"Higher education can play a central role in supporting businesses and individuals with skills, advice, knowledge and know-how. I know that business leaders recognise that their enterprises are more likely to survive if they continue to invest for the long term, but they need help.’
David Lammy MP, Minister for Higher Education and Intellectual Property.
Quietly among the proliferation of headline-grabbing stories in the recession, the Government is mobilising the higher education sector as part of the multifaceted approach that is imperative to the UK’s economic recovery. Interventions are supporting capacity building and responsiveness in universities to help businesses survive the downturn and prosper beyond it.
CFE’s work in the sector supports the idea that capacity building for employer engagement is important, now more so than ever. But the weight of evidence suggests that simply building it won’t make employers come.
In our two part comment piece we look at both the supply and the demand of higher level skills for businesses in the midst of the recession.
Building it - the supply of higher level skills
Universities have worked with employers for many years and the recognition of the value of this relationship is nothing new. In fact, in 1924 Ramsay MacDonald, then prime minister, declared that, ‘the skills issue will only work if driven by employers.’ But a concerted strategic effort for employer engagement has been high on the agenda since the Leitch Review in 2006. Leitch set the target of 40% of the working-age population being qualified to level 4 by 2020, and employers must be active in that considering that 75% of the 2020 workforce has already completed their compulsory education. Furthermore, there is a competitive incentive for universities as their core market of 18-20 year-olds is forecasted to decline in number by some 12% between 2010 and 2020.
To date, HEFCE have invested £60m in employer engagement projects at 29 institutions. They also plan to spend at least £105m between 2008 and 2011 to build employer engagement capacity. Projects include: efforts to ‘create an employer-facing institution’ at the University of Teesside, by offering business solutions and changing institutional culture; developing a vehicle for higher level skills in SMEs at De Montfort University; and establishing a ‘new business model for employer engagement’ at the University of Derby. HEFCE’s support for this agenda has transcended the institutional level, with the Higher Skills Pathfinders, for instance, charged with finding ways of connecting higher education and employers, and Lifelong Learning Networks also having employer engagement within their remit.
With the onset of the recession, businesses are being urged to invest in training, and employer engagement initiatives have been accelerated as the benefits of working with universities are highlighted. The Government has already moved, through the Economic Challenge Investment Fund (ECIF), to encourage universities to respond rapidly to the needs of employers; while John Denham led on the prevailing economic climate in his recent grant letter to HEFCE.
So, where can higher education help?
The ‘Standing Together’ brochure from Universities UK and GuildHE outlines the ways in which universities can work with businesses. It suggests innovation and knowledge transfer; training and workforce development; and the purchasing power of universities as ways in which they can provide support during the recession. With a long-term view, four in five universities now have employer engagement as part of their mission.
This is timely because, as we learned in Beyond Known Unknowns, this offer needs to be made clear. Employers currently do not understand the HE offer. For example, they are unaware of the bespoke provision that is available and perceive universities as providers of only ‘traditional’ academic qualifications. These are not necessarily top of the list of priorities for employers at the moment, but Kingston University, for example, are looking to dispel this with their Business Process Foundation Degree which is an e-learning course and available to those with no formal qualifications.
Some of these activities and others such as flexible non-accredited provision, research, and innovation are being encouraged through the ECIF, which HEFCE announced in January. Universities can bid for up to £500,000 of the £25m fund, which must be match-funded. As well as building capacity, it intends to encourage institutions to respond rapidly to the needs of employers during the recession.
The underlying principle of responsiveness is important.
However, the perception remains that universities are unresponsive, with Chris Humphries, Chairman of the UKCES, saying, ‘No, I don’t think they are [responsive]. I think they have only just very reluctantly and very recently understood the need to have a better focus on this [employer engagement].’ Furthermore, our Beyond Known Unknowns report showed that employers perceive higher education institutions to be less responsive than private training providers. But responsiveness is more than just a rapid reaction, as we champion in our work with the Training Quality Standard (TQS). It’s absolutely imperative in a recession, when business survival is at stake, that solutions are aligned to the specific needs of each employer customer. Employers’ perceptions are that universities are not doing this and it is a perception that the sector needs to challenge. CFE is working with HEIs to explore the potential of the TQS as a development tool in higher education. The principles of the TQS suggest it could be an important tool for fostering an employer-responsive culture and ensuring that HEIs have the capacity and flexibility to help businesses through the recession.
To enable HEIs to respond rapidly, they will not have to accredit training under ECIF funding. But is this what employers want from HEIs? Our demand studies, such as Known Unknowns and Beyond Known Unknowns suggest not, as the most important factor for employers is that training leads to a qualification (see graph). We must re-iterate that a key challenge for all HEIs is to develop a flexible approach without compromising quality.
GRAPH: Importance of key business areas rated out of 10 - average results from East Midlands, West Midlands, and Yorkshire & Humber
The announcement of the ECIF was preceded by John Denham’s juxtaposition of ‘supporting the economy’ and ‘wider engagement with business’ in the 2009/10 grant letter to HEFCE. Three themes related to this emerge from the letter: flexibility, cost, and capital.
The grant letter cites VAT cuts and urges universities to pass these savings on to employers. These, and other, reductions could be necessary to ease the concerns of cost-conscious employers. The forthcoming article, looking at the demand for higher level skills, will examine how the importance of cost has changed over time. Suffice to say for now, that looking at our demand studies chronologically, cost has gone from being a lesser concern to being a major one in decisions as to whether to invest in training.
HEFCE have also been asked to bring forward £219.3m of capital expenditure, which could further enhance the ability of universities to foster innovation. NESTA issued a rallying cry in December and asked us to ‘attack the recession’ while stating that, ‘innovation must be central to our response.’ It is also one of the Government’s five key drivers of productivity. Investment in business incubation units, a common feature at many universities, might enable micro-businesses to survive and flourish while encouraging entrepreneurship and innovation. In the economy more broadly, the link between higher skill levels and innovation is detailed in the 2005 publication, ‘A Literature Review on Skills and Innovation’ and ESRC’s, ‘Skills and Innovation in Modern Workplaces’). The Government also asserts that universities play an important role in fostering this among individuals and businesses in the ‘Innovation Nation’ white paper.
At both the institutional level and the national policy level, the contribution that universities can make to help businesses through the recession is appreciated. With the majority of employer-facing universities preparing ECIF bids, steps are being taken to open their doors to struggling businesses. This was an important pre-recession consideration but even more so in a climate in which businesses’ very survival is a daily concern. But will these businesses come?
The Innovation, Universities, Science, and Skills Committee articulated it thus: ‘we are also concerned that the current policy of supplying skills and expecting businesses to utilise them…will not hold up in a shrinking economy.’
This is where we will pick up in our next article.
Thomas Fletcher
Project Coordinator