Anchor institutions

Universities as ‘anchor institutions’ in the knowledge economy
By Dr Neil Lee, Senior Economist, The Work Foundation

The UK economy is undergoing long-term structural change. The production, use and dissemination of knowledge has become increasingly important, while routine production has become less so. Knowledge-based sectors are increasingly important: at the start of the 1970s, less than a quarter of economic activity was in ‘knowledge based services’ – it is now closer to half.
Much of the UK has benefited from this transition, with successful knowledge-intensive industries creating new jobs paying higher wages. Universities have been critical in this change, creating the skilled, adaptable workers who can profit. Cities with strong universities and concentration of skilled workers – ranging from London to York – have done well from this economic transition.
Yet other cities have been less successful in the transition to the knowledge economy. Cities such as Middlesbrough or Hull have fewer of the knowledge-based industries which are driving the economy. These places will often have been reliant on the public sector as a driver of growth in the past. And it is in these cities where the role of universities is equally important, but different.

The ability of universities to influence the local economy is particularly important in a knowledge-led economic recovery, even more so in cities which are declining.

Universities are unique organisations in many cities – often they are the only institutions with the scale and local connectedness to drive economic growth and shape the physical environment. In the US, the term ‘anchor institution’ has been used to describe this role. The fact they are fixed in a particular territory allows them to play an important, sustained role in local economic development.

Universities play multiple roles in local areas. Universities help educate the population and create the skills needed for successful urban economies. The traditional role of universities as an educator of the select few has been expanded to include a broader educational remit, a function improving social mobility. Firms are placing increased value on intangible assets and investing more in research. Linking the expertise of universities to the needs of local firms has rightly been seen as important for firms to grow and succeed. The role of universities in urban economies – in particular the money spent by students – is crucial in maintaining many city economies.

While education, research and student expenditure are important, the role of anchor institution relies on a broader notion of the importance of universities in cities. Any institution relies on the success of the town or city in which it is located, and this can provide a powerful incentive for local engagement. The economic benefits of anchor institutions come from demand for local goods and services, both from staff and students. They can also shape the physical environment, as universities have the scale to influence the built environment of a city in the way smaller landowners cannot. And universities serve as ambassadors for towns and cities, bringing in talent and investment to an area and building its reputation.

Universities are unique organisations in many cities – often they are the only institutions with the scale and local connectedness to drive economic growth and shape the physical environment.

Universities have recognised this role, and there are some great examples of good practice both in the UK and abroad. The University of Pennsylvania provided home loans for staff to ensure they lived locally, but also to help regenerate the area near the campus. Institutions such as Manchester Metropolitan University have linked plans for new buildings with long-term regeneration strategies.

The challenge will be to sustain efforts in the face of public sector cuts. In the context of low private sector confidence and a public sector which is likely to shed jobs, making the most of existing assets, such as universities, will be vital for many places. The ability of universities to influence the local economy is particularly important in a knowledge-led economic recovery, even more so in cities which are declining. Yet, as the financial support structures under which much of this work has happened is being removed, the role of universities as ‘anchors’ becomes more, not less, important. Universities have realised that it is in their interest to anchor local economies. The government needs to continue to provide incentives for this to happen.

Neil Lee is Senior Economist at The Work Foundation. He runs the Ideopolis team whose work helps cities and regions understand how the knowledge economy affects them and what they need to do to grow their economy further.