The possibility of a Brexit vote is hampering investor confidence across the UK. Mainstream sectors such as offices and industrial may be tangibly more susceptible due to underlying occupier confidence, but how will alternative sectors like the student housing market fare?
Recent figures indicate that transaction volumes for student housing show no signs of slowing. £3 billion represents the short term average and if this were to be the final trading position for the year, the impact of Brexit might be debatable. On the surface, it seems that investors have confidence in the underlying demand being created by UK universities. However, to understand the full picture and potential implications we have to look at the flow of students into the UK and the factors that entice them to study here.
Universities are becoming an increasingly significant voice in the campaign for the UK to remain in the EU, with support from high profile academics such as Professor Stephen Hawking. Their argument is about research funding and mobility, both of which allow UK universities to stay competitive and attract students.
Universities UK believes British universities benefit from £1.2 billion a year in European research funding, with the Russell Group of research intensive universities claiming a large slice of the pie. It is argued that without this funding the UK would cease to compete on research and innovation. Sceptics suggest we could direct our existing EU contribution to our own research projects, or strike a deal to remain an “associated country” on research programmes.
Loss of mobility and income?
There is a further argument that Brexit may also restrict the flow of researchers and students to the UK. The ability to recruit EU staff without having to negotiate the UK visa system is incredibly valuable. The potential damage of reduced research income and mobility restrictions would without doubt threaten the position of British universities on the global stage.
The UK has a considerable share of the overseas student market, ranked second behind the USA in the “Big 3” that control 74% of the global student market. A backward step in international reputation could have a direct impact on the investment market in the UK, despite the attractions of a weakened pound for inward investors.
Those in favour of the UK leaving the EU believe we could boost tuition fees by charging EU students fees in line with non-EU students. Average undergraduate tuition fees for EU students in 2014/15 was nearly £12,000 in classroom-based subjects compared with £15,000* for non-EU students. Improving academic quality in Europe means many UK institutions in the Top 100 of the Times Higher Education World University Rankings 2015-16 are ranked just one or two positions away from those in mainland Europe that offer study opportunities at a fraction of the cost. A higher cost of education, combined with potentially tougher visa entry requirements for EU students may dampen demand for UK universities amongst EU students.
The outcome of the referendum is likely to have a bearing on EU-related university research and tuition fee income as well as future mobility of students and staff. If the UK votes to leave the EU, universities may lose a competitive edge in attracting students and providing them with a first rate student experience.
Premium position in rankings critical
So, in the event of a ‘leave’ vote, should UK universities expect an immediate exodus of EU students? Our analysis suggests not. Academic quality is of high importance to EU students; of the Top 10 institutions with the largest full-time EU student populations, eight are top quartile ranked Russell Group members. EU students don’t appear to be that price sensitive when it comes to higher education. As long as UK universities can retain their premium position in the global rankings they will continue to compete strongly for EU and international students. This in turn means that the fundamentals for the student housing market remain solid.
*Source: Times Higher Education
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