justine andrew, director public sector, kpmg

Beyond Brexit

The Future of Higher Education: Beyond Brexit

—

23 January 2017

2

Document Classification: KPMG Confidential

© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),

a Swiss entity. All rights reserved.

3




Sector sustainability

TRAC income and costs by activity

Teaching

Research Other Total

Publicly

funded

Non-publicly

funded

Income (£ million) 11,127 3,941 7,466 4,868 27,402

Long run costs (full economic costs)(a) (£ million) 10,847 2,837 9,935 4,306 27,924

FEC recovery 2014-15 (income as percentage of

costs)

102.6 138.9 75.2 113.1 98.1

Publically

funded

102.6

Non-

publicly

funded

138.9

Research

75.2

Other

113.1

Total

98.1

4




Unprecedented times?

“I found myself saying at the beginning of an open meeting: ‘We live in times of

unprecedented uncertainty in the university sector’. But I thought, can I really

keep on saying this? But yes I can, clearly it’s the case with Brexit and the TEF

but it was the case last year. The uncertainty is ramping up.”

Simon Gaskell, the vice-chancellor of Queen Mary University London

TEF

There will be

winners and

losers

Apprentice

-ship

Levy

BREXIT

FE

Reforms

HE Bill

Demography

Immigration

reforms

REF

270

290

310

330

350

370

390

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Non-E

U S

tudent

Num

bers

(000s)

KPMG Forecast Range Anticipated Student Shortage

HEI Forecasts KPMG Base Forecast

KPMG Stretch Forecast 2010-15 Actuals

5




6




The complexity of the EU

Council of Europe

Albania

Armenia

Azerbaijan

Bosnia Herzegovina Georgia Moldova

Montenegro

Macedonia

Russia

Serbia

European Economic Area

EU

Customs Union

European Union Croatia

Bulgaria

Romania

United Kingdom

Euro Zone

Cyprus

Ireland

Schengen Area

Austria

Germany

Malta

Slovenia

Spain Latvia

Netherlands Portugal

Slovakia

Belgium Finland

Greece Italy Luxembourg

Estonia

Lithuania

Czech Rep.

Denmark

Hungary

Poland

Sweden

San Marino

Andorra

Turkey

Monaco

European Free Trade

Association

Switzerland

Iceland

Liechtenstein

Norway

France

Ukraine

7




A new Brexit language

Single market

access

Pick and mix

regulations

Customs

Union access

Free trade deal

WTO: the fall-back

option or

British and Bespoke

“A country that works for everyone”

Theresa May

‘Soft’ Brexit

In Single Market/Customs Union

‘Sector by sector’ Brexit

Tailored by industry

‘Hard’ Brexit Outside EU institutions

Early talk was

of existing

models…

Until new PM

shifts the

conversation

… to ‘special

deals’

… and back to the

models again

Free trade deal

8




How Brexit affects businesses

Rooted Interconnected Mobile

9




How has the sector responded?

EU CAMPUS

HOLD FEES HOLD FEES

10




Or the opportunity you are trying to

maximise?

— Reputation?

— Financial?

— Staff retention?

— Student mobility?

— Research income?

How would you prioritise them?

How do propopsed solutions align to

your existing strategy?

What is the problem you are trying to solve? Students People

Research Erasmus

11




Illustrative matrix of options to respond

Do

no

thin

g

(ca

rry o

n)

Mit

iga

te t

he

co

st

as

pe

cts

(b

e m

ore

eff

icie

nt)

Ac

tive

mark

etin

g i

n

Eu

rop

e

Inc

rea

se

mark

etin

g/

ac

tivit

y o

uts

ide

EU

:

Res

ea

rch

Stu

de

nts

Inc

rea

se

on

-

lin

e le

arn

ing

/de

ve

lop

ma

rke

t le

ad

ing

on

lin

e?

