The Economic Contribution of Loughborough University

Transcription

1 The Economic Contribution of Loughborough University A Report by Regeneris Consulting 31 July 2017

2 Loughborough University The Economic Contribution of Loughborough University 31 July

3 Contents Page 1. Purpose and Scope of the Note 1 2. Headline Results 3 3. Analysis by Type of Impact 5

4 1. Purpose and Scope of the Note 1.1 Regeneris Consulting has been appointed to assess the economic contribution of Loughborough University. This short note sets out the headlines from this analysis. Scope of the analysis Types of impact 1.2 Our analysis covers the following sources of economic contribution: Direct: the University s direct contribution to Gross Value Added, as measured in the National Accounts, and the direct employment it supports Indirect: the impacts of the University s expenditure on external suppliers, including multiplier effects as expenditure flows throughout the supply chain Induced: employee expenditure effects, encompassing the spending of direct employees and those within the supply chain Students: the impacts resulting from the expenditure of students, split by type of student (FT, PT, domestic/international) Skills and productivity: the contribution arising from highly-skilled graduates being employed in the economy Visitor effects: our analysis to date has considered the economic impacts from the spending of friends and family who visit students throughout the academic year Business support/innovation activities: a high level assessment of the value of the University s business engagement activities. Loughborough University Science Park: the economic value generated by companies within the Science Park. Measures of impact 1.3 Throughout, we measure impacts using the following: Gross Value Added (GVA) is the key measure of economic output at the level of an organisation, sector or region. It is measured as the sum of employment costs and surplus before interest, depreciation, amortisation and taxes. 1

5 Employment. Measured in terms of Full Time Equivalents (FTEs), which expresses full- and part-time jobs in a common currency. Time period 1.4 Impacts are calculated for the 2015/16 academic year. 1 Further details of how impacts have been calculated are provided in the technical appendix. Impact geographies 1.5 We present results for the UK, The Midlands Engine, and Leicester & Leicestershire LEP areas. The geographical distribution of impacts reflects the location of the campuses, suppliers, residential locations of staff and students, and the size of the economies. 1 The large majority of data used in this report is for the 2015/16 financial year however certain data sources cover a more recent period i.e. the HR data used is the University s position in as of

6 2. Headline Results 2.1 The results of the analysis are summarised overleaf, for the different impact area geographies and split by the different sources of impact. The analysis has been done on two bases: Firstly, by including the impact of all student expenditure Secondly, by netting off the expenditure from students who were already resident in the area prior to studying at the University (e.g. for the UK, netting off expenditure by domestic students). This reflects a recognition that, had these students not attended the University, they may have otherwise been resident and economically active in the area. 3

7 Table 2.1 Loughborough University economic impact summary, 2015/16 Economic impact including all student expenditure Leicester & Leicestershire LEP The Midlands Engine UK GVA ( m) FTE Jobs GVA ( m) FTE Jobs GVA ( m) FTE Jobs Direct 190 2, , ,800 Indirect Induced , ,700 Students 95 1, , ,200 Skills & productivity 2 Visitor effects Innovation and business support 3 Science Park 170 2, , ,100 Total 510 8, , ,400 Economic impact excluding non-additional student expenditure Leicester & Leicestershire LEP The Midlands Engine UK GVA ( m) FTE Jobs GVA ( m) FTE Jobs GVA ( m) FTE Jobs Students 85 1, , ,100 Total 500 7, , ,300 Source: Regeneris Consulting calculations. Note: Numbers are rounded so do not always sum exactly to totals. 2 An annualised measure of the Net Present Value (NPV) of the additional earnings and employability benefits that individuals can expect to achieve by gaining a graduate degree, compared to people who do not hold a graduate degree. Hence there are no additional jobs supported by this impact. 3 This represents the sum of impact generated by Knowledge Transfer Partnerships, contract and collaborative research and consultancy work. 4

