Universities make billions for the economy and should receive more public funding, according to a report published today.

Vice-chancellors were recently warned by David Lammy, the Higher Education Minister, not to expect an increase in public funds and told to take more responsibility for raising private money for their institutions.

But the report by Universities UK, which represents vice-chancellors, on the impact of universities on the economy, claimed that spending public money on higher education is an investment, not a drain.

It revealed that universities generated £59 billion for the economy in 2007-08, an increase of almost a third since the last survey four years ago. This was more than the agricultural, advertising, pharmaceutical or postal industries.

Universities’ total revenue was more than £23 billion and they directly employed more than 370,000 people. Much of the income was raised by universities working with businesses and taking on foreign students. Two thirds of their revenue still comes from the Government, however.

Professor Steve Smith, the president of Universities UK, said the report should force ministers to reconsider their attitude towards funding the higher education sector.

He said: “In these tight fiscal times, the Government will be examining all types of public expenditure, including its investment in higher education, with the aim of making significant reductions.

“This report provides compelling evidence of a sector where continuing public investment reaps continuing benefits for the UK economy, for society and for the individual personally.

“Today’s figures speak for themselves and I am sure the Government will take note.”

Universities made £6 billion — more than a quarter of their income — from the private sector, but received £14.3 billion, or two-thirds of their revenue, from public sources.

Taking on foreign students brought in 13 per cent of their income, almost £3 billion. The report said: “Personal, off-campus expenditure of international students and their visitors was estimated to be £2.3 billion, the equivalent of 14 per cent of all UK receipts from overseas visitors for 2007.”

Universities employed more than one per cent of the workforce and created another 300,000 related jobs. Consultancy work and spin-off companies, which create business ventures from the ideas of academics are increasingly lucrative, but they still represent a small proportion of overall revenue.

Only 47 per cent of university staff are academics. The report said: “The competitive environment in which universities operate requires a diverse range of support professionals — for marketing and student recruitment as well as for business development and research management.

Growing demands from students are contributing to an extra financial burden. “A growing emphasis on enhancing the ‘student experience’ (coupled with students paying a larger proportion of the cost than previously and harbouring greater expectations of the services provided) requires additional support staff, such as welfare officers and careers advisers.”

However, the report showed that for every £1 million of public investment in universities, £1.35 million was generated. This was more productive than the construction and health industries.

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