This post is part of a feature on “Urban Struggles,” moderated and edited by Raúl Acosta (LMU Munich), Flávio Eiró (Radboud University Nijmegen), Insa Koch (LSE) and Martijn Koster (Radboud University Nijmegen).
Between 2017 and 2020 Universities in the UK were on a building spree, in this period two billion pounds of construction contracts were agreed or enacted between universities and contractors. These buildings projects have been significantly funded by entry into capital markets – the Financial Times reported that between 2016 and 2018, around three billion pounds was borrowed by UK Universities.
This spending power means that in many towns and cities in the UK universities have become increasingly important actors in urban development. This higher education-led urban development is not unique to the UK, but is a pattern observable across North America, Europe and Australia (Adidie et al 2015). The expansion and investment of successful universities, offering post-industrial cities the promise of an ‘urban model anchored around education, rather than commodities’.
Higher education is viewed in this model as an industry, intertwined with business and government in a triple helix (Etzkowitz & Leydesdorff 1995), which attracts innovation, investment and talent. New sites are being developed to house these state-of-the-art buildings in joint ventures, often on land vacated by industry. Meanwhile, growing numbers of students (including importantly international students), understood to be attracted by these impressive new buildings, contribute significantly to the local economy with their spending power and are increasingly being housed in newly constructed private purpose-built accommodation.
As such, higher education became an important client to the construction industry, who enable this transformation of capital into new buildings, and derelict spaces into new sites of the ‘knowledge economy’. It is through a focus construction, and broader processes of urban development in Newcastle and the North East, that I began to explore this topic of education-led urban development. In 2018 – 2019 I conducted fieldwork with a buoyant construction industry, as part of the larger Frontlines of Value: Class and Social Transformation in 21st Century Capitalism project.
Seeking to understand the different perspectives of those involved in the construction of large buildings, and the processes of urban development, I observed in the site office of two large construction projects in the North East, as well as a local contractor and two architects’ practices, attending a wide-range of meetings and accompanying site visits. I also attended planning committee meetings, public consultations and construction industry conferences, seminars and networking events, and volunteered in a community café in an area particularly affected by these large projects. I conducted interviews with people involved across the development ‘ecosystem’ in the North East, including planning offers, university managers, local politicians, developers, and a range of construction industry professionals.
Like many other cities in the UK before 2020, Newcastle, a city of just over 260,000 inhabitants in the North East of England, construction was booming with a number of major construction projects in planning, in process or recently completed. The city’s universities, Newcastle University and Northumbria University, with 50,000 students combined, were playing an important role in this building boom. In 2016 the consortium of the five North East universities (Newcastle, Northumbria, Durham, Sunderland and Teesside) had allocated £750 million for capital investment projects, both new buildings and refurbishments, until 2022. As part of this, Newcastle University worked together with the city council, and the pension fund Legal and General, to develop a new site, The Helix, about 10 minute’s walk from the main campus. Across the city, over 30 new private purpose-built student accommodations had been built in the last 10 years, each housing hundreds of students.
The UK higher education construction spending spree is one of many that have come to an abrupt halt due to the Covid-19 crisis. Facing deficits due to a loss of international student fees, and loss of other income such as conferences, accommodation etc. Universities UK (UUK), the representatives of university senior management, have forecast that this could result in a drop of £7billion in income for the next academic year. Among the first cost-saving measures to be announced by many universities has been the suspension of planned building projects.
Marketisation of Higher Education in the UK
In England at least, this higher education building boom needs to be understood in relation to a sustained political effort to marketize universities (Brown 2014). In this ideology, universities are expected to compete with each other for students and research funding, with the threat that ‘unsuccessful’ universities will be allowed to fail. While processes of marketisation have been apparent since the 1980s, these have intensified in the last decade. The Browne report, an independent review of higher education in 2010, and subsequent government white paper Higher Education: Students at the Heart of the System (2011) set a course by which the purpose of higher education was understood in terms of improved economic growth and investment in human capital, rather than as a public good. Between 2012 and 2015, the Conservative-led coalition government reduced public funding for university teaching, sharply increased tuition fees, and removed the cap on student numbers for English Universities (since the late 1990s responsibility for higher education policy has been increasingly devolved to Scotland, Wales and Northern Ireland who have differing fee regimes, priorities and emphasis, Bruce 2015, Brown and Carasso 2013).
