BIRMINGHAM CITY UNIVERSITY'S SOCIO-ECONOMIC IMPACT - Framework

Birmingham City University’s Socio-Economic ImpactBirmingham City University’s Socio-Economic Impact1. INTRODUCTION1.1 REGIONAL CONTEXTBirmingham City Universityis a civic university. It seeksto respond to the needs of thelocal people and businesseswithin the city of Birminghamand the wider West Midlandsregion. This section beginsby discussing the economicbackdrop in which theUniversity works.Birmingham and the widerWest Midlands region makea significant contributionto the UK economy. In 2018,1.5% of the UK’s gross value1added was produced in theBirmingham local authorityarea by the 582,000 peopleemployed in jobs there—whichequates to 1.7% of the UKjob total that year (see Fig. 1).The West Midlands regionaccounted for 7.3% of the UK’sgross value added that year,from its 8.4% share of UK jobs.Between 2013 and 2018,both Birmingham andthe West Midlands regionoutperformed the rest of theUK economy, growing onaverage by 2.9% and 1.9% peryear respectively—comparedwith the national average of21.8%. In Birmingham, highvalue added sectors such asICT and professional serviceshave grown particularlyrapidly, at average annual ratesof 7.1% and 5.8% respectively.1But despite thesesubstantial contributions,both Birmingham and theWest Midlands trail thenational average in termsof labour productivity—withtheir workers respectivelyproducing 93% and 87% of thevalue added generated by theaverage UK worker. This lowerslocal workers’ incomes, andmakes goods produced in theregion less price competitive.Moreover, the West MidlandsCombined Authority’sStrategic Economic Planpredicts the region’s poorproductivity performance willworsen: “Forecasts suggestthat on current trends, theoutput gap between the WestMidlands and the rest of theUK will widen between now3and 2030.” The plan attributesthis to region’s “large numberof low-value companies inlow-growth sectors, the lowbusiness birth and survivalrates in some areas, and thecomparatively high numberand proportion of residentswith low skills and, in manycases, no formal qualifications.”This economic contexthighlights the importance ofthe growth- and innovationpromoting activities of highereducation institutions in theWest Midlands.Fig. 1: Overview of the performance of the Birmingham local authority,West Midlands region, and UK economies in 2018BirminghamWestMidlandsregionUK1,919.0Levels in 2018Total GVA (workplace-base), billion29.7140.6Workforce jobs (workplace-base), thousands5822,95935,081People employed (workplace-base), thousands5512,84632,853Employed residents, 1,00047,50054,700thousandsUnemployed residents, thousandsTotal population, thousandsGVA per job (workplace-based), Unemployment rate, % of labour force7.4%4.8%4.0%Births of new enterprises9,41031,300380,5803-year business survival rateb49.2%55.9%55.3%aShare of UK in 2018GVA1.5%7.3%100.0%Workplace jobs1.7%8.4%100.0%Employed residents1.5%8.7%100.0%Total population1.7%8.9%100.0%Births of new enterprises2.5%8.2%100.0%abEmployed plus unemployed residents2018 data, relates to businesses created in 20151.2 STRUCTURE OF THISREPORTThis report is organisedas follows:Chapter 2 quantifies BCU’sown economic contributionin 2017/18, and the economicactivity the Universitystimulated as a purchaserof locally-made productsand payer of wages to staffliving in the local community.It shows how the scale ofBCU’s contribution has grownsince the previous study,which used data for 2006/7.It then goes on to investigatethe contribution made bythe expenditure of (i) BCUstudents from outside the localarea, and (ii) visitors to theUniversity, including attendeesof Open Days and GraduationCeremonies.Chapter 3 looks at the skilllevels and productivity ofworkers in Birmingham. Itinvestigates how the Universityseeks to upskill students sothey are “work and practiceready” when they graduate,and to support students ingaining access to their chosencareer destinations. It looksat the University’s businesssupport activities, and howit fosters entrepreneurship.Lastly, it examines BCU’scultural contribution toBirmingham.Finally, Chapter 4 presents ourkey conclusions from the study.Gross value added is easiest thought of as the value that a firm’s or sector’s output is sold for minus the cost of thebought in inputs of goods and services used up in its production. The sum of gross value added across the economy8plus taxes (less subsidies) on products is equivalent to gross domestic product (GDP)2Oxford Economics forecasts based on ONS, (2018), ‘Regional gross value added (balanced) local authority by NUTS 1region: UKG West Midlands’, 12 December.3West Midlands Combined Authority, (2016), ‘Strategic economic plan’. Page 7.9

