Investing additional funds into UK higher education should not be prioritised by the Labour government as it seeks to boost economic growth, according to economists.

For a new report , 44 economists from academia, government, thinktanks, politics and the private sector – who are identified as “pro-growth” – were asked about how Sir Keir Starmer’s administration should tackle its so-called number one mission of achieving economic growth.

Quizzed on where the government should increase spending to increase growth in the medium term, the most commonly mentioned areas are nuclear energy and the electricity grid, followed by scientific research.

Other areas for additional spending favoured by economists include rail infrastructure, moonshot research and development and artificial intelligence infrastructure.

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However, the least popular area for additional spending is higher education (except research), with a significant proportion of economists (15 of 44, or 34 per cent) recommending a decrease in university spending relating to teaching and student finance.

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UK Day One

Another 15 economists recommended university spending should be kept at its current level, with only two economists (5 per cent) urging ministers to increase higher education spending by more than 10 per cent. Eleven further economists (25 per cent) called for an increase of less than 10 per cent.

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“Respondents tended to agree that universities, many of which are struggling financially, pose a challenge to this government,” explains the report, which adds there is “a general desire for reforming university management and the tuition fees system to improve incentives, since the current system rewards universities for taking on more students, which may have downsides for teaching and research quality”.

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UK Day One

However, while the importance of university-based research is noted, the wider importance of universities seems less appreciated.

For instance, when economists were presented with a list of potential priorities for Labour’s first 100 days in office, the choice of “committing significant public investment to save the university sector” was the least favourite option. Instead, the government should focus on reforming the planning system and fast-tracking regulatory processes to build new nuclear power, economists suggest.

However, despite scepticism about higher spending on universities overall, the study’s respondents highlighted several sector-related areas crucial to economic growth – with the so-called golden triangle of Cambridge, Oxford and London and the UK’s life sciences sector seen as the “most under-rated” of the UK’s strengths.

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“Life sciences are constrained by our inability to grow Cambridge and Oxford, both in terms of lab space and housing. It is a mistake to think we can simply persuade the industry to move to Hull because there’s space there: it is the golden triangle that competes with Switzerland and Massachusetts, not the UK as a whole,” said one economist quoted in the report.

Yet while economists are sceptical about extra funding for UK universities, their ability to attract talented individuals from overseas is a huge asset if properly utilised, the study adds.

“UK potential, given its geographical, linguistic and research advantages, is especially far from being met,” explained one economist, who concluded: “For a country with the population of the entire US eastern seaboard from Maine to DC, and with major agglomerations like London, Cambridge and so on, I see no intrinsic reason that it should not be on par with the US for per capita GDP.”

David Lawrence, co-director of UK Day One and author of the report, said the survey results highlighted “some of the politically trickier trade-offs involved in pursuing growth – particularly when it comes to high-skilled migration and EU relations.

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“The overriding message of the results was that the government needs to get the fundamentals right – particularly in planning reform, energy abundance, transport infrastructure and talent mobility,” he said, adding: “Public investment in areas like AI infrastructure and R&D provides huge growth potential for the UK, but getting the fundamentals right is essential for making these investments go further.”

jack.grove@timeshighereducation.com