Jo

int

ve

ntu

re/

pa

rtn

ers

hip

wit

h E

U

Un

ivers

ity

Op

en

a C

am

pu

s in

the

EU

fo

cu

se

d o

n

tea

ch

ing

Se

t u

p a

pre

se

nc

e in

the

EU

fo

r R

es

ea

rch

Op

en

a C

am

pu

s in

the

EU

fo

cu

se

d o

n

tea

ch

ing

an

d

res

ea

rch

Part

ner

wit

h a

n E

U

Un

ivers

ity t

o o

pen

a

cam

pu

s in

an

oth

er

EU

co

un

try

Op

en

a c

am

pu

s

ou

tsid

e E

U

UG

Recruitment

PG

Recruitment

Student

Mobility

Research

Staff

retention

Measure against:

— Brand/reputation (left)

— Financial Impact (right)

12




Current Overseas Presence in the EU Home Country

US 80%

EU (Non Eurozone) 10%

Other Non-EU 10%

13




Non-EU Case studies

Established 1990; 3,000 students (primarily from USA and France).

All full time students pay the full GT fees of $6,726 per semester plus the

GTL fee of $671 per semester for the full degree programme.

Roughly 50/50 research and teaching (if including summer programmes)

Partnered with:

— Le Centre National de la Recherche Scientifique;

— Georgia Institute of Technology; and

— Reciprocal dual degree agreements with:

- Arts et Métiers ParisTech (ENSAM)

- Supélec

- École des Mines de Nantes

- ENSEA

- Telecom SudParis

- ENSEEIHT

- École nationale supérieure de techniques avancées Bretagne

(ENSIETA)

- INSA Lyon

- École nationale supérieure d'électricité et de mécanique (ENSEM)

- University of Technology of Compiègne

- University of Technology of Troyes

Established 1994; 13,500 students across a number of campuses

(including London). Most students are Polish.

Fees:

— EU, Ukraine and Belarus: Administration fee of €120, plus fees varying

from €612 to €1,042 (course-dependent; per semester);

— Overseas (inc. USA): Fees range between €8,300 and €16,500 per

annum depending on the programme.

Research projects funded by the European Union and the Ministry of

Science and Higher Education.

Branch campus of Clark University (students receive US diploma)

Most popular private university in Poland, according to Ministry of Science

and Higher Education of Science

Partnerships with:

— In North America, Clark University (USA) and institutions in Canada

and Mexico;

— In Europe, BTU Cottbus (Germany), University of Perugia (Italy),

University of Cagliari (Italy), University of Lusofona (Portugal), and

University of Alcala (Spain); and

— Other institutions in South America (Brazil, Chile) and Asia

(Philippines)

14




Student perspective: Germany

Brand Cost Experience UK University

now

Many Germans are attracted by

the prestige and willing to pay for

quality – UK universities also

have a reputation of being

international and globally-open,

which employers in Germany

find attractive.

Up to £9250 €10,750 per year. Staff to student ratio much higher than in

Germany. Worst ratio in UK is 1:25. There

are more extra-curricular activities in the

UK, with students unions and sports

societies. The pastoral care, and general

support, both personal and academic,

is better than in Germany.

Home state Neutral: the highest rated

German university is ranked at

30 in the world (LMU

Munich), with 3 in the top 50.

Free. Average student-teacher ratio of 1:66.

University experience can be inefficient

and bureaucratic.

Home private Many private universities are for

applied sciences – close link to

industry.

Varies from university to

university – At Hertie School of

Governance, it is €32,500 for a

two year course. At Business and

Information Technology School,

courses cost €8940 per year.

More vocationally focused

Other EU

countries

High number of German UG

study in UK but also other EU

and Non EU countries

Depends on country but

obviously consistent across EU

zone, mainly free tuition.

Many courses taught in English though

experience very different from UK.

Permission to work post-graduation

could be an incentive

Non-EU

USA, Canada

Very attractive – 6 of the top 10

universities worldwide are in

the US.

$45,846/€42,500/£36,600 per

year.

Good – ‘college experience’, sororities

and fraternities, heavy focus on

extra-curricular activities and sports.

UK Campus in

the EU* (post-

Brexit)

Should be based on reputation

of university in UK

Could set own fee in overseas

location. Or could offer

differential pricing

If replicate UK model then should be

better than German experience

but cost

UK University

post Brexit

Brand in the UK may be

impacted in the long term

Students would need to pay fees

upfront unless some financing

arrangement put in place and

would be more expensive

Unlikely to change.

Name: Hannah.

Country: Germany

Subject: Engineering

Drivers: Wants a more

diverse experience.