Birmingham City University’s Socio-Economic Impact2. THE UNIVERSITY’SECONOMIC CONTRIBUTION1,3371,099244165BCU429Electricity, gas, steamand air conditioningsupply810Arts, entertainment mmodation andfood serviceIn 2017/18, the Universitymade a gross value addedcontribution to GDP of 165.34million . To give a sense ofscale, this is 0.6% of all theeconomic output producedin the Birmingham localauthority district. millionTransportation andstorage2.1.1 Gross value addedcontribution to GDPBirmingham City University’sUK operations—throughits teaching of students,engagement in research,and engagement with localand international businesses,charities and governments—generates economic activityin Birmingham, the WestMidlands region and the widerUK.Fig. 2: Birmingham City University’s gross value addedcontribution compared to other industrial sectors in Birminghamlocal authority district, 2017/18Information andcommunication2.1 THE UNIVERSITY’SDIRECT IMPACTSource: Oxford Economics. Totals may not sum due to roundingAn alternative way of tryingto gauge the size of theUniversity’s contribution toGDP is to compare it to thatmade by different industrialsectors in Birmingham. Forexample, it is equivalent to39% of the economic outputproduced by Birmingham’sarts, entertainment andrecreation sector, or 68% ofoutput in the electricity andgas supply industry (Fig. 2).4As the direct impact occurs at the BCU site, the University’s direct impact is the same across Birmingham,the West Midlands Region, and the UK.11

The University’s directimpact is the economicactivity generated by theUniversity itself, and inthe businesses supplyinggoods and services wherestudents and their visitorsspend their money.The indirect impact of theUniversity is the economicactivity generated throughsupplier purchases madein order to fulfil university,student and their visitors’orders.The induced impactarises as the University, itssuppliers and those servingstudents and visitors paywages to their staff, whichare onward spent in theconsumer economy. Gross value added is thecontribution an institutionor company makes toGross Domestic Product(GDP). It is most simplyviewed as the value ofits output minus the costof the inputs of goodsand services used upin its production. It isthe measure the Officefor National Statistics(ONS) use to quantifythe contribution to theeconomy of each individualproducer, industry or6sector.Employment, measuredon a headcount basis tofacilitate comparison withONS employment data.Tax revenue, includingall income taxes, NationalInsurance Contributions(NICs), corporation taxes,and other indirect taxes(such as VAT) attributableto the economic activitystimulated by theUniversity.The results are presented on7a gross rather than net basis.This means the study measuresthe economic ‘footprint’ ofBirmingham City Universityas it stood in during theyear. It does not subtract theforegone activity that theUniversity displaced from otherinstitutions or sectors. Nor itdoes not attempt to estimatewhat economic benefitscould arise if the labour andcapital resources employedby the University were putto alternative uses, as it isimpossible to know what theywould have produced if theywere employed in their nextmost productive use.Our results are presented forthree geographies:Birmingham local authoritydistrict as defined by theNomenclature of TerritorialUnits for Statistics (NUTS)8area 3 called Birmingham.It is the area for whichBirmingham City Council hasadministrative jurisdiction.The West Midlands regionas defined by the NUTS area1 called the West Midlandsregion since 1 April 2011. It wasformerly called the WestMidlands Government OfficeRegion (GOR) until the GORswere closed at the end ofMarch 2011.The United Kingdom includingEngland, Northern Ireland,Scotland, and Wales.INDIRECTIMPACTIt also spends money withsuppliers who employ staff,generate GDP and pay taxes.They use other suppliers in turn.UNIVERSITY IMPACTThe total economic impact ofBirmingham City Universityis the sum of these threechannels. The scale of theUniversity’s impact is measuredusing three metrics:The University employs lots of teachingand ancillary staff. Its operationsgenerate GDP and tax for the authorities.INDUCEDIMPACTEmployees (including of the suppliers)spend their wages in in the widerconsumer economy, generating moreGDP, jobs and tax revenues.Additional students (from outside the area)spend money in the wider economy, on studentaccomodation, leisure activities and consumergoods, generating more GDP, jobs and tax.STUDENTS’ IMPACTThis study quantifies theeconomic contribution the UKresident parts of BirminghamCity University makes to thelocal, regional, and nationaleconomy, using an analyticalmethod called an Economic5Impact Assessment. Theresults presented are for theacademic year 2017/18.To assess the University’scontribution, this reportexamines three channels ofexpenditure which stimulateeconomic activity in the localarea (Fig. 3):DIRECTIMPACTADDITIONALSTUDENTS’ SUBSISTENCEIMPACTAN INTRODUCTION TOECONOMIC IMPACT ANALYSISBirmingham City University’s Socio-Economic ImpactADDITIONALSTUDENTS’ VISITORSIMPACTBirmingham City University’s Socio-Economic ImpactFriends and relatives visiting additional studentsalso spend money in the wider economy, ontourist accommodation, meals out, and consumergoods, generating even more GDP, jobs and tax.Added together, all these effects—both the University's and students' impacts—comprise the total economic impact of the college.TOTALIMPACTFig. 3: Schematic of the University’s expenditure impacts125It does not include BCU’s overseas campuses.6Gross value added (plus net taxes on products) is aggregated to form the basis of GDP, the main measure of the totallevel of economic activity in a country.7This is a standard procedure in the analysis of the economic impact of individual industries or businesses.8The Nomenclature of Territorial Units for Statistics is a hierarchical classification of administrative areas, used across theEuropean Union for statistical purposes. NUTS areas are stable and are only be amended periodically.13

