Research article

Quality over quantity

Students are moving up the university rankings for extra cash

Our research shows a link between graduate earnings and university entry requirements. We expect continued growth in the demand for places at more selective institutions, while demand weakens further at lower ranked universities.

In 2015–16, the UK Government completely lifted the restrictions on student recruitment, allowing universities to bring in more undergraduate students to help boost their finances.

Initially this was advertised as a way to increase student numbers, but in reality the effect has been very different: rather than more students applying to university, similar numbers of students have applied but to a smaller range of higher ranked institutions.

This makes a lot of economic sense. With tuition fees hitting £9,250 in the 2017/18 academic year and living costs also on the rise, students want to ensure they get a good return on their investment in education.

Of course there’s a huge range of benefits from going to university, from learning from world-leading academics to meeting your future partner – The Student Room reports 20% of students meet the love of their life on campus. But in purely monetary terms, the easiest way to assess the impact is to analyse typical graduate salaries.

Figure 7

FIGURE 7Average Graduate Earnings by University UCAS Point Tariff

Source: IFS

A report from the Institute for Fiscal Studies released earlier this year identified a clear correlation between university entry requirements and graduate earnings. For every 20 UCAS points required – the difference between two A level grades – students can expect to earn an extra £930 per year once they graduate.

Figure 8

FIGURE 8UCAS Points by A Level Grade^

^ UCAS tariff points change from 2017 admissions cycle onwards. We expect correlation to continue

Source: UCAS

Graduate surveys tell a similar story. Our analysis of HESA’s graduate survey shows an even starker difference, with graduates earning £1,200 more per year for every 20 point difference in UCAS entry tariff. With such a clear route to higher potential earnings, it’s no wonder that students are applying to more selective universities.

Figure 9

FIGURE 9First Year Undergraduate Numbers


Source: HESA, UCAS, Savills Research

With university fees so high, students want to feel certain that this large investment of time and money will pay off in the long term. With increased government support for apprenticeships and vocational qualifications – which have much lower fees than universities, or may even be paid – we expect students to become even more selective in their university choices.

Figure 10

FIGURE 10Change in Full Time Student Numbers by University Rank

*Drop in top tier universities reflects cuts to Oxford University part time numbers

Source: HESA

A Vital Export

International student numbers may rise after the General Election

Assuming students are excluded from immigration targets in party manifestos, we forecast international student numbers to rise by 6% per year over the next three years.

This reflects the growth in the number of students worldwide who study overseas (OECD). In reality, growth may be much higher than this as access to UK higher education has been restricted to overseas students for so long.

Show me the money: The UK attracted 112,000 fulltime students from the EU and 285,000 from other countries last year, making up just under 23% of the full-time student population. These students contribute £25bn (Universities UK) to the UK economy each year through tuition fees and other spending such as accommodation and services.

They are also a key asset contributing to the UK’s “soft power” – our ability to influence and negotiate with other nations. According to research from the British Council, one in seven world leaders has studied in the UK. With Brexit brokering and trade talks on the horizon, international relations more important than ever. Maintaining these links will be absolutely vital.

Chinese satellites: University applications from Chinese students have almost doubled over the last decade, to 14,000 in 2016. With the sterling – yuan exchange rate 8% lower than it was before the EU referendum, we can expect this demand growth to continue.

Peking University’s satellite campus in Oxford marks an exciting step forward for education links between the two countries, further to increased student numbers. Peking is ranked 27th in the world on the Times Higher Education University Guide, making it highly competitive with many UK institutions. It will allow students to spend their first year in Oxford, before continuing the rest of their course in Shenzhen, China.

■ Manifesto madness: Any hope for a quiet, politics-free summer was smashed last month with the announcement of a June General Election. There are many reasons we should be accepting – welcoming – international students into the UK. With students cut from government immigration targets, UK universities could open their arms to overseas markets and drive growth in international student numbers.

Politicians of all parties must recognise that international students make an enormous cultural and economic contribution to the UK – to the tune of tens of billions of pounds each year. This election presents them with the chance to reflect this in their manifestos.

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