Effects of the post-war energy crisis on international students in the UK and Europe

Introduction

Russia stopped exporting oil and gas to UK and Europe, following its war with Ukraine. This led to an energy crisis in these nations and increased the cost-of-living manifolds. Every critical sector of their economy was affected, including higher education and student housing, both of which contribute significantly to the GDP of the UK and Europe. Let’s dive deep and understand how the energy crisis impacted the student housing market in the UK and Europe.

1. Post-War Impacts on Energy Crisis

Following the Russia-Ukraine War, Moscow (Russia) reduced its wholesale export of oil and gas to UK and Europe by 90% as the latter had extended their support to Ukraine during the war.

• As gas accounts for 43% of household and commercial power in the United Kingdom, the subsequent energy shortage reached a crisis level resulting in an exorbitant increase in gas and electricity prices (Source: The Office for National Statistics)
• Between January and July 2022, the gas price had skyrocketed by 96%, (accounting for 210% of the pre-war average) whereas electricity prices had The Office for National Statistics by 54% (reported by The Office for National Statistics)
• The projected year-end inflation rate was 80%, as every crucial aspect of the British economy began to suffer.

2. Post-War Impacts on Student Housing

Higher education and its allied services were among the worst-hit sectors. International students in UK and European Universities got affected by the direct shock wave of the energy crisis. They struggled to keep up even a basic standard of living as they tried to cope with increased rental expenses, daily living expenses and commuting costs. These were the impacts on the student housing market:

• In October 2022, amid Russia-Ukraine War, the student housing domain alone had contributed £3.1 Billion to the UK economy and attracted investments worth £4bn. However, 82.5% of it came only from Greystar and GIC's £3.3 Billion acquisition of Student Roost.
• In Europe, student housing had drawn a capital of €31.7 Billion in 2022, which was 36% higher than the previous year. But right around the time of the energy crisis, the investment fell by 23% compared to the previous year. (Source: Savills)
• It was further predicted that the annual energy bill was going to rise from £2,000 in August 2022 to £5,000 by July 2023.
• Inflationary prices, rising interest rates and high mortgage rates had a direct and adverse impact on the rental real estate sectors, especially, the student housing sector.
• The following figures are a snapshot of these problematic turn of post-war events causing inflationary pressures and ultimately increasing living expenses.

3. Impact of the Energy Crisis on Students and Higher Education:

The following sections elaborate on aspects of student life, which have been worse affected by the energy crises and heightened gas prices:

‍

1. Heated Food Versus Heated Classrooms

• The kitchen caterers in on-campus accommodations declared their decision to serve smaller portions of lunch from the Fall/Autumn sessions.
• They also resorted to lowering the quality of food and eliminating high-priced dishes in order to save costs.
• The funds saved were proposed to be used for heating University halls and classrooms.
• Public schools in England have reported the need to save £900,000 to meet the deficit for heating classrooms and heating meals. (Source: CNBC)

‍

2. Tuition Fees Not Exempted

• Norway was known to offer free education, even to numerous international students by covering their tuition fees with scholarships. But even Norwegian Universities are deploying tuition fees and are not providing scholarships.
• News outlets have criticised the system saying that international students, who benefitted the nation with taxes and their promising labour, are not at the receiving end of kindness during difficult times.
• This has led only children from affluent families to aim for foreign education, thus taking the students’ ‘merit’ entirely out of the equation.
• Dutch universities in the Netherlands have asked students to not enrol in university programs if they cannot afford the stay.

‍

3. Labour Deficit Versus Cash Deficit

• Many graduate students are entirely dependent upon their stipends for their sustenance.
• Due to the rise in commodity prices during the energy crisis, they require higher remuneration from their respective universities which is not possible under the current situation.
• The universities lack the funds or resources needed to increase or even pay stipends to grad students.
• Thus, despite the requirement for academic labour, graduate students have been dropping out of their courses and research programs to find stable, high-paying jobs.

‍

4. Disruption of Supply Chain and Logistics

• As a result of rising fuel prices, the cost of goods has increased manifold.
• Universities have resources brought in through third-party vendors in bulk.
• Higher costs of transportation may require universities to procure resources at a higher cost.
• Being short on cash, the Universities are likely to face a disruption in their supply chain and regular logistics.

‍

5. Neglected Housing and Student Homelessness

• Although the intake of international students in the UK and European universities was growing rapidly, the student housing sector remained neglected for a long time.
• The problem grew further, during the pandemic when universities divested their accommodation in the absence of students to remain solvent. However, as students returned at the end of the pandemic, they found themselves homeless and unable even to find a place to sleep.
• With the post-war energy crisis and the drastic rise in insolvency, the problem of student homelessness has grown worse. Besides homelessness, students are burdened with education loans and have little to no means of covering their living expenses.
• While Austria is trying to help students during this hour of need, Germany has been criticised for providing far lesser financial aid to the students rather than to the working population. But UK and Europe have yet to figure out a way to address the problem decisively.