15




The impact of Brexit on students’ cost of studying Indicative impact of Brexit on EU tuition fee levels

Note: (a) Average exchange rate for September 2015 (1.3655) has been considered as the average exchange rate pre Brexit; (b) Average exchange rate for the period June 24 to November 15, 2016 (1.16202) has been considered as

the average exchange rate post Brexit

Source (1) Oanda

12.3 16.3

19.1

0

5

10

15

20

25

Converted at averageexchange rate pre Brexit

Converted at averageexchange rate post Brexit

Converted at averageexchange rate pre Brexit

Fe

es (

€)

EU fee rate at £9,000 EU fee rate moving to £14,000

+32%

+56%

16




EU Students Flows within the EU

(150)

(100)

(50)

0

50

100

150

200

250

Germ

any

Slo

vakia

Fra

nce

Sp

ain

Gre

ece

Irela

nd

Neth

erla

nds

Po

lan

d

Rom

ania

Bu

lga

ria

UK

Sw

eden

Students In Students Out

Source:Eurostats 2012

Eurozone EU

17




Breaking the mould … other opportunities Link with broader

Industrial Strategy of

government

It’s all relative – The

Trump effect?

New global University

network focused on

research themes

Full merger with EU

entity to enable

access to funding

Set up own Student

Loan Book: invest in

Human Capital

Link with Industry

on a global basis:

UK Industrial Strategy

Increase participation

in UK: widening

participation

Building on the

devolution agenda

and focus on

regional economy

Language courses?

Geo-politics?

Proper vertical

integration

18




19




Speaker contact details

Justine Andrew

Market Director for Education

KPMG LLP

+44 (0) 113 231 3659

[email protected]

2 © 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG

International”), a Swiss entity. All rights reserved.

Lessons Learned

What do we know?

21




Good practice

Funding

Define requirement

Evaluate options

Optimise terms

Best execution

Cyber security &

compliance

Protect data

confidentiality, integrity

and availability.

Corporate intelligence

& due diligence

Understand

stakeholders and the

environment

In-depth investigations

Anti bribery &

corruption

UK bribery act (2010)

Adequate procedures to

prevent bribery

Fraud

Governance and control

frameworks

Awareness

Investigations

Ou

tbo

un

d

International tax

Structuring

Services delivered

Royalty/know-how

receipts

Branches or subs

overseas

Partnerships

Access new markets

Acquire local expertise

Spread risk

Align objectives

Appropriate governance

Employee global

mobility & tax

implications

Uk-based staff deployed

overseas

Global immigration

advice

Immigration

Global talent management

Local hires

Student recruitment

Sponsor compliance

Inbound

Employee global mobility

& tax implications

Hosting visitors

UK employees resident

overseas

Governance — Matches strategy

— Effective oversight

— Governance

— Scalability

— Structure

— Market analysis

— Proactive International

strategy

22




Guiding principles to deliver successful transnational initiatives: — Develop a framework for expansion: Developing an

overarching governance structure, engagement

process, and monitoring arrangements to guide all

overseas endeavours over their life cycle is critical to

reducing risk and delivering the institution’s

international strategy.

— Focus on communication: It is vital to ensure that

academic staff, administrators and researchers are

aware of the established processes for partnership

development and are updated on emerging risks in

target markets.

— Align clearly to academic and research strategies:

Securing early academic engagement and ensuring a

strategic fit help ensure that proposed international

ventures support the institution’s overall business

strategy.

— Take an iterative approach: Timelines and budgets

involved in expansion initiatives are often longer and

larger than anticipated, so it is important to frequently

review progress and make adjustments.

— Undertake due diligence: By conducting the various

due diligence processes in step with the project

development plan, institutions can identify emerging

issues to course correct, thus avoiding the need to

‘unpick’ arrangements after the event.

— Build transparent partnerships: No matter what

model of expansion is adopted, institutions must

remember that successful partnerships are built on

open lines of communication, mutual benefits and

transparency between the parties.

— Plan appropriate exit strategies: In many cases,

exiting a partnership can be as – if not more –

complex than initiating one, so institutions must

ensure that this is considered up front.

— Engage advisors early on: Financial and legal

advisors should be used throughout the planning

process as an independent sounding board and to

gain experience from their global reach.

Questions

What do we know?