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2
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
3
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
Sector sustainability
TRAC income and costs by activity
Teaching
Research Other Total
Publicly
funded
Non-publicly
funded
Income (£ million) 11,127 3,941 7,466 4,868 27,402
Long run costs (full economic costs)(a) (£ million) 10,847 2,837 9,935 4,306 27,924
FEC recovery 2014-15 (income as percentage of
costs)
102.6 138.9 75.2 113.1 98.1
Publically
funded
102.6
Non-
publicly
funded
138.9
Research
75.2
Other
113.1
Total
98.1
4
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
Unprecedented times?
“I found myself saying at the beginning of an open meeting: ‘We live in times of
unprecedented uncertainty in the university sector’. But I thought, can I really
keep on saying this? But yes I can, clearly it’s the case with Brexit and the TEF
but it was the case last year. The uncertainty is ramping up.”
Simon Gaskell, the vice-chancellor of Queen Mary University London
TEF
There will be
winners and
losers
Apprentice
-ship
Levy
BREXIT
FE
Reforms
HE Bill
Demography
Immigration
reforms
REF
270
290
310
330
350
370
390
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Non-E
U S
tudent
Num
bers
(000s)
KPMG Forecast Range Anticipated Student Shortage
HEI Forecasts KPMG Base Forecast
KPMG Stretch Forecast 2010-15 Actuals
5
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
6
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
The complexity of the EU
Council of Europe
Albania
Armenia
Azerbaijan
Bosnia Herzegovina Georgia Moldova
Montenegro
Macedonia
Russia
Serbia
European Economic Area
EU
Customs Union
European Union Croatia
Bulgaria
Romania
United Kingdom
Euro Zone
Cyprus
Ireland
Schengen Area
Austria
Germany
Malta
Slovenia
Spain Latvia
Netherlands Portugal
Slovakia
Belgium Finland
Greece Italy Luxembourg
Estonia
Lithuania
Czech Rep.
Denmark
Hungary
Poland
Sweden
San Marino
Andorra
Turkey
Monaco
European Free Trade
Association
Switzerland
Iceland
Liechtenstein
Norway
France
Ukraine
7
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
A new Brexit language
Single market
access
Pick and mix
regulations
Customs
Union access
Free trade deal
WTO: the fall-back
option or
British and Bespoke
“A country that works for everyone”
Theresa May
‘Soft’ Brexit
In Single Market/Customs Union
‘Sector by sector’ Brexit
Tailored by industry
‘Hard’ Brexit Outside EU institutions
Early talk was
of existing
models…
Until new PM
shifts the
conversation
… to ‘special
deals’
… and back to the
models again
Free trade deal
8
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
How Brexit affects businesses
Rooted Interconnected Mobile
9
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
How has the sector responded?
EU CAMPUS
HOLD FEES HOLD FEES
10
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
Or the opportunity you are trying to
maximise?
— Reputation?
— Financial?
— Staff retention?
— Student mobility?
— Research income?
How would you prioritise them?
How do propopsed solutions align to
your existing strategy?
What is the problem you are trying to solve? Students People
Research Erasmus
11
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
Illustrative matrix of options to respond
Do
no
thin
g
(ca
rry o
n)
Mit
iga
te t
he
co
st
as
pe
cts
(b
e m
ore
eff
icie
nt)
Ac
tive
mark
etin
g i
n
Eu
rop
e
Inc
rea
se
mark
etin
g/
ac
tivit
y o
uts
ide
EU
:
Res
ea
rch
Stu
de
nts
Inc
rea
se
on
-
lin
e le
arn
ing
/de
ve
lop
ma
rke
t le
ad
ing
on
lin
e?
