James Norton - Best Investigative Feature - Vision

YORK VISION

UNI VERSUS CITY Tuesday March 17th, 2009

From bankers in Barclays to builders in boots, the economic crisis has burrowed deep into the UK’s financial foundations. But here in our university bubble, the safety blanket of Higher Education seems impervious to the current crisis causing havoc worldwide. Or is it? JIM NORTON investigates the consequences of the credit crunch on the university.

PROSPECTIVE APPLICANTS York University presently boasts an impressive statistic; 80% of students are from state schools. But will the credit crunch continue to encourage this level of diversity?

University is an expensive choice for both parents and students and it seems fair to assume that the strain of university debts is particularly unwelcome during a recession. Yet, surprisingly, this is not the case. Professor of Economics and Finance Mike Wickens explains that “the demand for university places rises”. This is despite the statistic that three quarters of parents fear the credit crunch will make it harder for them to fund their children’s university education (AIC annual survey). It seems that a crucial consequence of the financial crisis on university applicants is a change in the percentage of different nationalities and backgrounds of potential York students. Professor Mike Wickens elaborates on who the prospective students are likely to be, “This time a weaker currency will add to [the demand] as it makes UK universities cheaper for foreign students, especially Chinese students”. Whilst foreign students take advantage of the reduced fees, the government is making sure students from poorer backgrounds can also afford to apply. In a letter to Vision, Minister of State for Higher Education David Lammy outlined his aims for widening participation in Higher Education: “Eligibility for grants and bursaries

during the current credit crunch due to financially unstable support from home.

I've tried to avoid getting taxis and buses whenever possible. My bike has become an essential student possession The university’s annual financial review is keen to dismiss the problem however: “Our current expectation is that the market for home students will be comparatively resistant to the effects of recession”. Moreover, the university appears

Jeremy Kyle. This will certainly keep second year Archaeology student Daniel Birchinall content, “I’m happy as long as ‘Countdown’ and ‘Deal or No Deal’ are on, that’s enough excitement for one day!”

GRADUATES

Left: DAVID LAMMY (Minister of State for Higher Education) Above: His exclusive letter of reassurance to York Vision

confident of a secure future: “student recruitment is currently buoyant and early indications are that future numbers will broadly match our projections.”

STUDENTS Surely we should be pleased the university is only mildly affected? Yet, it’s hard not to feel bitter that whilst our extortionate fees keep the university functioning, we, on the other hand, are faced with a very difficult few years ahead.

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Whilst it may be a little drastic to start wearing dirty socks inside out and going commando just to cut down on wasting money on the washing machine, now is a better time than ever to watch the budget and look after the pennies. It’s time to be creative and take advantage of student discounts. Josie, a Derwent Politics student, has decided to change her mode of transport: “I’ve tried to avoid getting taxi’s and buses whenever possible in favour of walking or cycling to town. My bike has become an essential student possession”. Another student concurred, although wished to remain anonymous; “Cycling to and from town on a big night out saves a lot. The exercise means the alcohol will set in quicker, and as long as you have lights and can act sober, the police don’t seem to mind.” As demonstrated by this dangerous cyclist, living away from home gives us the freedom to do as we please. Yet, with this comes responsibility and the unfortunate obligation to feed ourselves. So what does the credit crunch mean for general living costs? Fortunately, the prices of groceries should not cause any consternation. Despite low interest rates, inflation has also remained low and is forecast to fall near to zero until 2012. Professor Mike Wickens explains that “with inflation lower most commodities would rise in price by less”. But for those still hoping to cut back, PPE student Alex Cooper describes his recent revelation “In first year I had the feeling I was being robbed in the rather ironically named Costcutter but was reluctant to sacrifice the convenience. However, chicken breasts that were £2.20 are now £3.00 plus this year, so I’ve developed a love for Aldi, where whole chickens are £3.00.” So what should we start worrying about? Professor Mike Wickens explains a potentially key setback to university life: “Summer jobs will be scarcer”. For those unable to secure a summer internship, upcoming university holidays could well be spent depressingly trawling job centres for non-existent temporary work, leaving students with a strict budget during the term. The lack of consumer spending will certainly limit the amount of staff that high street shops will be looking to hire. Labouring jobs may also suffer as the Guardian recently

