Today London Higher - an umbrella body representing around 50 higher education providers (HEPs) in London – published a report prepared by Frontier making the case for retaining recurrent funding uplifts for London HEPs.

Currently, HEPs in London receive a funding uplift applied to their teaching grants, reflecting the higher cost of providing services in London. The Office for Students (OfS) is currently consulting on whether this uplift should be removed. Our work suggests that its removal presents significant risks:

• Unit costs (labour, land, buildings) of higher education provision are significantly and unavoidably higher in London compared with the rest of the country. The removal of the funding uplift requires London’s HEPs to absorb these costs, putting at risk their ability to offer provision on a par with that provided by equivalent HEPs elsewhere in the country.
• London is home to a diverse set of HEPs. While there are some benefits of operating in London (in being able to attract revenue from international students), these advantages are not shared uniformly by London providers, particularly those teaching-focussed institutions who primarily educate local students.
• A number of London’s HEPs are close to or already are in deficit and removing the London weighting will push them further into the red. Some of those likely to be hardest hit are already in financial difficulty and have limited ability to generate extra income from other sources. HEPs which focus predominantly on teaching are likely to be disproportionately affected. The funding uplift is a more significant proportion of their income, they tend to rely more heavily on tuition fees from home students and have limited ability to raise revenue from other sources.
• London is a very diverse city - income and wealth inequality runs high and London boroughs are home to some of the most deprived areas of the country. The diversity of the capital is reflected in the student intake at London HEPs. The HEPs most vulnerable to funding cuts train large numbers of local students from difficult and disadvantaged backgrounds who require significant support to complete their education.

The full report is available here.

Frontier regularly advises clients on questions surrounding funding in the Higher Education sector.

For more information please contact media@frontier-economics.com or call +44 (0) 20 7031 7000.