Wendy Ayres-Bennett and Marco Hafner | July 2022 | Policy Papers
English – though important as a lingua franca in business worldwide – is not the sole driver behind existing trade flows across different business sectors. Our study demonstrated how sharing spoken languages can reduce trade barriers. We estimated, for instance, that if the populations in the world who speak Arabic, French, Mandarin, and Spanish could communicate with the UK population without difficulty, then UK exports would increase by £19bn a year.
We considered how these potential financial benefits might be realised through the establishment in UK schools of an intensive language programme for Arabic, French, Mandarin or Spanish, akin to the government’s Mandarin Excellence Programme (MEP). We found that a 10% increase in the UK Key Stage 3/4 pupil population undertaking such an intensive programme in Arabic, enabling them to use this language later in a business setting, could improve the UK's GDP cumulatively over 30 years by between £11.8bn and £12.6bn. This corresponds to about 0.5% of the UK's 2019 GDP. We estimated economic benefits of comparable magnitude for Mandarin (£11.5bn-£12.4bn), French (£9.2bn-£9.9bn) and Spanish (£9.1bn-£9.8bn). If more pupils were engaged in such a programme, the cumulative benefits would be higher.
Comparing these benefits to their potential costs, we found that £1 spent today could return £2 by 2050.
Based on our findings, we offer the following policy recommendations:
In formulating policies to promote ‘Global Britain’, more attention should be given to the importance of language skills in the globally integrated business community, especially with the growing geopolitical and economic importance of countries like China, where English is not the official or main first language. As a country, the UK cannot be complacent that English is enough.
Programmes such as the MEP should be developed and expanded to other strategically important languages so as to combat concerns about the quantity and quality of languages education in the UK and the decline in entries for languages at GCSE and A level.
The economic case for languages in terms of the cost-benefit analysis provided should be used to try to secure more funds for languages education and to promote, both in government and in society more widely, the value of languages for the UK’s prosperity.
In a closely interconnected world, the ability to communicate in different languages has become increasingly important for the globally integrated business community. The United Kingdom (UK) has a comparative advantage due to the global nature of English as a lingua franca. However, there are risks associated with relying heavily on one language given the increasing geopolitical and economic importance of countries where English is not the official (or the main first) language such as China. These risks are particularly acute in a post-Brexit UK, as it seeks to forge new trade relationships across the world and to promote ‘Global Britain’.
In this paper, we present evidence relating to the potential economic benefits of enhanced foreign-language skills to the UK as set out in Ayres-Bennett, Hafner, Dufresne, and Yerushalmi (2022). It is worth emphasizing from the outset that there are, of course, many other benefits of language learning. Aside from the acquisition of linguistic skills and intercultural competence or ‘cultural agility’, many other skills accompany language learning, including improved literacy in one’s first language (Fisher and Forbes 2020, Murphy et al. 2015), and mental agility, creative originality and problem-solving ability (Vega-Mendoza et al. 2015, Li and Woll 2019), the soft skills valued by business (CBI/Birkbeck 2021: 40). Nevertheless, if languages education in schools is to secure increased investment, particularly when government funding is under severe constraints, then the economic case is key. A 2014 study (Foreman-Peck and Wang 2014) estimated that the UK is losing out on trade to the value of 3.5% of the UK’s GDP every year because of the lack of a common official language with all its trading partners that do not have English as an official language. Our research revisits this 2014 study and aims to provide an updated and improved economic estimate for some of the UK’s untapped language potential.
In our study, we first consider the existing literature on the economic effects of languages. We then apply a gravity model of trade to assess the relative importance of languages for bilateral trade, including at a more fine-grained sectorial level. Finally, we estimate the wider economic benefits for the UK in investing and extending languages education in schools.
The economics of language: what the literature tells us
Two key findings emerged from a review of the literature on the economics of language. First, languages play a significant role in international trade, and not sharing a common language acts as a barrier. In other words, having a common language can, all else being equal, reduce trade barriers and foster trade, akin to free-trade agreements. Second, learning additional languages enhances human capital, with multilingual individuals potentially earning higher wages and enjoying better labour-market outcomes. For instance, a US study (Saiz and Zoido 2015) estimated that speaking an additional language increased college graduates’ earnings by around 2%, even when adjusted for many other factors that determine income such as gender or degree subject. A wage premium for using a second language at work was also identified in European countries (including, significantly, in English-speaking Ireland). Conversely, for the UK, in many cases no direct wage premium was found. Possible reasons for the mixed UK evidence include an undervaluation of language skills by UK employers, as evidenced in the latest CBI/Birkbeck Education and Skills Survey (CBI/Birkbeck 2021: 40-41); an unwillingness on the part of business to invest in language skills; a potential mismatch between the proficiency of UK language learners and the level required by business; and UK businesses’ traditional reliance on recruiting employees from abroad with the necessary language skills rather than building human capital.