warned, “there is no disguising the fact that...UK construction output is facing difficult times”. Instead, why not look to the tourist industry for employment? The recession has weakened the British pound and foreigners may be encouraged to take the opportunity to visit the UK. This summer could be the year to make use of your empty student house as York in particular has numerous job opportunities in museums and attractions. At least we can forget about our troubles by settling down on the sofa, cup of tea in one hand, remote in the other, and watch some TV. Or can we? Unfortunately, even television is not quite as secure as we hoped. The fundamental reason is that advertising budgets depend on corporate profitability: once these profits are under pressure, marketing budgets get cut. This results in financial trouble for independent channels dependant on advertisement for revenue. ITV have already begun to cut jobs and a possible merger between channel 4 and 5 is a possibility. So it’s goodbye to decent dramas and hello to cheap ‘shiny floor shows’ such as Britain’s Got Talent and Strictly Come Dancing. BBC bigwig Bea Ballard explains: “Compared to drama - which is so expensive - a big entertainment show can deliver bigger ratings for half the price”. But does this even matter to the average student? Daytime shows such as ‘Loose Women’ and ‘Bargain Hunt’ are currently the cheapest shows to produce meaning days spent hung-over can still be enjoyed watching chavs argue with

"T Those who win in a recession look for the silver lining, rather than getting depressed

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Our university has enjoyed exponential growth since its creation almost fifty years ago and this shows no signs of slowing, despite the recession. The current expansion into Heslington East will double the university in size but will ultimately cost the university £500 million. York’s annual financial review for 2008 concedes that funding will not fully cover costs: “Even allowing for donations, grants and third party funding, the scale of the planned and prospective capital investment will entail a very significant increase in the University’s overall indebtedness which could ultimately rise to around £150m”. Could this ambitious project be affected by the turbulent times ahead? York’s Director of Finance, Graham Gilbert, answers this question with a resolute “No”. Unwilling to elaborate on this issue, it seems that the university is either incredibly secure financially, or reluctant to concede that unfortunate timing has unshipped their best-laid plans. So how does the recession affect the university’s budget? “Not much observable impact yet” answers Gilbert, curtly. As a student with a significant amount of debt invested in the university, this brief response does not give much reassurance. The vast debt the UK is currently building must have some effect on the £7.1 billion budget given to the HEFCE (Higher Education Funding Council for England) to invest in the UK’s 119 universities. Again the answer is vague and the key details are lacking as Gilbert responds: “We must expect some tightening of both revenue and capital support eventually”. The 2008 Operating and Financial Review and Financial Statements (University of York) annual review elucidates on his answers: “As well as attending to cost pressures we also need to look to the protection of income, particularly in today’s difficult environment. In this respect the University continues to fare reasonably well. In the case of government funding, whilst we remain optimistic that higher education will continue to

means that lower income students need not be deterred by the prospect of debt. We realise that without this support, students from low income families might otherwise have difficulty accessing or remaining in Higher Education.” However, this excludes a large percentage of York students. The current recession has unexpectedly affected the proportion of university students that are commonly assumed to cope with the financial pressure. Graeme Leach, chief economist at the Institute of Directors, explains “In this recession we’re seeing something new and dramatic: highincome unemployment. These are individuals with nice houses and two children in private schools, who are suddenly seeing their standard of living plummet. This will be one of the hallmarks of this recession.” The recession in the early Eighties concerned manufacturing and manual workers, in the nineties it was the white collar sector, and now it’s the turn of the higher earners. Consequently, students who aren’t able to receive bursaries or grants for higher education could suffer

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WITH A TOTAL income of over £200 million, the University of York has a lot to lose. Has the financial crisis threatened the complex funding system that supports our institution? Vision consults the university’s Director of Finance Graham Gilbert for his thoughts on the potential consequences of the recession.

receive priority there must be a risk that universities will suffer from any paring of discretionary budgets.” So what’s the plan? “To achieve our plans for growth we have begun to establish solid annual surpluses which give us the financial stability we need.” This reassuring news is apparently due to the excellence of York University: “Our academic record and financial dependability remain attractive to top quality staff, students, partners and investors. These underlying strengths are our best protection against the current external economic downturn.” Gilbert continues with words of encouragement; “we remain confident that Higher Education has an important economic role to fulfil and that the University of York is well placed to weather adverse developments and to benefit from the eventual upturn”.