8 3. Analysis by Type of Impact 3.1 We estimate that in 2015/16, Loughborough University supports a total of 14,400 FTE jobs and 940 million in Gross Value Added 5 in the UK. The breakdown of these contributions is provided below. Core impacts 3.2 The University s core impacts cover the direct, indirect and induced effects described in Section 1. Direct 3.3 The University employs a total of 2,800 direct FTEs. Its total direct contribution to GVA is 190 million. Indirect 3.4 In 2015/16 the University spent a total of 80 million on external suppliers, 6 of which 71 million was sourced from the UK. 3.5 Of this 71 million in UK supplier expenditure, 42 million worth of purchases were made with suppliers based in the Midlands Engine area, and 7.6 million was purchased from Leicester & Leicestershire LEP based companies. 3.6 We estimate that the economic impacts from this spending, both directly within the University s immediate suppliers and through knock-on multiplier effects down the supply chain, were as follows. Table 3.1 Indirect/Supply Chain Impacts, 2015/16 GVA ( m) FTE Jobs UK The Midlands Engine Leicester & Leicestershire LEP Source: Regeneris Consulting calculations 5 Note: the GVA figure includes the value of the skills and productivity effects over graduates working lifetimes, calculated for the cohort graduating in the academic year 2015/16. 6 Note: excludes Exchequer payments. 5

9 Induced 3.7 The University s directly employed staff predominantly reside in the Leicester & Leicestershire LEP. As these direct employees and those in the supply chain spend their wages and salaries, this supports further economic activity within consumer-facing sectors and down through the supply chain. The estimated impacts from these induced effects are summarised below. Table 3.2 Induced Impacts, 2015/16 GVA ( m) FTE Jobs UK 120 1,700 The Midlands Engine 75 1,200 Leicester & Leicestershire LEP Source: Regeneris Consulting calculations Student impacts 3.8 The University has a total of 20,500 students, 16,700 of whom were studying on a Full-time basis, 1,900 were studying Part-time and 1,900 were engaged in a different mode of study Overall, 95% all of the students came from outside Leicester & Leicestershire LEP and 80% were from outside the Midlands Engine. Consequently, a large portion of the student expenditure brought there is additional expenditure by students who were not living in either Leicester & Leicestershire LEP or the Midlands Engine region prior to their studies. We estimate that, in total, students spent 225 million annually in the UK, 175 million in the Midlands Engine area and 150 million in the Leicester & Leicestershire LEP area. 8 The economic impacts of this expenditure are summarised below. 7 This includes students who were registered on short term exchanges (such as Erasmus), students on international exchange programmes abroad and students who started courses and subsequently dropped out etc. 8 Note that these figures do not include transfers to the University through tuition fees and expenditure on Universityowned accommodation, since the impact of this expenditure is already captured within the Direct Impacts above 6

10 Table 3.3 Student Expenditure Impacts, 2015/16 FT students from outside the area FT students from inside the area PT students All students GVA ( m) FTE Jobs GVA ( m) FTE Jobs GVA ( m) FTE Jobs GVA ( m) FTE Jobs UK 65 1, , ,200 The Midlands 130 2, ,200 Engine Leicester & Leicestershire LEP 85 1, ,800 Source: Regeneris Consulting calculations. Note: figures are rounded so may not sum exactly to totals. Skills and productivity impacts 3.10 As highly skilled Loughborough graduates go on to find employment they contribute towards the productivity of the organisations they work for, as well as experiencing an earnings premium themselves Using data from DLHE on the subject areas studied and the destinations of graduates, we have estimated these productivity effects over the graduates lifetimes to be 390 million for the UK, of which 100 million is within the Midlands Engine. Table 3.4 Productivity Impacts NPV (net present value) of graduate earnings, 2015/16 prices Annualised ( m) Over the graduates lifetime ( m) UK The Midlands Engine Leicester & Leicestershire 1 65 Source: Regeneris Consulting calculations Visitor economy effects Visits from friends and relatives 3.12 Domestic and international students receive visits from friends and relatives throughout their studies. Whilst there is a lack of direct data on such visits, we have estimated their potential economic value using other data (see the technical appendix). Using this 7

