Mergers are unlikely to work for universities as well as they do in the private sector because higher education institutions cannot access the same levels of investment, a former vice-chancellor has said.

Institutional mergers are increasingly being seen as a solution to some of the funding problems facing higher education institutions, with the universities of Kent and Greenwich the latest to announce their plan to join forces.

But speaking at GuildHE’s annual conference on 20 November, Chris Husbands, director of Higher Futures and former vice-chancellor of Sheffield Hallam University, said he “increasingly” believed mergers are not the answer to the sector’s challenges.

He said that while mergers happen often in the private sector, the conditions are very different.

51�Թ�

“By and large, mergers happen because they’re routes to secure shareholder value, to secure higher returns.

“Even if one of the entities has failed, there are assets that can be stripped and sold. Merging institutions can go to the markets and issue equity to make the investment needed in systems that are required to make the merged entity work successfully.

51�Թ�

“None of those things work in higher education,” Husbands argued.

“If you’re going to make a merger work, there’s got to be some investment to align systems and without a source of investment, mergers simply mean putting incompatible systems together and ending up with two struggling institutions.”

Husbands said the higher education sector should instead be thinking about what else institutions could be doing together, such as working on common curriculum frameworks.

While universities have already begun thinking about working together more closely, with sector body Universities UK forming a transformation task group, commonly-cited barriers to greater collaboration include competition laws and tax rules around shared services, which can make joining forces less cost-effective.

The government’s recent Post-16 White Paper encouraged specialisation, arguing there are too many higher education institutions making similar offers.

51�Թ�

Husbands went on to criticise incentives within the sector, such as TEF ratings and research income, saying they discourage collaboration and incentivise homogenisation.

“I can’t ultimately see that we get to a more collaborative system or even a more specialist system without looking at some of the funding incentives,” he said, such as closing quality research funding to some providers and opening up new streams with a different focus. 

“It doesn’t need to be more money going into the system, but it needs some thought around money going in to drive differential incentives.

51�Թ�

“You’ve got to create enough multiple incentives for universities to want to create different choices.”

Speaking at the same event about some of the proposals outlined in the Post-16 White Paper, Jacqui Smith, skills minister, said the government planned to do more to reward quality.

“Additional investment must be matched by increased quality and where there’s evidence that quality isn’t high enough, increased investment won’t follow,” she said. 

“Collectively and individually, you’ve talked to me about the burden of regulation.

51�Թ�

"And I make no excuse for supporting a strong regulator in the sector, but there are good arguments for a more differentiated approach to regulation and this is a challenge taken up by the new leadership of the Office for Students, which also proposes to simplify future regulation by rewarding higher quality providers with fewer regulatory burdens.”

helen.packer@timeshighereducation.com