Jo
int
ve
ntu
re/
pa
rtn
ers
hip
wit
h E
U
Un
ivers
ity
Op
en
a C
am
pu
s in
the
EU
fo
cu
se
d o
n
tea
ch
ing
Se
t u
p a
pre
se
nc
e in
the
EU
fo
r R
es
ea
rch
Op
en
a C
am
pu
s in
the
EU
fo
cu
se
d o
n
tea
ch
ing
an
d
res
ea
rch
Part
ner
wit
h a
n E
U
Un
ivers
ity t
o o
pen
a
cam
pu
s in
an
oth
er
EU
co
un
try
Op
en
a c
am
pu
s
ou
tsid
e E
U
UG
Recruitment
PG
Recruitment
Student
Mobility
Research
Staff
retention
Measure against:
— Brand/reputation (left)
— Financial Impact (right)
12
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
Current Overseas Presence in the EU Home Country
US 80%
EU (Non Eurozone) 10%
Other Non-EU 10%
13
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
Non-EU Case studies
Established 1990; 3,000 students (primarily from USA and France).
All full time students pay the full GT fees of $6,726 per semester plus the
GTL fee of $671 per semester for the full degree programme.
Roughly 50/50 research and teaching (if including summer programmes)
Partnered with:
— Le Centre National de la Recherche Scientifique;
— Georgia Institute of Technology; and
— Reciprocal dual degree agreements with:
- Arts et Métiers ParisTech (ENSAM)
- Supélec
- École des Mines de Nantes
- ENSEA
- Telecom SudParis
- ENSEEIHT
- École nationale supérieure de techniques avancées Bretagne
(ENSIETA)
- INSA Lyon
- École nationale supérieure d'électricité et de mécanique (ENSEM)
- University of Technology of Compiègne
- University of Technology of Troyes
Established 1994; 13,500 students across a number of campuses
(including London). Most students are Polish.
Fees:
— EU, Ukraine and Belarus: Administration fee of €120, plus fees varying
from €612 to €1,042 (course-dependent; per semester);
— Overseas (inc. USA): Fees range between €8,300 and €16,500 per
annum depending on the programme.
Research projects funded by the European Union and the Ministry of
Science and Higher Education.
Branch campus of Clark University (students receive US diploma)
Most popular private university in Poland, according to Ministry of Science
and Higher Education of Science
Partnerships with:
— In North America, Clark University (USA) and institutions in Canada
and Mexico;
— In Europe, BTU Cottbus (Germany), University of Perugia (Italy),
University of Cagliari (Italy), University of Lusofona (Portugal), and
University of Alcala (Spain); and
— Other institutions in South America (Brazil, Chile) and Asia
(Philippines)
14
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
Student perspective: Germany
Brand Cost Experience UK University
now
Many Germans are attracted by
the prestige and willing to pay for
quality – UK universities also
have a reputation of being
international and globally-open,
which employers in Germany
find attractive.
Up to £9250 €10,750 per year. Staff to student ratio much higher than in
Germany. Worst ratio in UK is 1:25. There
are more extra-curricular activities in the
UK, with students unions and sports
societies. The pastoral care, and general
support, both personal and academic,
is better than in Germany.
Home state Neutral: the highest rated
German university is ranked at
30 in the world (LMU
Munich), with 3 in the top 50.
Free. Average student-teacher ratio of 1:66.
University experience can be inefficient
and bureaucratic.
Home private Many private universities are for
applied sciences – close link to
industry.
Varies from university to
university – At Hertie School of
Governance, it is €32,500 for a
two year course. At Business and
Information Technology School,
courses cost €8940 per year.
More vocationally focused
Other EU
countries
High number of German UG
study in UK but also other EU
and Non EU countries
Depends on country but
obviously consistent across EU
zone, mainly free tuition.
Many courses taught in English though
experience very different from UK.
Permission to work post-graduation
could be an incentive
Non-EU
USA, Canada
Very attractive – 6 of the top 10
universities worldwide are in
the US.
$45,846/€42,500/£36,600 per
year.
Good – ‘college experience’, sororities
and fraternities, heavy focus on
extra-curricular activities and sports.
UK Campus in
the EU* (post-
Brexit)
Should be based on reputation
of university in UK
Could set own fee in overseas
location. Or could offer
differential pricing
If replicate UK model then should be
better than German experience
but cost
UK University
post Brexit
Brand in the UK may be
impacted in the long term
Students would need to pay fees
upfront unless some financing
arrangement put in place and
would be more expensive
Unlikely to change.
Name: Hannah.
Country: Germany
Subject: Engineering
Drivers: Wants a more
diverse experience.