Quantifying language effects on trades by sectors
To quantify language effects on trade by sectors, we applied a well-established empirical framework, the so-called ‘gravity model of trade’. This model enabled us to calculate the associations between shared spoken languages and bilateral sector-specific trade flows between any given pair of countries, after taking into account other factors, such as shared culture, religion or a common history, that may influence spoken languages, trade or both. Geographical distance is also taken into account, since countries that are closer to each other may trade relatively more with each other due solely to their close proximity. For data on shared languages, we drew on the language dataset provided by Melitz and Toubal (2014). This dataset includes different common language indicators (such as whether countries share a common official language) as well as indicators on common spoken languages (native and non-native) shared between two countries. We used what they call a common spoken language (CSL) as the relevant measure for our analysis, since this includes not only native languages, but also those acquired through choice, something which can be affected, for instance, by educational policy. To construct CSL, Melitz and Toubal (2014) first compute the population share of each common spoken language for each country. They then construct this indicator as the proportion of each country’s population that speaks languages common to both countries. In addition, the data used for the language capabilities within a country take into account that there may be a rich set of different languages spoken in any given country at a given time. For instance, Switzerland has four official languages (German, French, Italian and Romansh), as well as a relatively large part of the population who also speaks English.
Whereas previous studies mostly focused on aggregated merchandise trade (agriculture and goods), our analysis was conducted at the sector level using international trade figures between a large number of countries broken down into four sectors – agriculture, manufacturing, mining and energy, and services. Finally, we compared the relative importance of English and other languages with regard to bilateral trade flows.
There were three key findings from this analysis. First, sharing spoken languages can reduce trade barriers. Our study found that bilateral trade in mining and energy and services increases when a proportion of the population of the two countries involved are able to communicate through a shared spoken language. For instance, a 1% increase in the probability that two people from two countries meet at random and are able to communicate with each other increases bilateral trade in mining and energy by 2.4% and trade in services by 0.6%. This second figure is important, since services such as professional, business and financial services, tourism and travel, film and culture account for around 80% of UK economic output and 46% of UK exports. Second, while English plays a very important role in determining business relations worldwide, it is not the sole driver in sectors such as mining and energy and services, and other languages (e.g. Mandarin, among others) matter equally, if not more, in reducing trade barriers. Third, UK exports are predicted to increase if there is an increase in the number of languages shared with its trading partners. Our study estimates that the removal of language barriers with trading partners from Arabic-, Chinese-, French- and Spanish-speaking countries could increase UK exports annually by about £19bn.
Quantifying the economic benefits for the UK economy
In the third phase of our study, we assessed the potential economic impact for the UK if languages education were extended in the way set out below. To calculate the impact, we employed a macroeconomic model that mimics the behaviour of various economic agents such as individuals, firms and the government. For example, in the model, as in reality, individuals provide their labour to firms which pay their workers wages (which depend on the individual’s skill levels or human capital). With the income gained, workers buy goods and services that are provided by the firms. Some of the disposable income individuals save then generates further investments for firms through capital markets. Furthermore, the model links the UK with its trading partners in the world through trade and foreign direct investment. The economic model chosen is akin to those recently used in government to assess free trade agreements or the economic implications of different Brexit scenarios. It is important to emphasise that this is not an economic forecast for the UK economy, as it considers only the potential effects associated with a reduction in trade barriers and improvements in human capital, and does not take into account the many other factors that would influence the economy’s performance, such as fiscal or monetary policies.
Using the model, we examined the effects of extending languages education on trade costs and human capital and how this affects the UK’s overall economic performance over time. The economic performance of the UK was investigated under different scenarios. In a baseline or ‘no-change’ scenario we projected the UK economy under current levels of language-education provision in schools. Then, in a series of hypothetical scenarios, we assessed how UK economic activity would change between now and 2050 if either 10% or 25% more of the pupil population at Key Stages 3 and 4 (KS3/4) learnt an additional modern language to a level where it could be applied later in a business setting. We focused on improving language skills in four modern languages – Arabic, Chinese, French and Spanish – for UK pupils in the first five years of secondary schools (i.e. aged 11-16). These languages were cited in a 2017 British Council report as the four languages that will be of most importance to the UK’s future prosperity, security and world influence. They represent, moreover, two languages which are well established in UK schools and two which are not, but where there is potential for future economic benefits.