This has enabled universities to expand and resulted in fierce competition to attract students. International students, who typically pay higher fees, and offer a market many times larger than that of 18-year-old UK students, were a particular focus of university desire. At the start of 2020, about a third of student fees in UK higher education were from international students.
In order to compete with each other, a consensus seemingly emerged: what would attract students, both national and international, was impressive new buildings and refurbishments and state-of-the-art facilities. Over the last few years, universities across the country have been on a construction ‘spending spree’.
It was not only student fees funding these construction and refurbishment projects. Across the UK university spending on building project has been funded for many by entry into capital markets, a number of universities issued bonds in order to fund major new projects, including privately placing debts. This has implications for a number of other aspects of UK higher education. For example 14 days of strike by University and College Union members in 2017 – 2018, and 22 in 2019 – 2020 were in response to the proposed move from defined benefits to defined contributions pensions (the latter was also in relation to the four fights pay, workload, casualisation and equality). As scholars and journalists highlighted here, here and here the push to de-risk pensions and universities entry in capital markets are related.
Ethnographic research on construction and urban development in the North East of England
Despite the crucial role construction plays in processes of urban development and the importance of the property sector in creating new urban sites of capital accumulation (Harvey 2012), surprisingly little critical social science attention has focused explicitly on construction projects, workers, or industries more generally (Elinoff et al 2017, for exceptions see; Di Nunzio 2019, Elinoff et al 2017, Hirslund 2019).
Construction sites are hubs of activity, hidden behind smartly painted hoardings. Large buildings emerge through huge amounts of labour, involve globe-spanning supply chains, and require massive investments of capital, often from speculative financial flows. Construction sites are arenas of concentrated activity and transformation; land into property, finance into fixed capital, and drawings into buildings. Transformation is not straightforward but requires intense material and symbolic work.
The planning, development, construction and occupation of large buildings connects large numbers of people together through these complex projects; a global network of investors, construction industry professionals (consultants, architects, contractors and subcontractors), local politicians and planning officers, local residents and those who will eventually occupy the buildings. People are both connected, and differently positioned through these projects, and often have very different perspectives on their value and impact on the city.
During my fieldwork in 2018 – 2019, a focus on construction enabled a focus on these interconnections and transformations in Newcastle and the North East. During the period of fieldwork, I encountered a buoyant construction industry; in addition to the university projects, other large buildings in planning or under construction included hotels, offices, build-to-rent apartment blocks and a 260-million-pound arena and waterfront complex.
In contrast to the buoyancy of the construction industry, and the spending power of the universities, the scene in local government was very different. Local councils are funded through a combination of central government grants and money raised from local taxes and charges. Justified in the name of post- global economic crash austerity, the Conservative-led coalition government in 2010 instigated severe and fast cuts to public expenditure including cuts to welfare, social care, and local government. This austerity regime was continued by the Conservative government from 2015 until now (Hall 2015). Local councils in the North East have on average had their budget cut by 50% since 2010. Less able to raise revenue through local taxes and charges, and with more need, it is deprived urban areas, such as Newcastle and Gateshead, that have had to “shoulder the burden of austerity”. Time after time during my fieldwork I heard that the cuts have been ‘savage’ and things have ‘never been so bad’.
From the construction industry networking events, with free drinks and canapés in hotels, to the local politician discussing the increasing number of people in his ward who were in a ‘desperate’ situation – it sometimes felt being in two different worlds which just happened to share a location. But of course, these processes were connected. Cost-cutting was no longer enough to sustain local councils, and they needed to be generating income as well. Section 106 payments from developers, to ‘mitigate’ against the impact of development (for example through the provision or funding of affordable housing or local infrastructure) are one example of revenue generation, as are councils funding construction projects that once built will generate income through rent.
Higher education-led urban development in Newcastle
In this context, with money to spend and offering the promise of employment opportunities as well as the specific and desirable potential for higher education-led urban development, the universities have become both important players in urban development in the city. Situating themselves as anchors institutions, they have been working together with the private sector and government to attract innovation and professionals to the city. While their 50,000 students (an amount that has doubled in the last twenty years) contribute an estimated £500 million to the local economy each year.