Birmingham City University’s Socio-Economic Impact2.1.1 EmploymentIn 2017/18, Birmingham CityUniversity employed anaverage of 2,575 membersof staff each month on a9headcount basis. This ismore people than work in theresidential nursing industryand the creative, arts andentertainment sector in10Birmingham (Fig. 4). Whencompared to important localinstitutions, BCU employedthe equivalent of just over halfthe number of staff workingwithin the large BirminghamCommunity Healthcare NHSTrust (Fig. 5).Birmingham City Universityemploys staff with a diverserange of skills. In additionto the 1,183 academics, BCUemploy 869 professionaland administrative staff, aswell as 347 managers. This isimportant for the local labourmarket, as administrationand managerial staff aremore likely to be drawn fromthe local area, meaning thatthe University also providesemployment for peoplewho already live in the WestMidlands.Fig. 4: Birmingham City University’s direct employment relativeto sub-sectors within Birmingham in 2017/18Insurance1,750Creative, arts and entertainment activities2,000Advertising2,000Residential nursing2,500BCU2,575Manufacture of motor vehicles3,000Event catering3,50001,000 2,000 3,000 4,000EmploymentSource: BCU, ONS, Oxford EconomicsFig. 5: Comparing Birmingham City University’s directemployment to that of local institutions in 2017/18Birmingham City University’s Socio-Economic Impact2.1.2 Productivity2.1.3 Tax contributionsBy dividing the University’sgross value addedcontribution by its numberof employees it is possibleto create a simple measureof labour productivity.This suggests each workerproduces an average of 64,200 per year (see Fig.6). This is greater than theaverage worker in Birminghamlocal authority district, theWest Midlands region, and thenational average (albeit theseare measured using jobs asthe measure of labour input).This comparatively high grossvalue added per employeemeasure displays the highskilled nature of employmentat BCU.In 2017/18, the University andits employees paid 41 millionin tax, the majority of whichwas paid as labour taxes andbusiness rates. To give a senseof scale, this is sufficient topay the average salaries of111,470 nurses or 1,190 teachers.Fig. 6: Birmingham City University’s staff labour productivity versus local, regional and nationalaverages in 2017/18 BCU 2,575Birmingham CommunityHealthcare Trust70,00060,0004,86454,70050,000Birmingham City ,00012,00020,000People10,0000Source: BCU, BCC & BCH trust annual reportsBCUUKBirmingham West MidlandsregionSource: BCU; ONS; Oxford Economics14910Birmingham City University, (2019), ‘Report of the Board of Governors and financial statements 2017/18’. Page 47.ONS, (2019), ‘Business register and employment survey’, 26 September.11ONS, (2018), ‘Earnings and hours worked, occupation by four-digit SOC: ASHE Table 14’, 25 ts/occupation4digitsoc2010ashetable1415

