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Five (financial) reasons why UK institutions engage in TNE

Eduardo Ramos

Eduardo Ramos

Head of Transnational Education
Universities UK International
TNE Finance


UK universities are expanding their transnational education (TNE) initiatives. In 2017–18, 139 universities enrolled students in programmes outside of the UK – 84% of UK institutions. Practically all sector groups are represented, from small and specialist institutions to large multi-faculty providers, from red brick civic to post-92 universities.

Given the current climate of political and financial uncertainty, this appetite for embarking on overseas ventures may seem counterintuitive. Why then, do UK universities continue to invest in TNE?

As one of the major incentives for engaging in TNE, financial returns have often been controversial. A 2014 Department for Business, Innovation & Skills (BIS) report on the value of TNE to the UK estimated the average annual income at £1,530 per active student. A recent study termed returns for educating students offshore 'derisory'.

However, these models do not consider the total return on investment in TNE.

To take a term from the financial sector, the yield on an investment is the amount of cash that returns to the investor in the form of dividends. Yield on its own says little about the return on investment that may be expected from a business venture. It needs to be looked at alongside past earnings, capital employed/invested, market price movements, goodwill and intangible assets like brand recognition and intellectual property.

Similarly, there are positive externalities that need to be taken into account when calculating the return on an investment in TNE. Direct fee income is a significant component, but not the only one. Here are five other factors that might support a more positive return on investment for universities.

1. Diversification

British Council research found that the international mobility of students is expected to slow significantly from some of the traditional countries of origin such as South Korea, Malaysia, Hong Kong and Singapore. As more nations enter the race to attract global talent, students have an ever-growing range of options to study abroad, and this may impact the bottom line of UK higher education institutions. TNE offers an alternative income stream for universities that can help prevent financial overexposure to potentially volatile streams of income such as international student fees and government funding.

2. Student recruitment

Research has found a correlation between offshore higher education provision and onshore student recruitment. Rather than being substitute services, there seems to be a multiplier effect where students who engage in TNE are more likely to become part of onshore educational activities. This pattern may become more relevant as TNE models evolve and as the relationship with partners overseas matures. TNE providers can benefit from growing trends such as intra-regional mobility and demand for English-taught higher education, increasing their overseas recruitment in emerging economies.

3. High-quality pathways

Many UK institutions started TNE collaboration as a way to assure and enhance the quality of their provision at home. The provision of articulation, twinning and foundation degrees abroad provides a cost-effective way of ensuring the consistency of entry and progression standards to UK degrees. TNE allows UK institutions to recruit international students who are better prepared and equipped to thrive on their courses. In this way, UK institutions enhance the quality of the student experience, which is the surest route to creating a competitive advantage in the crowded market for student talent. This in turn increases the attractiveness of their brand overseas.

4. Global positioning

International branch campuses are perhaps one of the best-known TNE ventures. They host fewer than one in ten UK TNE students, but they are by far the most visible type of TNE. Branch campuses can offer universities a high-profile opportunity to position themselves as leading institutions in global higher education. Positive externalities such as league table positioning and research collaboration result in increased teaching and grant income. Responding to the critiques of branch campuses as costly and overly unilateral, innovative approaches have developed such as micro-campuses, joint international universities or edu-hubs that can reduce costs and enhance local connectivity.

5. Contribution to host community economy

The last factor is perhaps the least known and may come as a surprise. A growing number of TNE ventures begin as a result of collaborations for capacity-building in country. They tend to be accompanied by governmental or multilateral seed-funding, such as that offered by the Department for International Development or by the EU's Erasmus+ programme. Some of these ventures tackle local problems linked to the United Nations Sustainable Development Goals and they may bring significant economic benefits to the communities in which TNE operates. League table publishers are already taking stock of this trend.


So, to sum up, TNE can be seen as both a cause and a consequence of the extraordinary internationalisation of UK higher education. Its success is a credit to and a result of the outward-facing nature of the sector. Reasons for engaging in TNE are multiple and complex. Financial returns are necessary to make TNE viable, but we should also look at the wider picture, both in financial and in non-financial terms, to understand the significant benefits that TNE can bring to both UK institutions and the communities in which they operate. Understanding and articulating the wider financial benefits of TNE may play a key role in ensuring that the UK maintains its leading position in an increasingly competitive international environment.


Glossary

  • Dividends – payments made to company shareholders from the profits of a company
  • Positive externalities – benefits that are enjoyed by a third-party as a result of an economic transaction
  • Articulation – an agreement between institutions that allows students to transfer between them without duplicating already completed courses.
  • Branch campuses – a physical presence established by a UK university in a location overseas from which teaching and awarding of degrees can take place.
  • Joint international universities – an independent higher education institution founded through collaboration between foreign higher education institutions and host country institutions or government.
  • Seed-funding – funding provided at the early stage of a project to support its future development and growth.  

Our team

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Communications Manager
Universities UK International

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