11 approach, we estimate that such visits support a total of 9 million in GVA and 190 jobs in Leicester & Leicestershire LEP. Table 3.5 Impact associated with visits from friends and relatives, 2015/16 Domestic 9 International Total GVA ( m) FTE Jobs GVA ( m) FTE Jobs GVA ( m) FTE Jobs UK The Midlands Engine Leicester & Leicestershire LEP Source: Regeneris Consulting calculations. Note: figures are rounded so may not sum exactly to totals. Conference centre 3.13 Imago Venues (part of Loughborough University) is a leading conference and event facility. Included are four sites, Burleigh Court, Holywell Park, The Link Hotel and Loughborough Campus that feature a range of conference facilities and event hosting facilities. Including: Residential conference and exhibition space lecture theatres and training rooms modern hotels and spa world-class sports facilities tailored wedding services As people from outside the impact area attend events hosted at Imago Venues, they spend money in the local area. This additional expenditure circulates around the local economy generating economic output and supporting jobs. It is estimated that visits to Imago Venues contributed 7 million GVA to the Midlands Engine area, and supported 140 FTE jobs in It should be noted that at the UK level domestic tourism does not have any additional impact, as all trips and visits originate from within the impact area. The exception to this would be if the university causes import substitution to take place e.g. if a UK based relative of a UK domiciled student decides to visit Loughborough instead of making a visit abroad. As there is no evidence on the extent to which this may happen, to be conservative all domestic visits are assumed to be non-additional at the UK level. 8

12 Table 3.6 Visitor impact associated with Imago venues, 2016 GVA ( m) FTE Jobs The Midlands Engine Leicester & Leicestershire LEP 4 90 Source: Regeneris Consulting calculations Innovation and business support Knowledge Transfer Partnerships (KTPs) 3.15 The Knowledge Transfer Partnership (KTP) scheme helps businesses to innovate and grow. It does this by linking them with a University and a graduate to work on a specific project. Each KTP is a three-way partnership between a business, an academic institution and a graduate. The academic institution employs the recently-qualified graduate who works at the company. The graduate, known as the associate, brings new skills and knowledge to the business In 2015/16 Loughborough University was involved with 10 KTP projects. The University has completed 27 KTP projects over the past six years It is estimated that in 2015/16 KTPs with Loughborough University contributed an estimated 3.7 million GVA and 65 jobs to the UK economy and 1.6 million and 30 jobs to the Midlands Engine. Table 3.7 Economic impact of Knowledge Transfer Partnerships 2015/16 Leicester & The Midlands Leicestershire LEP Engine UK GVA ( m) FTE jobs Source: Regeneris Consulting calculations Contract & collaborative research and consultancy income 3.18 Loughborough University contributes to the economy through it s engagement with the business community. The University engages with businesses offering its capacity to research as a service for businesses to contract or engage with collaboratively. The University also utilises its inherent expertise to provide consultancy services to businesses In 2015/16 Loughborough University received 9.1 million worth of income from commercial contract/collaborative research and consultancy projects with businesses, of 9

13 which 4.5 million was from within the UK. Using this figure in combination with the locations of the projects and information about the returns of similar projects 10, it is possible to estimate the GVA and jobs supported by Loughborough University s research and consultancy activities In 2015/16 it is estimated that Loughborough University s commercial contract/collaborative research and consultancy activities support a total of 30 million GVA and 440 jobs in the UK. Table 3.8 Economic impact supported by contract/collaborative research and consultancy income 2015/16 GVA ( m) Consultancy Contract Research Total UK The Midlands Engine Leicester & Leicestershire LEP FTE jobs Consultancy Contract Research Total UK The Midlands Engine Leicester & Leicestershire LEP Source: Regeneris Consulting calculations Loughborough University Science and Enterprise Park (LUSEP) 3.21 Part of the University is the Loughborough University Science and Enterprise Park (LUSEP) which is one of the UK s largest science parks, with 700,000 sq ft of high quality accommodation set in over 19 acres of mature parkland. LUSEP provides a fully commercial corporate environment, whilst also having ready access to the research capability, resources and the high quality graduates of Loughborough University LUSEP has a total of 59 occupiers split between 6 buildings. These occupiers range from large organisations, to SMEs and micro businesses. Data from the University indicates that there is a total of 2,100 direct jobs linked to the science park. Taking into account indirect 10 Department for Business, Enterprise & Regulatory Reform, Impact of RDA spending National Report Volume 1 Main Report,