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UNIVERSITY

FEATURES

YORK VISION

Tuesday March 17th, 2009

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Unless you’re hoping to become a bailiff, pawnshop employee, or a doorstep lender, prospects for students graduating in 2009 are not as healthy as they once were. The financial crisis has hit graduate recruitment hard as job opportunities dwindle and the unemployment rate is predicted to reach two million very soon. The unfortunate truth is that job opportunities for graduates have vastly declined as a direct result of the economic turmoil. David Lammy (Higher Education Minister) concurs “we recognise that the graduate labour market will not be immune from the effects of the economic downturn and some individuals may face particular difficulties this year”. Statistics in the 2009 Graduate Recruitment Survey make for grim reading, including a 5% drop overall in graduate vacancies. Carl Gillead, Chief Executive of the company that published the report, explains why: “We saw a series of catastrophic events in the financial sector with serious consequences. It comes as no surprise that these seismic shifts in the economy are being mirrored to some extent in the graduate jobs market.” The impending job interviews for 2009 will be more competitive than ever as students desperately sell themselves to whoever will listen. Carl Gillead reveals “the economic crisis is concentrating employers’ minds on the war for the best and most well-informed talent”. If you haven’t started scrutinizing the job market, David Lammy has advice for anyone beginning the hunt: “Graduates will need to consider a wide range of jobs; look for jobs earlier; and do research on potential employers to maximise their chances of success.” Choosing wisely could perhaps be the key to securing a job during the financial crisis. Sectors to stay clear of tend to dominate jobs that deal with money. A 6% reduction in graduate recruitment for accountants may sound high, but this is minimal compared to a 25% decrease in investment banking’s graduate opportunities. Whilst working with money is not ideal at the moment, sorting out the legal side of it could be. The ever increasing amount of takeovers seems set to continue and Law firms are in huge demand to deal with the problems. Jobs in law currently command impressive graduate salaries and recruitment is set to grow by 9%. Jobs in both the engineering and the public services could also appeal to graduates

NUMBER CRUNCHER £150

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The University of York’s expected debt after the expansion into Heslington East

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(2008 Operating and Financial Review and Financial Statements)

Percentage of prospective students expecting to work to support themselves (AIC annual survey) Projected 2009 decrease in graduate vacancies (Graduate Recruitment Survey 2009)

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job security. Students seem to be rethinking their future plans as a consequence of the impending doom and job security is perhaps the overriding factor. Third year PPE student Sarah explains her second thoughts; “I came to university with ambitions of getting a job in London. However, having heard many different stories of huge redundancies the chances of getting a job seem much slimmer than eighteen months ago. I’ve started to take the possibility of going into education much more seriously. Teaching could possibly be one of the most secure forms of employment around.” The facts and statistics may be depressing, but Carl Gillead manages to give some much needed reassurance: “the situation is certainly not as severe as it could be. We saw a sharper decrease in 2003 when recruiters had a negative reaction to the dot.com crash. By and large, while no one doubts the seriousness of the current economic downturn, the picture for graduate recruitment, though worrying, could be bleaker”. Further comfort may be gained from Professor Mike Wickens belief that: “a university degree adds to life-time earnings far more than it costs, and that a Masters degree adds more than a first degree”. This is perhaps where Higher Education comes into its element; a degree could prove the most effective weapon in battling the effects of the credit crunch. David Lammy is positive that “having a degree remains one of the best pathways to a rewarding career as employers prize the highly-developed skills and talents that graduates bring to their businesses.” Fortunately for students at York, recessions generally see a decline in lowskilled, far more than high-skilled, jobs. Though, as mentioned previously, this may not be the case for 2009. “What we do know from the last recession is that graduate employment rates tended to recover faster than those with qualifications at level 3 and below” encourages David Lammy, but he goes on to reveal an ominous warning: “However, given the sectors affected this time (e.g. finance) there is no guarantee that this will again be the case.” Future careers post-university are uncertain to say the least. In the current economic climate, maybe it’s time to be original and find a job that isn’t on the generic career path. Matt Kingdon, chairman of ‘?Whatif!’, an innovation company, advises students that “Those who win in a recession look for the silver lining and the opportunities, rather than getting depressed.” So look for something you have a passion for. How about the beverage that excites students nationwide? The immense amount of tea consumed during your university years may prove to be more important than the all–night essays they were used for. Executive chairman of the UK Tea Council, William Gorman, revealed “Our experience and data from the previous two recessions is that tea doesn’t suffer in a recession; if anything it enjoys modest growth”. It may not have the fashionable lifestyle of a banker or lawyer, but recent graduate and Tetley employee, Paul Jeffries certainly knows how to advertise a job; “I spend part of the day in the tasting room and can taste up to 36 cups a day”.