Funded by a 100-million-pound loan from the European Investment Bank (EIB), Newcastle University funded a number of major building projects. In an article announcing the loan, they declared this represented “the largest ever loan for a university outside London and the south east”.
These plans involved the development of The Helix site, a partnership between the university, Newcastle City Council and pension fund Legal and General. Like other cities such as Manchester and Bristol, Newcastle has responded to the space limitations of its city centre location, by developing this new site, situated on the site of a former brewery. The Helix, is the materialisation of the triple helix model, in which the university is envisioned as an entrepreneur ‘putting knowledge to use’. On the finished Helix site, university buildings would sit along-side high-rise apartment and office blocks, food and drink venues and a hotel.
Figure 1: Plans for the Newcastle Helix site with construction behind (author’s own)
A second important university related trend in urban development has been the rapid growth of privately owned, purpose-built student accommodation (PBSA), housing an increasing percentage of the 50,00 university students in the city. In the last 10 years, these types of buildings, which do not require the same planning permissions as residential schemes, have proliferated in university towns and cities throughout the UK. Selling themselves on all-inclusive ease and luxury, international students were viewed as the main market for PBSAs. With non-EU student enrolment increasing by one third between 2008/2009 and 2017/2018, and (pre-Covid) forecast to keep rising, for investors, purpose-built student accommodation was considered ‘a golden goose’, offering a guaranteed return on income. Although there was already growing evidence of over-supply and failed schemes prior to Covid-19.
In 2018 it was reported by The Chronicle, Newcastle’s local newspaper, that the city had the highest rate of student housing in the country, with one in every fifteen abodes occupied by students. Prior to 2014, an average of 550 student beds in PBSAs were built, which rose to 2,316 in 2016, putting the number of beds in PBSAs at 24,028.
The post-industrial nature of the city enabled this proliferation, where the availability of land for development is a direct result of this deindustrialised history. For example, in Shieldfield, a small neighbourhood on the outskirts of Newcastle city centre, the availability of land vacated by industries, and its proximity to the two universities (10 – 15 minute walk) has led to a large number of PBSAs being built in the area. 20 new student accommodations have been built since 2008 (with hundreds of students accommodated in each block), increasing the amount of student accommodation in the area by over 500%. As a collaboration between Shieldfield-based community group Dwellbeing and Newcastle University Planning students recently evidenced, of the £130 million pounds spent by developers on land in Shieldfield since 2008, 50% of it is from companies lying off shore. This holding structure is common for student accommodation throughout the UK and enables tax avoidance and evasion.
What next for higher education and construction?
Universities in Newcastle, as with universities in other cities across the UK and the world, were becoming increasingly involved in shaping a future for the city, situating higher education and its students as key to post-industrial redeveloped, intertwined with industry, government and the local economy. This has been funded by student fees and new loans.
With Covid-19, there has been a sharp drop in the recruitment of international students for the coming academic year, as well loss of other incomes, and universities are facing a significant decrease in income for the coming year. While the government have agreed measures to advance tuition fee payments, they have denied the request from Universities UK for a £2 billion pound sector bail-out.
Furthermore, financial agreement attached to the debts taken on for higher education capital projects are constraining how universities can respond to the financial impact of Covid-19. Due to the obligation to make an annual financial surplus, these universities will not be able to use their existing reserves to cover the shortfall.
Most have now announced immediate cost-saving measures to address this short-fall, including the suspension of all planned construction and refurbishment projects. The pipeline of major new projects, that construction companies were banking on, has now been turned-off. Higher education and construction are industries that became intertwined through boom, and now face the consequences of bust.
Sarah Winkler-Reid is Lecturer in Social Anthropology at Newcastle University. Her research explores personhood, value and ethics, and contemporary Britain. She has examined this through a focus on young people’s daily lives in London and now through a focus on construction and urban development in the North East.
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Cite as: Winkler-Reid, Sarah. 2020. “Higher Education-Led Urban Development in Newcastle and the North East of England, and its abrupt Covid-19 interruption.” FocaalBlog, 17 July. http://www.focaalblog.com/2020/07/17/sarah-winkler-reid-higher-education-led-urban-development-in-newcastle-and-the-north-east-of-england-and-its-abrupt-covid-19-interruption/