Rankings and the financialisation of higher education

University rankings are now being used for purposes that would have been inconceivable a decade ago. The latest is supporting the large scale borrowing of money by UK universities.

The Financial Times has an interesting article by Thomas Hale about the growing financialisation of British higher education. He reports that some universities such as Portsmouth, Bristol, Cardiff and Oxford are resorting to capital markets for financing supposedly because of declining government support.

The University of Portsmouth has borrowed GBP 100 million from two North American institutional investors. The placement agent was Lloyds and  PricewaterhouseCoopers (PwC) the advisors.

"The money will be spent on the first phase of “estate development”. It is expected to involve a number of buildings, including an indoor sports facility, the extension of a lecture hall, and a flagship “teaching and learning building”."

It seems that this is just part of a larger trend.

"The private placement market – by definition, more opaque than its public counterpart — is a particularly attractive option for universities, and a popular target of investment for US pension and insurance money seeking long-term projects. Lloyds estimates that more than £3bn has been borrowed by UK universities since 2016 on capital markets, with around half of that coming via private placements.

The market is small by the standards of capital markets, but significant in relation to the overall size of the country’s higher education sector, which has a total annual income of close to £30bn, according to the Higher Education Funding Council for England. "

The press release explicitly referred to Portsmouth as being first in the UK for boosting graduate salaries, by which is meant earning above expectations based on things like social background and exam results. That could reflect credit on the university although a cynic might wonder whether that is just because expectations were very low to start off with. In addition, the university is ranked 37th among UK universities in the Guardian University Guide and in the top 100 in the Times Higher Education (THE) Young Universities Rankings.

If millions of pounds have been advanced in part because of a 98th place in the THE young universities rankings that might not be a wise decision. These rankings are quite credible for the top 20 or 30 but go down a bit more and in 74th place is Veltech University in India which has a perfect score for research impact based entirely on the publications of exactly one serial self-citer.

The profile of the University of Portsmouth shows a fairly high score for citations and a low one for research, which is often a sign that its position has little to do with research excellence and more to do with getting into high-citation, multi-author astrophysics and medical projects. That does appear to be the case with Portsmouth and it could mean that the university's place in the young university rankings is precarious since it could be undermined by methodological changes or by the departure of a few highly cited researchers.

The role of PwC as advisor is interesting since that company is also charged with auditing the THE world rankings.