The £13B non-profit: Valuing the modern University

When I speak with non-university friends, the conversation often ends with a knowing: "Well, going to university isn't really worth it anymore." They are in good company, even if the data suggests otherwise.

But behind this comment lies a fundamental question: How do we measure the worth (or value) of a University? And perhaps more importantly, if universities did not exist, would we build them today?

Valuing universities is emotive, political, partisan, and highly debated. But we know that in the business world, the financial value of companies (even controversial ones: cigarette manufacturers, arms manufacturers, fossil fuel extraction) are not debated - they are calculated. And if we cannot agree on social value for a university, perhaps we can agree on a financial worth?

To help put this in context, I'm drawn to consider a close-to-home tale of two Manchesters. On one side, Manchester United: a global icon, recently valued at ~£5bn during the INEOS stake acquisition. On the other, the University of Manchester.

Focussing on the balance sheet, the football club might appear to be the superior asset - it is a high-margin media franchise. But, what about its worth? If Old Trafford closed, the city would skip a cultural heartbeat. On the other hand, if the University closed, the region would face an economic catastrophe, losing 12,000 direct jobs, 40,000 students, a £1.7bn annual economic contribution, the largest medical school in the UK, and a growing deep-tech pipeline.

To understand the challenge to price this difference, it's worth going right back to look at the strange structure of a university.

A sovereign grade utility?

Modern UK universities are (almost always) not a company. They are not public sector, although they are heavily dependent on government funding. They are not exactly a charity - they are regulated by the Office for Students, although they often follow charitable structures. Most pre-92 institutions are established by Royal Charter - answerable to Privy council - with post-92 universities established under primary legislation. In short - UK universities are unique structures, deeply tied to the British legal system.

The modern university is unrecognisable from its origin as a 12th-century centre for religious education which led to Oxford, Cambridge, and early Scottish universities, where Royal or Papal support was essential. On the contrary, by the secular 19th century, UCL was being established as a joint-stock company; the barrier to entry was primarily access to capital. Today, the key strategic barrier protecting Universities from new entrants is the regulator, the Office for Students. As such, Universities more closely resemble regulated utilities than free-market operating charities or companies.

Does this mean that a University is therefore not a proper business? Far from it! The ratings agency Moody's gave Oxford and Cambridge sovereign-level Aa1 rating in 2023. On the bond market, UCL raised £300M in 2021, Manchester raised £300M in 2013, Cardiff £300M in 2016 (and £100M extra in 2021); these values exceed municipal bonds values issued by local authorities. Universities are big financial players, and make big moves in financial markets.

To value such a complex organization, we must make some assumptions. Consider a sum of three components:

• Net Operational Assets (NOA): The physical organization
• Endowment and Commercial (EV): The financial assets and wholly owned activities
• Core Goodwill (CG): The reputation, the brand and the license to operate

NOA is the tangible, book value of the organization. It can be reconstructed from public financial statements: total assets - (total liability + non-monetisable value + endowment value). Non-monetisable value represents things that lie on the balance sheet, but cannot readily be sold, such as heritage assets (museum contents). For context, in their 2024/25 returns, Manchester is £2.2B, UCL is £2.3B, Edinburgh is £3.1B.

EV covers financial assets. Universities sometimes operate as tax-exempt investment vehicles. Oxford’s £6.3bn endowment generated ~£380m in 2023; a corporate fund would face a ~£95m tax bill. Instead, this capital compounds tax-free. When wholly-owned subsidiaries (like Cambridge University Press) donate their £64m profit back to the University to erase their own tax liability, it becomes clear: The tax exemption is not just a relief, it is a state-sponsored compounding that disproportionately benefits the wealthiest institutions. Excepting Oxbridge, UK academic endowments are smaller than their US counterparts: Manchester has £240M, UCL has £175M, Edinburgh has £580M.

CG represents the additional value of the organization as a running business. A common method to calculate value is to look at a multiples of EBITDA. However, in a sector where 'profit' might better be seen as a management failure (surpluses must be reinvested), EBITDA is a poor metric that measures inefficient use of resource, not value. An alternative is to look at  franchise volume (Revenue) and the franchise quality (Margins/Reputation): we can value by multiples of revenue - more commonly used for fast-growing tech firms. We separate income into streams with multiples calculated by comparison with similar industries where enterprise value is known.

