What have they ever done for us?

Imagine waking up during term-time in 2014 on Portswood Road, one of the main student-housing drags in Southampton. Stepping outside, you find the road strangely deserted - not a student to be seen. Walking south along quieter streets, you find a huge expanse of grass where Southampton Solent University's East Park Terrace building once stood. By the docks, the National Oceanography Centre - the University of Southampton's research centre for the study of ocean and earth sciences - is now just a slab of wet concrete. Perplexed, you hop on a bus to the University of Southampton's Highfield Campus, but the site opposite Southampton Common is just an empty space. Southampton's two universities have mysteriously disappeared.

This is not a realistic prospect, of course: both the University of Southampton and Southampton Solent University recorded healthy financial surpluses in 2009-10. But at a time when the value of universities is being widely scrutinised and discussed, it is a novel way to consider their impact on and relationship with the local community. If the two universities were to vanish from the city, what would be lost?

The consequences for a city today would be very different from the state of affairs in earlier times. According to John Goddard, co-author of the forthcoming book The University and the City and emeritus professor of regional development studies at Newcastle University, universities have not always been helpful neighbours. The ancient universities served the church, not the city, and so "historically, universities were detached. They weren't involved with issues of the city." The 63 scholars killed by the townspeople of Oxford in the 1355 St Scholastica Day riot after two students forcefully complained about the quality of drinks in a tavern is a notorious example in a long history of conflict between town and gown.

As Goddard sees it, there was a temporary "blip" of engagement by the civic universities in the 19th and early 20th centuries, as Manchester, Liverpool, Newcastle and others were created by an industrial bourgeoisie to provide skills for their cities. However, from the end of the First World War, universities were effectively nationalised as they drew more and more of their money from a government funding body. This shift meant that the university "turned its back on the city".

But in the past few decades, Goddard believes, this situation has changed. Universities now see that "their competitive strength comes from the relationship with cities re-emerging".

"Universities need a good city to attract students and academic staff," Goddard points out. The relationship between town and gown, once antagonistic, is now symbiotic.

One thing that would be noticed instantly if a university were to vanish overnight would be the sheer loss of student numbers. Almost 40,000 of Southampton's 239,700-strong population are students, of whom roughly 4,000 are from the local area. So removing the universities would severely affect Southampton's population and would force local students to travel at least 10 miles to the next-nearest institutions, in either Winchester or Portsmouth.

As 22 per cent and 17 per cent of Southampton and Southampton Solent's students, respectively, hail from overseas, the exodus of international students would also "diminish the international flavour of a place", observes Rick Rylance, chief executive of the Arts and Humanities Research Council.

Such a mass departure would be disconcerting to say the least, but once the locals recovered from the initial shock, might it simply leave them in peace, free from noisy parties, unkempt gardens, increased insurance premiums, late-night kebab shops and upward-spiralling rents?

Adrian Vinson, a councillor for the student-heavy ward of Portswood and leader of the Liberal Democrat group in the city, says that despite the universities being major assets to the city, some streets risk becoming unbalanced by the sheer concentration of students.

"We have streets where the overwhelming majority of residents on the street are students," he says. This creates serious difficulties for the non-students living there. He lists the classic problems of "studentification": noise, a squeezed council tax take, and pressure on local services and parking.

Meanwhile, "local shops, which are struggling to survive, want rounded business across the year. They don't want term-time business only."

The solution, he argues, is to cap the number of houses that can be turned into student residences. Southampton says that it is "liaising closely" with the council and that it also plans to accommodate more students in halls.

Vinson thinks the situation in Portswood is such that some residents might initially find it a relief if the universities disappeared, although "it would not be long before they would realise what a severe blow it would be".

On the positive side, many students do their bit to support the community, and volunteering is widespread. In 2007, Southampton says, students gave up around £1 million worth of their time to help the community. Since 2003, the university adds, it has donated £62,500 in grants to 54 local projects involving more than 500 staff and students.

The two universities are also major employers. Of a local workforce of about 120,000, the University of Southampton employs roughly 5,000 of them, making it the second-biggest employer in the city after Southampton City Council. Southampton Solent employs just over 1,200 staff, while another 146 have jobs with Southampton's students' union.

Although focusing on the value of higher education purely in economic terms is anathema to many academics, it is certainly true that the two institutions have significant spending power. In 2009-10, Southampton's overall expenditure was £410.3 million and Southampton Solent's was £92.8 million.

Southampton Solent has calculated that the two institutions' combined student populations spend £300 million a year in the region.

In economic terms, another lucrative by-product of universities is the host of spin-off companies that emerge from the most potentially profitable research. Southampton says that 12 firms that are still in business have been spun off in the past decade, creating 1,200 jobs, the "vast majority" of which are within the Hampshire region. Four have been floated on London's Alternative Investment Market.

The university's science park helps to hatch these ventures. For example, Ilika scales up materials from the laboratory for everyday commercial use, and Synairgen, based in the city's general hospital, develops therapies for respiratory diseases.

But how much difference do spin-off companies make? Julie Mercer, head of education at consultancy Deloitte, says that spin-off companies tend to form only "a tiny proportion" of start-up companies in a city.

For example, between 2004 and 2008, 37 university spin-off firms were set up in Manchester, according to Starter for Ten, a 2011 report from the thinktank Centre for Cities, but this accounted for just 0.1 per cent of all start-ups in the city. Even in Oxford, which had the best ratio of spin-offs to start-ups, the proportion was still just 1.3 per cent.

Nonetheless, universities support new businesses in other ways: they can offer a one-stop-shop for solving problems and training staff. Southampton, for example, offers a consultancy service to small and medium-sized businesses, and training for employees. Southampton Solent's lecturers and students provide media services, including logo design, event management and public relations, through an organisation called Solent Creatives.

