So, what is Brexit likely to do?

On 11 January 2017, Cambridge University announced there had been a 14% fall in applications from students in the EU. With a fall in student numbers comes a fall in income and pressure to borrow money from other sources.

By contrast, in Scotland, student fees are paid by the state, and a reduction in students from Europe is seen as an opportunity to fill places with more Scottish students.

Andrew McConnell from the University of Huddersfield summarised the current balance sheet dilemmas of many universities. Over the period 2014/15 through to 2018/19, expenditure is expected to grow more than income, with increasing reliance on borrowing and difficult funding decisions.

On face value, borrowing through bond finance is not an issue for universities as outlined by Sarah Seed, a finance lawyer with Mills and Reeve. The cost of borrowing post Brexit was expected to rise but in reality it has fallen. However Sarah tempered this optimism with the reality that universities still need to repay their loans and with typical bonds circa £250m+ and over 40 years, the interest alone is substantial and more uncertainty over future university income could create difficult funding decisions.

Sir Simon Hughes of the Open University (and former deputy leader of the Liberal Democrats) speculated that the profile of education in five to ten years will be different from today with more students opting to stay in further not higher education, and preferring paid apprenticeships to the burden of student debt. This all adds to the pressures on university income.

Other non-Brexit issues for universities include:

The forthcoming Teaching Excellence Framework (TEF). This will produce gold, silver and bronze league tables from mid-2017. Bronze is actually the booby prize reflecting a poor institution. Universities create surpluses each year (an excess of income over expenditure) which is re-invested in new facilities. The feeling is that falling student numbers at a TEF bronze university could wipe out any surplus within five to ten years.

- The Office for Students (OfS). This new Government body replaces the HEFCE (Higher Education Funding Council for England). OfS is seen as more akin to a regulatory body (similar to Ofsted in schools) whereas HEFCE was an active promoter of the university sector. 

- Substantial backlog of maintenance. Investment in lifecycle and maintenance is the first thing to go when estates directors are forced to make efficiency savings. This is a serious issue and getting worse. Poor quality environments adversely affect student choice.

- A second Scottish referendum.  The Scottish economy is weaker now than it was during the first referendum. The consensus is that a second one is unlikely to happen and even more unlikely to succeed. But, if it did, then this could put a strain on the Scottish Government’s current model of financing student education.

It’s clear to me that competition for students at home, on the European continent and further afield will be a major challenge in the years ahead and that universities will have to differentiate by the quality of their facilities and the student experience they can offer. Existing estates will need to be made more efficient and/or be reconfigured for the future.  Increasingly, using data intelligently to monitor how buildings are used and when, and the user experience, will help drive decisions about future development. BAM can help universities with developing smart campuses, reconfiguring existing buildings and planning future sustainable development.

One delegate told me that seeing BAM there taking an interest in the sector’s outlook was most welcome. We regularly sponsor AUDE’s annual conference, and understanding the environment for our clients is the basis of being a strong partner when creating their future estates.




 
Materials Innovation Factory project for the University of Liverpool
Investcorp Building, Middle East Centre at St Antony's College, University of Oxford
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About the author

Adrian Padley

Director of Business Planning – BAM Construct UK

Adrian’s career in construction commenced in 1980 and he joined BAM in 2002 as a Commercial Manager for the North East region. In 2007, he was promoted to a national role covering initially education sector work and then a wider multi-sector role.

Adrian has a passion for improving efficiency and best practice within the business which has seen him lead and develop initiatives such as Bid Support, the BAM KPI Engine and recently an embryonic Innovation Hub.

In 2016, Adrian worked with the BAM Construct UK Executive Board on implementing Royal BAM Group’s Strategic Agenda 2016-2020 (Building the present, creating the future) and the company’s operating plan for 2017. This led to Adrian being appointed Director of Business Planning where he continues to support the Executive Board and our Business Units in delivering the strategy.  


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