14 and induced effects, the total economic impact supported by the companies comes to 4,100 FTE jobs and 270 million GVA in the UK. Table 3.9 Economic Contribution of Loughborough University Science and Enterprise Park FTE jobs GVA ( m) UK 4, The Midlands Engine 3, Leicester & Leicestershire LEP 2, Source: Regeneris Consulting calculations 11

15 Appendix A - Technial Appendix A.1 Here we set out the methodology used to assess the range of economic impacts of the University. It should be noted that estimates are based on data provided by the University. Core economic contribution Direct A.2 Direct impacts refer to the employment and wealth creation resulting from the University s activities, measured in terms of Full Time Equivalent (FTE) employment and Gross Value Added (GVA): Employment numbers have been sourced from a snapshot of Loughborough University s HR database covering the 2015/16 academic year. This captures the number of direct employees by type (academic/professional and support), mode (Full-Time/Part-Time), contract terms (permanent/temporary), residential location and censored gross salary. Employee headcount has been converted to FTEs based on their contracted hours. Gross Value Added (GVA) is the key measure of economic output at the level of an organisation, sector or region. It is measured as the sum of employment costs and surplus before interest, depreciation, amortisation and taxes. Indirect A.3 Indirect impacts refer to the employment and GVA supported by the University s external expenditure (capital and revenue) on local suppliers. This expenditure creates employment and value added within the University s immediate suppliers and within all subsequent tiers of the supply chain, as the University s suppliers make purchases from their own suppliers, and so on. A.4 Loughborough University holds a database of expenditure on external suppliers, which contains information for each supplier on their location, the total level of University spend and their account description. A.5 We mapped the University s account descriptions onto the Standard Industrial Classification (SIC) contained in Regeneris Consulting s Input-output model for UK and the regions, and used the postcode information to determine the location of each supplier. A - 1

16 A.6 The full economic impacts of this expenditure were then estimated using our input-output model. The model is based on data from the UK National Accounts and allows us to estimate the supply chain and induced multiplier effects from an initial injection of expenditure in a particular sector. Induced A.7 Induced effects refer to the effects of spending by employees whose jobs are supported directly within the University and indirectly within its supply chain: Impacts from expenditure by the University s employees have been estimated using data on wages and salaries from the University s HR database, adjusting for income tax (PAYE), National Insurance contributions, pension contributions and saving rates. Different rates of leakage of expenditure are assumed for the different impact areas. Our input-output model has been used to estimate the economic impacts from this spending. Impacts from expenditure by employees in the supply chain have been estimated using the Type 2 (indirect and induced) multipliers within our input-output model. Student expenditure A.8 Expenditure by Loughborough University s students is an important source of the University s economic contribution. The National Student Income and Expenditure Survey, published by BIS, provides detailed data on the spending behaviour of students in UK universities, split by full-time/part-time students and the goods and services purchased (other breakdowns are also available). We have used this data, along with the University s data on the student population, to estimate the economic impacts of this expenditure. A.9 The approach is as follows: 1) Determine how many full-time and part-time students live in each impact area, split by those who live in University-owned accommodation and those who live in other accommodation 2) Analyse how many of these originally came from outside the impact area before moving to study there this includes both domestic and international students 3) Apply the average expenditure per student (split by full- and part-time) to these breakdowns of the student population (excluding expenditure which represents a A - 2

