The UK government¡¯s rejection of a bailout for UK universities is significant, not only for institutions that must now cut costs and jobs, but potentially for the UK taxpayer, too.

The requested ?2.2 billion was turned down with hints from Whitehall that some future support might be forthcoming, if tied to reforms of the sector ¨C some of which are already in government plans.

While the sector could do with reform, the government needs to be mindful that the change it seeks may end up more like a costly collapse, similar to the banking sector during the global financial crisis. The costs of that could be far more than ?2.2 billion. It would look more like a university shakedown than a shake-up.

The requested bailout would have stabilised the sector, allowing plans and resources to be focused on new and returning students this autumn. Instead, we will now see cost-cutting, redundancies, pay cuts, debt management, and emergency loans as universities struggle to survive.

³ÉÈËVRÊÓƵ

This will demotivate a sector, and individual academics and students, already under pressure from Covid-19. Universities have responded to the crisis by putting themselves on a war footing, refocusing research on treatments and vaccines, supporting the NHS and charities with facilities and expertise. At the same time, students and staff have adjusted to new ways of working online, with almost no preparation.

This may sound like an alarmist prediction, but we could now be facing a Lehman Brothers-type event ¨C the defining moment of the global financial crisis of 2007-8, the last major global economic shock. Then, the laissez-faire economic thinking of governments held them back from stabilising the financial markets?after the credit crunch.

³ÉÈËVRÊÓƵ

The predominant philosophy was that strong financial institutions would be ¡°too big to fail¡±. Lehman Brothers was allowed to collapse in the belief that its demise was a natural extinction, and would serve as a useful warning to others. The actual results were disastrous, introducing panic and moral hazard, and forcing taxpayers to stump up for previously unthinkable bailouts costing billions.

Could this be a predictor of what is to come in UK universities? The equivalent would be a major institution going bust. As with any financial virus, contagion can set in as networks that the system is built on locally, nationally and internationally unwind. Other failures would follow, leading to hysteria and panic in the system.

As with Lehman Brothers, some in government and the sector may think that it¡¯s about time a weak university fell. In this thinking, the first institution to fail would be a small local university, possibly one that nobody has even heard of. The exposure from such a failure would be easier to mediate, even if the effect on the local economy and society, and on thousands of lives of students and staff, would be devastating.

But we should be more worried about a larger regional or metropolitan institution, financially exposed to a collapse in international student numbers, sitting on a serious and complex debt pile, becoming unable to pay its large wage bill.?

Lehman Brothers, remember, was not the institution most exposed or highly leveraged during the financial crash ¨C it just ran out of cash more quickly than others, as markets stopped trading.

³ÉÈËVRÊÓƵ

In the face of such a university failing, students may begin to question whether their own institution ¨C current or prospective ¨C would continue to exist, and thus defer their education until the situation stabilises. Why put your money, and your time, into an institution that might go bust?

Like the customers of Northern Rock, students might think it better to put their money and their efforts somewhere safer ¨C a classic ¡°run on the bank¡±. Indeed, anecdotal evidence suggests that international students are already asking such questions. A ¡°run on the university¡± would further escalate the instability of the higher education ecosystem. If a bailout was then offered, it could come at a much higher cost to the taxpayer than the current ask.

Universities are not systemically as important as banks were during the financial crash. No single university is ¡°too big to fail¡±. While we¡¯d miss them, society could go on without them. But the government is showing some curious favouritism. Fast fashion and fast food have been , with McDonalds furloughing 135,000 staff and Primark 30,000 in no-strings attached packages.?

³ÉÈËVRÊÓƵ

While universities can access the furlough funding, it has taken time for clarity on eligibility, and the numbers furloughed are small. Universities have carried on operating and are fighting to survive. In contrast, many multinationals have furloughed almost all their staff, and have no plans to reopen all or parts of their operations.

The government says that universities will be vital for post-coronavirus recovery. A few months ago, the UK was planning to double spending on research. Yet so far, the government¡¯s action appears not to match its rhetoric.

I enjoy a burger as much as the next professor; and multinational retail chains have a part to play in the economy. But does the government consider them more important than our universities to our future health and well-being? We will have to wait and see.

Adrian R. Bell is chair in the history of finance and research dean ¨C prosperity and resilience at Henley Business School, University of Reading.

³ÉÈËVRÊÓƵ