15
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
The impact of Brexit on students’ cost of studying Indicative impact of Brexit on EU tuition fee levels
Note: (a) Average exchange rate for September 2015 (1.3655) has been considered as the average exchange rate pre Brexit; (b) Average exchange rate for the period June 24 to November 15, 2016 (1.16202) has been considered as
the average exchange rate post Brexit
Source (1) Oanda
12.3 16.3
19.1
0
5
10
15
20
25
Converted at averageexchange rate pre Brexit
Converted at averageexchange rate post Brexit
Converted at averageexchange rate pre Brexit
Fe
es (
€)
EU fee rate at £9,000 EU fee rate moving to £14,000
+32%
+56%
16
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
EU Students Flows within the EU
(150)
(100)
(50)
0
50
100
150
200
250
Germ
any
Slo
vakia
Fra
nce
Sp
ain
Gre
ece
Irela
nd
Neth
erla
nds
Po
lan
d
Rom
ania
Bu
lga
ria
UK
Sw
eden
Students In Students Out
Source:Eurostats 2012
Eurozone EU
17
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
Breaking the mould … other opportunities Link with broader
Industrial Strategy of
government
It’s all relative – The
Trump effect?
New global University
network focused on
research themes
Full merger with EU
entity to enable
access to funding
Set up own Student
Loan Book: invest in
Human Capital
Link with Industry
on a global basis:
UK Industrial Strategy
Increase participation
in UK: widening
participation
Building on the
devolution agenda
and focus on
regional economy
Language courses?
Geo-politics?
Proper vertical
integration
18
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
19
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
Speaker contact details
Justine Andrew
Market Director for Education
KPMG LLP
+44 (0) 113 231 3659
2 © 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
21
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
Good practice
Funding
Define requirement
Evaluate options
Optimise terms
Best execution
Cyber security &
compliance
Protect data
confidentiality, integrity
and availability.
Corporate intelligence
& due diligence
Understand
stakeholders and the
environment
In-depth investigations
Anti bribery &
corruption
UK bribery act (2010)
Adequate procedures to
prevent bribery
Fraud
Governance and control
frameworks
Awareness
Investigations
Ou
tbo
un
d
International tax
Structuring
Services delivered
Royalty/know-how
receipts
Branches or subs
overseas
Partnerships
Access new markets
Acquire local expertise
Spread risk
Align objectives
Appropriate governance
Employee global
mobility & tax
implications
Uk-based staff deployed
overseas
Global immigration
advice
Immigration
Global talent management
Local hires
Student recruitment
Sponsor compliance
Inbound
Employee global mobility
& tax implications
Hosting visitors
UK employees resident
overseas
Governance — Matches strategy
— Effective oversight
— Governance
— Scalability
— Structure
— Market analysis
— Proactive International
strategy
22
Document Classification: KPMG Confidential
© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affilia ted with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
Guiding principles to deliver successful transnational initiatives: — Develop a framework for expansion: Developing an
overarching governance structure, engagement
process, and monitoring arrangements to guide all
overseas endeavours over their life cycle is critical to
reducing risk and delivering the institution’s
international strategy.
— Focus on communication: It is vital to ensure that
academic staff, administrators and researchers are
aware of the established processes for partnership
development and are updated on emerging risks in
target markets.
— Align clearly to academic and research strategies:
Securing early academic engagement and ensuring a
strategic fit help ensure that proposed international
ventures support the institution’s overall business
strategy.
— Take an iterative approach: Timelines and budgets
involved in expansion initiatives are often longer and
larger than anticipated, so it is important to frequently
review progress and make adjustments.
— Undertake due diligence: By conducting the various
due diligence processes in step with the project
development plan, institutions can identify emerging
issues to course correct, thus avoiding the need to
‘unpick’ arrangements after the event.
— Build transparent partnerships: No matter what
model of expansion is adopted, institutions must
remember that successful partnerships are built on
open lines of communication, mutual benefits and
transparency between the parties.
— Plan appropriate exit strategies: In many cases,
exiting a partnership can be as – if not more –
complex than initiating one, so institutions must
ensure that this is considered up front.
— Engage advisors early on: Financial and legal
advisors should be used throughout the planning
process as an independent sounding board and to
gain experience from their global reach.