17 transfer to the University, such as tuition fees and rents, for those living in University accommodation) 4) Allocate this expenditure to sectoral categories in our input-output model, using a best fit analysis of the categories in the Student Income and Expenditure Survey 5) Apply leakage rates for each of the impact geographies, to each expenditure category 6) Estimate the economic impacts from this expenditure using our input-output model. A.10 We have estimated the total economic impact from this expenditure, as well as the portion which comes from students who were originally from outside the impact area. Skills and productivity impacts A.11 Productivity impacts have been based on evidence of earnings uplifts for different types of degree, along with the productivity captured by their employers in the form of higher profits or increased competitiveness, and by co-workers or other employers due to the transfer of knowledge. A.12 To estimate these economic benefits, the study has drawn upon research that measures the Net Present Value (NPV) of the additional earnings and employability benefits that individuals can expect to achieve by gaining a graduate degree compared to people who do not hold a graduate degree. A.13 The NPVs for different degree types and sector subject areas are applied to all those Loughborough University graduates who had found employment (using data from the DLHE 2015/16 survey). A series of adjustments are applied to account for the difference in earnings between the UK and the Midlands Engine, the benefit of increased productivity and the financial costs incurred by undertaking a degree such as fees cost of living. Visitor economy effects Visits from friends and relatives A.14 There was no direct data on visits from friends and relatives to the University. We have used data from Visit Britain on the average spend per visit from friends and relatives for different durations of visit in Leicestershire. For domestic tourism (visits and trips originating from A - 3

18 within the UK) the Great Britain Tourism Survey and the Great Britain Day Visits Survey have been used. For international visits, average spending in Leicestershire by the country of origin has been acquired from the International Passenger Survey. These benchmarks have been combined with conservative assumptions on the number of visits each student received per academic year from family and friends, to obtain estimates for additional expenditure and the supported GVA and jobs. Conference centre A.15 Data on the number of night and day visits to Imago Venues has been provided by the University. This has been used with data from Visit Britain on the average spend per visit to Leicestershire for different lengths of trip and ONS estimates of the average composition of UK tourist expenditure, to acquire a breakdown of tourism expenditure in the area. The full economic impacts of this expenditure were then estimated using our input-output model. Innovation and business support Knowledge Transfer Partnerships (KTP) A.16 Benchmarks for the number of net additional jobs created per KTP by different sizes of business and GVA generated per KTP by region have been estimated in a review 11 of the KTP programme undertaken in It is assumed that the annual GVA impact of the project while it is still live is only 10% of the impact after the KTP has been completed, as the main knowledge sharing benefits are still yet to be realised. A.17 By applying these benchmarks to the number of KTP projects currently live or completed in the past six years it is possible to estimate the economic impact of the KTPs in the different impact areas. Contract/collaborative research and consultancy activities A.18 In 2009 PwC LLP carried out a study 12 for the Department of Business, Enterprise & Regulatory Reform which assessed the impact of Regional Development Agency spending. The report found that Science, R&D and innovation infrastructure interventions had 11 Regeneris Consulting, Knowledge Transfer Partnerships Strategic Review, Department for Business, Enterprise & Regulatory Reform, Impact of RDA spending National Report Volume 1 Main Report, 2009 A - 4

19 produced a cumulative GVA equivalent of 340% to the funds invested into the project. This has been used with data provided by the University on the income received for commercial research and consultancy activities and their location to produce estimates of the GVA supported. The employment impact was then calculated by dividing the GVA impact by the GVA per employee in relevant sectors, after which relevant multipliers were applied. Loughborough University Science and Enterprise Park (LUSEP) A.19 Data on the number of direct employees located within the science park have been provided by the University. These figures have been used with multipliers for relevant sectors from our input-output table to estimate the total economic impact of the science park. A - 5

20 London: Manchester: