From the realities of life outside the EU and effects already in evidence, to potential dividends as seen by supporters, ESCP Europe’s Simon Mercado runs the rule over Brexit’s implications for UK Business Schools
In April 2019, Xavier Bettel, Prime Minister of Luxembourg, remarked that waiting for Brexit is a bit like waiting for Godot. In Samuel Beckett’s famous play, the central characters stay and wait for somebody (Godot) who never quite materialises. Moreover, their long and painful wait is characterised by bickering and disagreement. One gets the connection to Brexit as well as the good humour that extends from the fact that Waiting for Godot was originally written in French. Plus, before anybody screams ‘backstop!’, it’s worth mentioning that the English version of the play is often played out with the central characters depicted as two Irishmen.
Three years on from the UK’s EU referendum, we still wait for a Brexit process outcome. Theresa May’s resignation and a pending summer recess with a new Tory leader will not speed things up much. Halloween (31 October 2019) awaits the UK and EU as a self-imposed deadline. A game of ‘trick or treat’ looks inevitable.
Over these three torturous years, the UK’s Business Schools have had time to eat, breathe and sleep Brexit. Few, if any, have expressed joy at its choice or impact and most have lobbied for a softer variant or its abandonment. This position has tended to reflect a majority view that continued EU membership is the best platform for the sector’s growth and future success.
In one of its early pronouncements on the subject, the UK’s Chartered Association of Business Schools (CABS) declared: ‘We can’t change the outcome of the referendum but we need a good deal if we are to avoid seriously adverse consequences.’ Behind such a careful statement is a community of Business Schools that would tend to believe that Brexit is a setback, the scale of which will reflect the nature of the final exit deal. Across the sector, Business School Deans have queued up to couple cries of resilience with admission that leaving the EU hurts the UK’s ability to attract the best students, researchers and academics from across Europe.
Brexit fears and impacts
What underpins opposition and/or suspicions over Brexit? To answer this question, we have to look at the current situation and benefits of EU membership.
At the moment, higher education (HE) institutions in the UK can recruit the best European academic talent with relatively little restriction. Over 20,000 European nationals work in the UK’s HE sector on a visa-free basis. Among these are outstanding academics and professionals making great service to UK institutions. In many disciplinary fields, this supply line is vital to the educational offerings and reputation of UK institutions.
On the other side of the staff-student relationship, the UK currently attracts EU nationals to study here with few obstacles or barriers. There are close to 140,000 fee-paying degree students from continental Europe in the university sector alone, making up about one quarter of its global international student population. As a full EU member economy, the UK can match its appeal as a high-quality, English-speaking sector with a fee and access regime that positions EU nationals favourably when compared to other international students.
With EU nationals treated as if they were home students, they pay lower fees and can study on UK-based degree programmes without visas. They can secure loan financing for their UK-based studies (as if they were UK nationals) and enjoy a right to stay and work in the UK after graduation. On top of this, there are around 20,000 UK citizens studying elsewhere in Europe for a degree at lower continental fee levels and a similar number of British exchange students funded each year under the Erasmus+ mobility programme. For younger people, this is one of the primary symbols of the UK’s EU membership.
Finally, as a highly competitive and impactful sector, the UK’s transnational education (TNE) strategies are very much aided by single market freedoms with considerable scope for growth in such activity. Campus implantation is easier in a context of regulatory alignment than regulatory divergence, as are other forms of award-based collaboration. Our research strategies are intrinsically linked to EU funding regimes and programmes. We presently enjoy full participation and access rights to Horizon 2020, with an excellent funding and participation rate. EU-funded research projects and initiatives have been the source of vast funding for research in UK institutions and are playing a vital role in enabling and scaling collaborative research across European borders. Programmes of this type build relationships and interdependencies that naturally span out into other forms of institutional co-operation. In addition, the EU’s structural funds have enabled many universities and their Business Schools to develop infrastructure and capacity.
The threat of Brexit
Are all the above benefits really at threat? If we consider what happens in a ‘hard’ or ‘crash-out’ Brexit, some of these established benefits look to be at risk. In terms of access for EU students and workers, basic legal rights of access would change dramatically. Students would be treated like other international students in terms of visa requirements and would almost certainly face higher fees and new visa-based access requirements.
UK higher education is renowned for its two-tier pricing model with international students already facing higher study fees, visa requirements (and costs), and restrictions on post-study work. This would be the new reality for EU nationals studying in the UK and one could lead to a decline in demand. The Department for Education (DfE) is said to be preparing for higher fees for new EU students from as early as 2020. Academics and professionals taking up work in UK higher education would require visa sponsorship, which amounts to an administrative nuisance and (small) extra cost to all parties.
The UK would also be outside Erasmus+ and forced either to buy in, or to set up new bilateral exchange schemes. On top of this, there would be no ‘pay-outs’ from EU structural funds to part support infrastructure and capacity projects at institutions in eligible UK regions. Outside the EU, the UK moves from a position of centrality within impactful Horizon 2020 research programmes to life on the outside. In the face of competing investment priorities at national level, there is no certainty that current EU funding levels would be matched by substitute schemes.
