UK For-Profit Higher Ed: The 'Home Market' Opportunity

The 'Home Market' opportunity is the buzzword in the For-Profit Higher Ed in the UK, not just for the colleges themselves but for the Private Equity houses that chase them. There is a sense of fatalism here: The 'Home Market' is at the fore because there may be no other market available. The big overseas market which sustained private Higher Education in Britain for the last three decades is all but shut out, given the cavalier attitude of the UK Border Agency. They have done everything they can to indicate that British Higher Ed is closed for business and overseas students are not welcome here. This leaves UK Higher Education in general, but For Profit Higher Ed in particular, without an option but to focus solely on the 'Home Market'.

Except, that no one really figured out how the Home Market looks like. There is a fairly simplistic assumption underlying the Home Market proposition, which may turn out to be false. The underlying idea behind this talk is that the British government has now committed themselves to the irreversible path of privatising Higher Education. The indications are surely there. First, the shifts in student funding, where the money follows the student as a loan rather than given as grants to institutions opens up the field for myriad private and public players including the Further Education colleges. Further, the private providers, For Profit and Non-Profit alike, are expected to offer degrees at a lower cost, thus lessening the burden of debt on students and attracting them away from the universities. Finally, for the last key dependence in this model, the fact that private providers have to work with public universities to grant a degree, the government is relaxing the norm to allow any institution with more than 1000 students to get degree granting powers. All these indicate a real willingness to get private providers in the Higher Education game, backed by provision of student loans and autonomy to grant degrees.

However, there are several problems in this model. For a start, all private providers and investors are looking at the excess student numbers who can't find a place in the universities. There were roughly 250,000 of those last year. This number may now disappear, given that even the elite universities are reporting available vacancies at the wake of the fee hike this year. Besides, the number of 18 year olds are decreasing in the UK, as the population ages. In fact, if the university seat capacity remains the same, the excess student numbers will still disappear in 2015. This isn't exactly a sustainable business model for huge expansion of private higher education.

As for lower costs of teaching, the private players going for this will be training people for those middle ability, middle income jobs that are disappearing. What good would be a Business undergraduate degree from a indistinct college when the Customer Service and Sales jobs are either getting automated or outsourced? The current model so favoured by the investors and entrepreneurs is aligned to mediocrity, whose time has well and truly passed for the students, who are conscious of the job market trends and wouldn't easily sign up for a course which does not get them anywhere.

75% of British undergraduates surveyed this year stated that they considered studying abroad, particularly in Holland, Germany and France, whose universities have started experimenting with English language led teaching. This is a huge change, as the British students are notorious for their parochialism. This may ultimately turn out to be a great boon for the British society in general, but in the short run, this would further dampen the 'Home Market' opportunity for the private sector.   

The intended expansion of degree granting powers are also problematic. Britain already has more than 150-plus degree granting institution against the 30-odd in Australia. Indeed, the Australian population is roughly 1/3rd of Britain, but Australian government's policy of controlling the degree granting powers within a small group of universities have worked so far and resulted in creation of some of the most dynamic new universities in the world. Apart from the apparent public-to-private shift, the pursuit of degree granting power presents a problem to the sector, a trend that Andrew Rosen, the Chairman and CEO of Kaplan Inc., calls 'Harvard Envy'. The degree granting powers will invariably get the sector into a reputation game, rather than being about the provision of good quality affordable teaching. Going by the experiences across the pond, where this was already played out, this means cost spirals and pointless degrees ['mickey-mouse degree' being a very British expression in vogue for a few decades].

The interesting point in this whole discussion about the 'Home Market', however, is the conspicuous absence of any education innovation. UK has a Higher Education problem like anywhere else; the issues regarding national competitiveness in skills and enterprise are alive and kicking. There is a huge requirement of reskilling the workforce. The economy, desperately dependent on Banking, may need to balance itself, a possibility many of us don't want to think about, and educational innovation is the only way one could do it. However, the 'Home Market' seems to refer to only the traditional undergraduate students, in the parlance of education investors, and not anything slightly complicated.

 Seen that way, the 'Home Market' scramble looks very much like Yeltsin-era Russian privatization, than any wave of innovation or new ideas: With this, we are likely to get indifferent players with Higher fees, drawing on public subsidies [there are two kinds of subsidies - direct, through student loans, and indirect, as the tenured lecturers from public universities often moonlight in the private colleges] trying to chase a dwindling student population. This is setting up to be not just policy disaster, but bad business too: While there may be some short term gains to be achieved from public-to-private conversion of assets, for Private Equity, they should be able to sell these assets on based on a growth proposition. With the student numbers turning south by 2015, costs moving up with competition and overheads, and placement opportunities looking as limited as ever, the investors may have to wait a lot longer for their payday if they solely look at the traditional undergraduate market and try to ween it away from the public universities.

Comments

Popular posts from this blog

Lord Macaulay's Speech on Indian Education: The Hoax & Some Truths

Abdicating to Taliban

India versus Bharat

When Does Business Gift Become A Bribe: A Marketing Policy Perspective

The Curious Case of Helen Goddard

The Morality of Profit

‘A World Without The Jews’: Nazi Ideology, German Imagination and The Holocaust[1]

The Road to Macaulay: Warren Hastings and Education in India

A Conversation About Kolkata in the 21st Century

The Road of Macaulay: The Development of Indian Education under British Rule

Creative Commons License

AddThis