There are, of course, many ways to foster languages education in the UK. For our study, we chose to mimic broadly the government’s Mandarin Excellence Programme (MEP), introduced in 2016, which aims to enable participating pupils in KS3/KS4 to attain at least a B1 level in Mandarin according to the Common European Framework of Reference for Languages (CEFR); early evaluations suggest the programme has been successful (Nicoletti and Culligan 2021). Why choose the MEP? It is a programme that has been fully costed by the Department for Education and is integrated into the public examination system. Schools have demonstrated the programme to be logistically feasible – it comprises 4 hours of classroom teaching with the extra hours timetabled mostly at lunchtime or after school and 4 hours of private study – and, importantly, not to impact on the learning of STEM or other EBacc subjects. The lessons are intended to combat the perception that ‘languages are hard’ and to be fun, fast-paced and engaging.
Our modelling demonstrated the following cumulative effects on GDP, taking into account both trade and human capital effects. We found that a 10% increase in the UK KS3/KS4 pupil population undertaking an intensive Arabic programme, enabling them to use this language later in a business setting, could improve the UK’s GDP cumulatively over thirty years by between £11.8bn and £12.6bn, which corresponds to about 0.5% of the UK’s GDP in 2019. Economic benefits of a comparable magnitude were estimated for Mandarin (£11.5bn-£12.4bn), French (£9.2bn-£9.9bn) and Spanish (£9.1bn-£9.8bn). If more pupils were engaged in such a programme, the cumulative benefits would be higher: for instance, if the increase in uptake is 25% rather than 10%, the figures are £29.4bn-£31.5bn for Arabic, £28.8bn-£30.8bn for Mandarin, £22.9bn-£24.6bn for French, and £22.80bn-£24.3bn for Spanish.
The final stage of our analysis required setting the benefits of these estimated effects against the cost of achieving them. While there is no publicly available data on the cost of providing education in one of the four languages, based on the information about the MEP and discussions with stakeholders, a central cost estimate per student per year for Mandarin of at least £480 was applied. It is likely that programmes for French and Spanish teaching, already well embedded in schools, would cost less, and that Arabic would be at least as costly as Mandarin as it is starting from an even lower base. In order to be conservative, we applied a range of cost estimates for each of the four languages (£600 - £800 Arabic; £480 - £720 Mandarin; £240 - £600 French; £240 - £600 Spanish). Even with the most conservative cost estimates, we calculated a benefit-to-cost ratio of about 2:1 for promoting Arabic, French, Mandarin or Spanish education. In other words, £1 spent today on languages education could return approximately £2 over a time horizon of 30 years. This estimate considers only trade and human capital effects and does not include other potential effects of increasing languages education, for example, those related to health. There is emerging evidence, for example, that the onset of dementia occurs later in bilinguals and that they recover better from strokes (Alladi et al. 2013, Alladi et al. 2015, Bialystok et al. 2014). This potentially entails not only a reduction, for instance, in drug expenditure, but in the burden on carers and thus on absenteeism or lower labour market engagement.
Even with our conservative approach, our research demonstrates that there are identifiable economic returns for investing in high-quality languages education. There are currently concerns about both the quantity and quality of languages provision in the UK. The OECD 2018 Pisa results, for example, show that the UK is well below average in the number of hours spent on language learning. As for quality, the 2015 Ofsted report Key Stage 3: the Wasted Years? concluded that languages education often fails to challenge and engage pupils (see also the LSP paper by Myles, Tellier and Holmes). The outcome is that, while on average 89% of people aged 16-30 in the EU consider themselves able to read and write in more than one language, the UK’s figure is just 32% (Bowler 2020). Investment in languages, then, is vital if the UK is to begin to generate the language skills needed for it to compete in an increasingly globalised world, as well as those required in defence, diplomacy and national security and international development and to exercise soft power. Even if we focus only on the narrow economic benefits to the UK of language learning, English is not enough.
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Cite this article
Ayres-Bennett, Wendy and Marco Hafner. 2022. ‘The economic value to the UK of speaking other languages’. Languages, Society and Policy.