A softer variant of Brexit would arguably soften the blow, especially one with a commitment to preserving freedom of movement for young people for the purpose of education and training. In this scenario, one would envisage bilateral protocols between the UK and the EU in keeping with those concluded between the EU and Switzerland.
Specific agreements would, of course, need to be negotiated and implemented. These would almost certainly maintain some of the current freedoms and benefits enjoyed under EU membership but this would be a menu-based approach with agreement to be struck on fees, rights of residence, post-study work entitlements, participation in the successor programme to Horizon 2020, Erasmus+, and mutual recognition of qualifications and diplomas.
Life beyond Brexit
Of course, the strength and resilience of the UK higher education sector must be taken into full account, as must the arguable benefits of a more independent path. Set against the so-called `Brexit penalties’ are the Brexit dividends as seen or understood by its supporters. Taking a narrow view of potential reform to HE and immigration, UK institutions could expect higher per capita fee income from EU students and a potential reduction in the burden of student loan financing previously open to EU nationals, for which recovery rates are staggeringly low.
UK institutions have proven their ability to continue to attract international students in high number despite relatively high fee levels and even when visas supposedly function as an administrative barrier or psychological deterrent. The logic runs that if the product or service is good enough, demand will endure.
Pending immigration reforms driven by Brexit also extend the period of time that international graduates can stay in the UK in order to secure graduate-level work after completion of their studies. Planned rules will increase the time period international graduates are permitted to stay after graduation, from four months to six months, with a full year in prospect for PhD graduates. If this legislation comes onto to the statute books, then Brexit will arguably have improved the post-study work entitlements of half a million international students.
Brexit supporters will also remind us that whatever money is redistributed back to UK universities and Business Schools through EU projects and programmes pales into insignificance when compared to global net contribution. There is also broad assumption that substitute schemes will emerge at national level and with significant funding. Outside the formal structure of the EU, it is clear that UK-based Business Schools and researchers will find ways to collaborate with their European counterparts too.
Effects and impacts
Although the Brexit process has yet to come to a conclusion and the ‘end state’ remains unclear, it is abundantly clear that its effects are already being felt. One quick win for the UK sector has been the fall in the value of the pound on international currency markets, which has had the effect of making UK study more affordable; a sort of Brexit premium.
Application and registration rates have held up, at least for now, although the fast rate of growth in EU applications for undergraduate courses experienced prior to the referendum has been lost. There are EU nationals on faculty and in administration teams across our institutions upset at developments and concerned over their future status. The ‘settled status scheme’ introduced by the government has allayed certain fears but the introduction and management of that scheme has attracted widespread criticism.
A significant number of EU staff and academics have left UK institutions citing Brexit as an influence on their decisions and applications for new posts have changed in profile for many institutions with a relative decline in applications from continental European academics. Some students have been confused about the extent and timing of rule changes that might affect them, especially as a whole series of supposed ‘independence day’ dates have come and gone. They and prospective entrants have faced uncertainty over the nature and timing of fee-related decisions as the UK has stumbled through without certainty over the start dates for new rules and regimes.
Worries across UK higher education about future Erasmus+ and Horizon 2020 participation, have been linked to more immediate effects. Organisations across Europe have indicated that uncertainty about the UK’s continued involvement in European programmes is already causing problems. These include sharp falls in secured funding and requests for UK institutional/researcher involvement in Horizon 2020 project bids and applications.
But in a sense, we leave the biggest issue to last. Like other service businesses, the industry is better placed if the market is healthy and performing strongly. The first concern here is the most obvious one. Brexit is an assumed factor in the UK’s weakening growth rate. Apart from the knock-on effect on spending and earnings, there is ample evidence of Brexit-influenced relocation decisions. This may not amount to a ‘Brexodus’ of firms and jobs but there is a growing impact on the UK graduate jobs market, especially in areas such as banking and finance. After a bumper year for graduate jobs in 2015-2016, plans for graduate hiring by top employers have been downgraded. One annual survey (by research firm, High Fliers) has found an average 10% annual cut in graduate recruitment by private sector employees in the first two years subsequent to the EU referendum. Moreover, the requirement for firms to ride out Brexit uncertainties and fund expensive contingency plans is leading to short-term suspensions on investment decisions, for example, into management development training and/or commissioned research.
A final thought
As we await the final act of the great Brexit drama, it remains unclear what sort of sector the UK will finally have. One embedded firmly in the European Higher Education Area and subject to the full body of EU law, one connected to this area through some sort of independent deal, or one that is fully on the outside of it? The curtain falls on Beckett’s drama without Godot’s arrival. Luxembourg may be a tiny state but its Prime Minister might just have found the perfect way to depict and conceptualise this protracted Brexit drama.
Simon Mercado is Professor of Management and Campus Dean/Director for ESCP Europe Business School in London (UK).