Calculating multiples is an art, not a science. Nonetheless, let's have a go:

• Teaching, 2.5x: Educators such as Pearson, with a premium for degree awarding power
• R&D, 4x: Information providers such as RELX, with discount for blue-skies nature of University research
• Block Grant, 4x: High-grade sovereign income - an AAA perpetuity (this is a conservative value: block grant depends on REF etc. and can change)
• Other, 2x: General commercial income

Using most recent numbers, the University of Manchester has £3.9B, Edinburgh has £3.9B, and UCL have £6B in core goodwill value.

The Snapshot of Value: £6 Billion

These three factors - assets, endowment and goodwill - combine to give a financial value that you might charge to sell a modern UK university as a going concern. This total value is ~£6B for the University of Manchester; or, in other words, greater than their Manchester United or Manchester City. This number represents the sale price - but as charitable organizations, we must try to consider the added value to the region and the country, or its worth.

Understanding/communicating the worth of a university is the topic of academic articles, the stuff of Vice-Chancellor opinion pieces, and the core of advocacy group output. As a physical scientist, I want a quantitative number with a straightforward calculation (acknowledging that precision is not accuracy).

The Holistic View: £13 Billion

Let's consider two additional key (but simplified) benefits:

• Regional benefit (REB): FTE student numbers and student's annual in-region spend. Approximate as £15k/student/year.
• National benefit (NSV): The underlying research capacity of a university has been shown to be extraordinarily valuable in times of crisis. We can consider this latent capability as an "option on research", valued as 2x annual research income. In addition, international student numbers provide global brand value (£25k lifetime/student).

We can convert annual REB into a balance-sheet line considered as an annuity: 40,000 students at Manchester are worth £6B to the region at a 10% capitalization, or £7B for UCL, or £3.1B for Durham. National strategic value combines the research option with brand value to UK PLC; for Manchester, this is~£0.9B.

Combined, we have a total economic worth for the University of Manchester of £13.3B - that's a huge amount for a single-site organization, underpinning the sheer scale of modern UK higher education. Drax Group may be the largest single-site public company in the UK, with a 2026 market cap of £3B; yet it is smaller than a Russell Group on any metric. UCL gives £17.3B, Leeds is £10.75B.

Worth as a Warning Light

This crude and approximate accounting establishes a snapshot of University value/worth: it's generally tempting to compare within the sector, but perhaps the real utility of this approach lies in longitudinal analysis. This provides insight into a crucial question: who is vulnerable to changing environmental pressures? Accountants love ratios - if we track the ratio of Net Operational Assets (NOA) to Core Goodwill (CGV) over time, we have a metric to track the health of an institution.

This crude analysis tells us that (top) the efficiency of turning assets into worth is dropping across the sector, but that post-92's remain strong. This is worrying: it seems to be getting more expensive to deliver the same national benefit. Center shows a faster decline in the value of operations (i.e. plateauing student numbers, research volume etc) despite increasing assets. But the total worth of higher education institutions remains huge... and it is this final measure that represents what a rational government would be willing to pay to receive the benefits that these organizations provide.

So, Are They Worth It?

OK, it is clearly not appropriate to apply a deeptech valuation model to a 12th-century social construct. As the sociologist William Bruce Cameron noted: "Not everything that can be counted counts, and not everything that counts can be counted." The purpose of this framework is not to generate a price tag for a private equity buyout, but to force us to ask harder questions: Why is our Goodwill eroding? Are our physical assets generating a return? In a sector governed by sentiment and tradition, I hope that a "roughly right" valuation model may be more useful than a precise delusion.

When friends argue that the university sector is "not worth it," they are usually considering the cost of the ticket rather than the value of the infrastructure. Even those of us within the sector see research grants or the tuition fees, but are not generally thinking about the sovereign-grade asset class underpinning their regional economy!

What comes next? The sector needs to start managing our asset base. We can look at the NOA to Goodwill ratio as a new dashboard warning light. If our physical assets are growing while our reputational value stagnates, we are becoming expensive landlords rather than engines of innovation; we risk becoming asset-rich, relevance-poor zombies. The "worth" of a university is immense, but it is not guaranteed - it is an annuity that requires constant reinvestment.