‍

6. Defunding and Privatisation of Higher Education

• Over the last two decades, since the end of the Global Financial Crisis, the sector of higher education has been continuously defunded to be taken over by private investors.
• However, amid the energy crisis, the intervention of the state has become of paramount importance as universities face the scarcity of resources and an excess of expenditures on all fronts.
• The graveness of the situation has pushed universities to turn off their lights and heat across the campus even through the winter months. This has happened across France, Poland and Latvia, putting the health and well-being of numerous students in jeopardy.
• As the best alternative, universities are opening up their communal-use buildings, like kitchens and canteens, so that simultaneous energy usage can reduce costs.
• Inflationary effects are also bound to raise the cost of food, medication and utilities, which is why such collective energy consumption is being regarded as a pragmatic measure.

‍

7. Rent Hike

• The energy crisis compounded the post-Brexit weakening of the British pound. To match up to the high inflationary prices, high mortgage rates and high rates of interest, the property management groups and landlords hiked the rent prices.
• In October 2022, 52% of the students reported that they might have to drop out due to the rising expenses. As of 2023(Q1), this has risen to 63% of students.
• In February 2023, the average rent in the UK across PBSAs and PRS was £ 2161 per month, up by 13.8% since last year, whereas the expected rate never exceeds 4%.

‍

8. Not All-Bills-Included Anymore

• Many reputable property managers made surprising calls to students and told them that they would have to pay for amenities previously included in the bills.
• As of February 2023, most students were paying £400/month extra on energy bills for gas and electricity.
• Many managers would only inform students after they took possession of their rooms to avoid cancellations. This breach of contract shocked the students, but in the midst of the housing crisis, they had nowhere else to go.
• Between the end of 2022 and the beginning of 2023, students in the UK are spending 74% of their government aid to pay their rent. In Bath, Bristol and Manchester, the expenses have gone up to 97%.
• When critiqued for maximising their profits amid the housing crisis, the property managers said that they were desperately trying to meet their own expenses and pleaded for government intervention.

‍

9. Government Measures Amid Energy Crisis

• In September 2022, the UK government was optimistic that the war would be ending by the following year.
• It announced discounted rates for property managers to ease their energy expenses.
• However, by the first quarter of 2023, the energy crisis was nowhere near resolving the deficit, because all possible measures seemed to be bringing solutions only in the long run.
• Thus, in his Spring Budget in March 2023, UK Chancellor Jeremy Hunt announced that discounts on energy prices would be extended for another 3 months, despite a heavy cost to the government’s financial reserve.

‍

10. University Aid

• Many Universities are trying to help students through these tough times.
• The University of West Scotland is providing students with free breakfast twice a week.
• The University of Reading has introduced free meal plans and has started an ‘essentials cupboard’ to provide students with snacks and items of personal care. The university is also providing supermarket vouchers worth £50 to help students with their everyday needs.
• The University of Strathclyde has offered to help students with £300-500 in urgent need of housing and had set up an accommodation advisory committee.
• The University of Edinburgh has offered students temporary shelters and access to hot showers whenever they need them while setting up support funds to help struggling students.

11. The Silver Lining of Falling Gas Prices

• The only silver lining in this situation is that UK and Europe are experiencing a warmer summer in 2023. As a result, fuel prices have fallen marginally between January 2023 and April 2023.
• The milder weather has given Europe and the UK the opportunity to source liquified natural gas from around the world, reducing their dependency on Russian exporters.
• Storing liquified natural gas would also ensure fewer blackouts during the winter months, saving the British government £12 Billon in the financial year 2023-24.
• This might help retain the average annual bills of rental properties between £2500-£3000, instead of reaching £5000 (as was predicted last year).
• In the long run, students might hope to benefit from this reduction by having to pay lesser rent for their accommodation.

Conclusion

The number of applicants in the UK and Europe is still on the rise. Despite several provisions by the state authorities to control expenses, the energy crisis has too many variables to resolve quickly, including inflation, recessive market conditions, rent hike and raised interest and mortgage rates. Given the circumstances, it seems highly probable that students might need to set aside a larger portion of their education budget just to avail of proper accommodation in a new country. Whereas property management can effectively maintain their occupancy levels by listing their properties with trusted aggregators like amber.

‍

‍

‍