Open University’s economic and social impact totals almost £3bn to UK plc

@OpenUniversity’s economic and social impact totals almost £3bn to UK plc 

Total annual economic impact of The Open University (OU) was £2.77bn in 2018-19, with £619m of that figure returning to the Exchequer

Report shows impact of flexible distance learning on the UK Government’s priority to level up opportunity as 85 per cent of graduates remain in the location where they studied 

The average graduate premium significantly increases for adult learners whose highest level of prior attainment was GCSEs or below – this group is estimated to earn an average of £252,000 more in real terms over the rest of their career 

Implications for lifelong learning are clear too with survey results among OU alumni highlighting the positive benefits on health and work.    

New figures place the total yearly economic impact associated with The Open University’s activities across the UK economy at £2.77bn – a figure which covers teaching and learning, research, exports and direct, indirect and induced impacts. 

The new report compiled by London Economics The economic and social impact of The Open University in 2018-19 quantifies the overall economic impact of the OU across the UK as a whole and each devolved nation (see table 1).  With the economic and social impact of the Covid-19 pandemic to be felt for years to come, the report’s findings demonstrate the value of the OU’s world renowned model of flexible supported learning, reinforcing the importance of and value in more flexible higher education provision.  

The vast majority (85%) of graduates from The Open University remain in the location where their study was undertaken, meaning investment in talent and skills, benefits local communities across every corner of the UK, in line with the UK Government’s priority to level up opportunity around the country. 

Overall, the report found that the total benefit of the OU’s formal teaching and learning activities for the UK-wide 2018-19 cohort of students – in terms of estimated additional career earnings – is £1bn1 – with a further £619m2 returning to the Exchequer.

Breaking this down, those completing a part-time degree at the age of 37, the average age of an OU graduate, are estimated to earn an average of £164,000 more in real terms over the rest of their career for those who began their studies with A-levels (equivalent to a NPV of £84,000 at Government discount rates)3.

But this average graduate premium significantly increases among those whose highest level of prior attainment was GCSEs or below. These graduates are estimated to earn an average of £252,000 more in real terms over the rest of their career, of which £104,000 in real terms is estimated to flow back to the Exchequer4 (equivalent to an NPV of £135,000 and £52,000 respectively). This reinforces the OU’s unique mission to make education open to all, supporting people from all backgrounds through their journeys to success. 

Driving this economic benefit, two in three OU alumni (66%) reported improvements in their working life and prospects – across factors such as job satisfaction, pay and promotion prospects and employability. Of this group, 91 per cent said the OU had helped them achieve this.

With lockdowns likely to increase time spent at home across the UK this winter, informal teaching and learning will continue to offer important support to people.  London Economics estimate that the economic impact was £24.2 million in 2018/19 for the OU’s informal teaching and learning activities including FutureLearn (a social learning platform which the OU founded and now jointly owns with SEEK), OpenLearn and its YouTube Channel: £18.8 million of this is estimated to be contributed by FutureLearn, with an estimated £5.2 million contribution to the UK economy from OpenLearn – the OU’s free learning platform, where learners can explore a subject, get inspiration, build skills and confidence and earn recognition. 

Looking at the wider social and personal impact, almost all respondents (94%) said that studying at the OU had improved at least one aspect of their personal development. Crucially, in an ever-changing jobs market, study had an impact on graduates’ attitudes to lifelong learning, with 84 per cent feeling that they had become more enthusiastic about education in general. Meanwhile, just over three in four (78%) respondents believed that their experience made them more likely to undertake further learning and training.

Similarly, 86 per cent of respondents said that their study at the OU had contributed to an improvement in their personal wellbeing – including increased confidence, self-esteem and general quality of life.

As of 2018-19, The Open University supported 11,865 FTE jobs across the UK economy, with the direct impact from The Open University’s expenditures across staff and operating expenses being £437.5 million. As with alumni, the majority of staff expenditure (55%) was dispersed around the UK outside of the main OU campuses, student support centres and offices5.

Professor Tim Blackman, Vice Chancellor of The Open University commented:

 “In challenging times for the economy and jobs market, support will be needed more than ever for people looking to retrain or reskill, people in “left behind” towns and cities and young people who are eager to boost their future career opportunities by gaining qualifications. 

“Quality higher education delivered flexibly, at a distance with support and powered by technology can play a significant role in helping the UK not only navigate the crisis brought about by the pandemic, but issues and inequalities present beforehand. Furthermore, there’s a clear benefit to the Exchequer too. 

“The Open University is well placed to continue to add value by applying its 50 years of knowledge on what makes flexible learning, underpinned by high-quality digital provision, work. We look forward to continuing to help boost income, job satisfaction and wellbeing among those who study with us – many of whom are looking to stay and apply their skills in their own communities.” 

Table 1 – Aggregate economic impact of The Open University’s activities in the UK in 2018-19

All estimates are presented in 2018-19 prices, and rounded to the nearest £0.1m. Totals may not add up precisely due to rounding. Source: London Economics’ analysis 

Report Methodology – London Economics

To capture the impact of the University on the UK economy, we estimated the impact associated with:

• The University’s formal teaching and learning activity, by estimating the expected additional lifetime earnings and employment, and enhanced Exchequer tax receipts, associated with undertaking higher education qualifications and modules at The Open University (for the 2018-19 cohort of UK-domiciled OU students);
• The informal learning activity delivered by The Open University (via OpenLearn, FutureLearn, and the OU YouTube channel), through an assessment of the opportunity cost of the time spent learning using this content (using estimates of the value of leisure time);
• The University’s research activities, including both the direct impact of OU research as well as the productivity spillovers generated throughout the rest of the economy;
• The educational exports generated by the University’s overseas students, by assessing these international students’ tuition fees and non-tuition fee spending in the UK over the course of their studies (for the 2018-19 cohort of OU overseas students), as well as The Open University’s income generated from its overseas validation activities in 2018-19; and
• The direct, indirect and induced impact associated with the University’s staff and non-staff expenditures in the UK in 2018-19.

On top of these purely economic impacts, the multitude of non-quantifiable societal impacts associated with the University’s activities were identified through a survey of Open University alumni.

The total benefit to students from the OU’s formal teaching and learning activities of £1bn is after tax and after the costs of attainment

The total return to the Exchequer from the OU’s formal teaching and learning activities of £619m is after the costs of provision

This is based on a UK-domiciled student in the 2018-19 cohort completing a part-time first degree at The Open University, completing their degree at age 37, with GCE A-levels (or equivalent) as their highest level of prior attainment. This figure is after accounting for the total costs of study facing the individual and the Exchequer. The net graduate premium for these individuals is estimated to be on average £100,000 in real terms.   After applying the standard 3.5% Green Book (HM Treasury, 2018), discount rate to future increases in earnings, this is a net present value (NPV) of £55,000. The return to the Exchequer is estimated to be on average £64,000 (NPV of £29,000)

Net Present Value (NPV) is a standard method used by Government to evaluate different investments or projects. The NPV figure will be lower than today’s value since society values the present more than the future. For example, £10,000 in real terms today is valued more than £10,000 in real terms in 30 years’ time. 

This is based on a UK-domiciled student in the 2018-19 cohort completing a part-time first degree at The Open University, completing their degree at age 37, with GCSEs or below (or equivalent) as their highest level of prior attainment. This figure is after accounting for the total costs of study facing the individual and the Exchequer. The net graduate premium for these individuals is estimated to be on average £148,000 in real terms (NPV of £83,000), with return to the Exchequer estimated to be on average £104,000 (NPV of £52,000)