151021.35Professional,scientific 24.68.70.95.84.90.64.44.2Other0.2Real estate2026.511.6Information andcommunication2533.0Administrativeand supportservices30Construction35The University’s procurementstimulates jobs across the UKeconomy. In 2017/18, BCU’ssupply chain spending isestimated to have supported2,120 jobs in the UK economy.Of these, 1,175 jobs werelocated in the West Midlandsregion and 865 jobs in theBirmingham local authoritydistrict.In 2017/18, 33.0 million (or30%) of the gross valueadded stimulated by theUniversity’s procurementalong its UK supply chain wasproduced by the professionalservices sector (whichincludes accountancy, legal,consultancy, architecture,testing services, etc). Mostof this economic activityoccurred in the Birminghamlocal authority district. Theconstruction industry andadministrative and supportservices sector were thesecond and third-largestbeneficiaries in gross valueadded terms, with over aquarter of the latter occurring12in Birmingham (Fig. 7).Fig. 8: The University’s supply chain employment impact byindustry and geography in 425597335646618820517229311110892118OtherFig. 7: Birmingham City University’s supply chain impact on grossvalue added by industry and geography in 2017/18The University’s procurementsupported an estimated 111.5million gross value addedcontribution to GDP along itsUK supply chain. Of this 47.6million was generated in theWest Midlands region and 31.2 in the Birmingham localauthority area.The sectors with the mostjobs supported by BCUactivity and spending werethe professional services(628 jobs), construction (355jobs) and administrativeand support services (335jobs). Most of the jobs inprofessional services andadministrative and supportservices were located inBirmingham local authority(see Fig. 8).Real estateThe University’s procurementstimulates economic activityat its suppliers as they2.2.2 Supply chainemploymentInformation andcommunicationMore than 40 million(32% of its total procurementspend) was with suppliers inBirmingham that year.2.2.1 Supply chain grossvalue addedAdministrative andsupport servicesNumber of Birmingham-basedsuppliers used by BCU in2017/18.Birmingham City Universityprocures a substantialproportion of its goods andservices from local businesses.In 2017/18, the Universityspent 40.9 million, or 32.3%of its total procurementexpenditure, with 529businesses based in theBirmingham local authority.An additional 20.2 million or15.9% of the total was spentwith 540 suppliers in thewider West Midlands regionand 62 million with 883suppliers in the rest of the UK.produce output to satisfyits orders. As such, theUniversity’s expenditure oninputs of goods and servicesunderpins a proportionof each firm’s gross valueadded contribution toGDP, employment, and taxalong its local supply chain.Quantifying this ‘indirectimpact’ in 2017/18, weestimate that the University’sprocurement supported a 31.2 million gross valueadded contribution to GDP,865 jobs, and raised 9.5million in tax revenues in theBirmingham economy.Construction5292.2 INDIRECT IMPACT:PROCUREMENT FROMLOCAL SUPPLIERSBirmingham City University’s Socio-Economic ImpactProfessional,scientific andtechnical activitiesBirmingham City University’s Socio-Economic ImpactBirminghamRest of the West Midlands regionRest of UKSource: BCU; Oxford EconomicsBirminghamRest of the West Midlands regionRest of UK1612Source: BCU; Oxford EconomicsAdministrative and support services include: renting and leasing, employment agencies; travel agencies; security andinvestigation; services to building and landscape (including cleaning); and office administration services.17

Real .613.6Other1030.0Professional,scientific andtechnical activities2037.6Accommodationand food services3043.6Financial services40Retail &wholesale5059.68.42.3.1 Induced impact on grossvalue addedThe wage-financedconsumption spendingor ‘induced impact’ isestimated to support a 23.9 million gross valueadded contribution to GDPin Birmingham in 2017/18.Elsewhere in the rest of theWest Midlands and wider UK,the spending is estimated tohave stimulated an additional 39.9 million and 93.0million in gross value 581273046161Other m60Fig. 10: Induced impact of the payment of wages by theUniversity and firms in its supply chain on employment byindustry and geography in 2017/18Transport & storageFig. 9: The impact of Birmingham City University and supplier’spayment of wages to staff to gross value added by industry andgeography in 2017/18At the national level, the retailand wholesale sector was thesecond largest beneficiary.Some 23.5 million of its grossvalue added was attributableto BCU and the firms inits supply chain. At theBirmingham local authoritylevel, it was the largestbeneficiary, with 5.3 millionof the gross value addedstimulated occurring there.Professional, scientificand technical activitiesThe University spent 128 million on employeecompensation in 2017/18—ofwhich, 55.2 million (43%)was paid to staff living in theThe 865 staff estimated to beemployed in the University’ssupply chain in Birminghamare also paid wages. Basedon the average for theirindustry, we estimate thatthis amounted to some 15.7 million in 2017/18. Anadditional 13.9 million and 31.4 million was paid to staffin the University’s supplychain elsewhere in the WestMidlands region and rest ofthe UK.The industry that benefitedthe most from the wagefinanced consumer spendingacross the whole UK wasthe real estate sector. Some 43.6 million of its gross valueadded was stimulated by thepayment of wages by BCUand the firms in its supplychain. This reflects the largeshare of income spent rentingor the margin on purchasingor selling property (Fig. 9).Administrative andsupport servicesEmployee compensation paid byBCU to staff who live in theBirmingham local authority district.The University and the firmsin its direct supply chainpay their staff wages. Therecipients are likely to spenda proportion of this incomein the consumer economy.This expenditure in localretailers, leisure and otheroutlets stimulates furthereconomic activity, which canbe measured in terms of GDP,employment and tax revenuesBirmingham local authorityarea. This is equivalent to0.6% of all the wages paid toBirmingham’s inhabitants thatyear. A further 58.2 million(45% of the total) was paidto staff residing elsewherein the West Midlands region,meaning that 88% of BCU’semployee compensation waspaid to staff living in the WestMidlands regionAccommodation andfood services 55.2m2.3 INDUCED IMPACT:PAYMENT OF WAGES BY BCUAND ITS SUPPLIERSBirmingham City University’s Socio-Economi

Birmingham City University's Socio-Economic Impact Birmingham City University's Socio-Economic Impact Prior to the coronavirus crisis, Birmingham's economy was growing strongly. Over the five years from 2013 to 2018, it expanded by an average of 2.9% a year in real terms—well above the national rate of 1.8%.