A spokeswoman for the Southampton Chamber of Commerce says such services are often provided almost free of charge, although some businesses do not take advantage of them because they cannot believe that there is no catch.

"There's also a perception that graduates will only work with a big company, or will cost as much as a consultant," the spokeswoman says - adding that this is unfounded.

If the two universities disappeared tomorrow, the harmful effects would be felt not only by businesses and the economy, but also by "the wider community, as research into future technologies, medicine and the environment would all be lost and the private sector would be unable to pick up all the costs for this high level of research and development", she says.

For bigger national and multinational firms, such as Rolls-Royce, BAE Systems and GlaxoSmithKline, Southampton has major knowledge-transfer programmes, and sponsored research makes use of the institution's facilities. These contracts with business are collectively worth £30 million a year to the university.

Universities say they boost the local economy by providing skilled graduates, but do bright graduates stay?

Southampton Solent has made efforts to help its graduates find work in the local area. Its student entrepreneur programme gives students support to set up their own businesses, largely within the city. And the university recently ran a successful campaign that resulted in local businesses pledging £10 million worth of internships, placements and jobs for graduates.

"The most buoyant cities have more qualified people," says Mercer. But this may only be a correlation. It is "the location of job opportunities, rather than the location of a graduate's university, that will have the biggest influence on where a graduate goes after university", according to Starter for Ten.

"The more global the university, the more graduates leave the area," says Mercer. "As a graduate of a university with a global brand, you probably have ambitions to continue to play in a global marketplace rather than the local one."

Overall, the Southampton economy would undoubtedly take a significant knock if it lost its two universities: £610 million in lost output (goods and services), according to research by Economic Modeling Specialists Inc, commissioned by Southampton Solent, and almost £1.7 billion to the country.

However, some see danger in trumpeting universities as steroids for the economy, and wonder if the unrelenting focus of sector leaders on economic impact has lost the academy public support - and public funding. "Certainly since 1997...we've emphasised the private good [of higher education]," argued Mary Stuart, vice-chancellor of the University of Lincoln, in a speech in June. "Maybe that is when [universities] began to lose the argument and be seen more as a problem."

According to Paul Manners, director of the National Co-ordinating Centre for Public Engagement, it is "public engagement, more than commercially orientated activities, that generates and sustains the social and public value of universities - be that through researchers working with schools, creating cultural events, volunteering or inviting public participation to shape research projects".

So higher education's public relations efforts have recently begun to look a little less Gradgrindian. In June, Universities UK and the New Economics Foundation, a left-leaning thinktank, released a report (Degrees of Value: How Universities Benefit Society) that claimed that UK universities added £1.31 billion a year in value to society. According to figures from the Organisation for Economic Cooperation and Development, graduates are moderately more politically engaged, trust others more, and have better self-reported health.

The NCCPE is about to publish a report that attempts to throw light on this area. It reviews how the social value of universities can be accounted for and looks at how others - such as the cultural sector and the BBC - have tried to articulate the value they create.

Universities also own cultural and sporting facilities that are often open to the public. Southampton's Nuffield Theatre, the Turner Sims classical music and jazz venue and the John Hansard contemporary art gallery collectively pull in 85,000 visitors a year.

With universities across the country facing a new funding regime and the uncertainty this brings, many fear that community-focused activities could suffer.

According to Jackie Dunne, the honorary secretary for the Universities Association for Lifelong Learning, one area of community engagement that is vulnerable is lifelong learning. Over the past decade, universities have reduced the number of evening classes and short courses available to local people, she says.

"There have probably been instances where these programmes have been a very important part of a university's engagement with its community," she says. Squeezed funding means that universities have to decide whether lifelong learning is a "core mission", Dunne explains, and not everyone thinks it is.

At Southampton Solent, a promise to offer "inclusive and flexible forms of higher education" is part of the university's mission statement, and 23 per cent of its student population is mature.

Southampton, meanwhile, attracted 1,000 people to its language classes last year.

Southampton Solent does not offer evening courses, and Southampton has only just started to offer them, but the latter institution says it expects to "significantly increase" lifelong learning numbers in the future.

Although "studentification" is a common and not always welcome effect, the presence of a university in a city also results in a phenomenon that could be termed "academicification" - and this is likely to be a slightly less messy process.

Where there are universities, "there are expectations that you will get more high-end and middle-class shops (to serve academics) - particularly food shops," explains Allan Cochrane, professor of urban studies at The Open University.

The arrival of jazz venues and delicatessens may help universities endear themselves to Southampton's bourgeoisie, but would people from less well-off backgrounds miss them if they disappeared?

Although the situation is improving, a 2010 report from the Higher Education Funding Council for England found that in the bottom fifth most-deprived areas, just 19 per cent of young people entered higher education. This suggests that in the poorest parts of the country, higher education has fairly shallow roots.

In April last year, Sir Martin Harris, director of the Office for Fair Access, in a report entitled What More Can be Done to Widen Access to Highly Selective Universities?, urged universities to seek out "young people of talent from poorer families with least experience of higher education" in Year 9 at the very latest, particularly through summer schools and other outreach programmes.

Schools in Southampton ranked in the bottom third by GCSE results told Times Higher Education that both universities are assiduous in their outreach activities, offering visits around campus and student mentors to promising pupils.

Some of the schools, however, fear that the end of the Aimhigher national outreach programme could mean the end for these activities. Reassuringly, Southampton says it will continue to fund all of this work.

Next year, the two universities are launching a project called Junior University, where about 100 undergraduates will be trained to mentor 300 Year 10 pupils who are either on the C/D or A/A* GCSE borderlines.

When it comes to attracting pupils from low-participation neighbourhoods, Southampton (5.3 per cent) scores significantly below the UK average of 10.3 per cent, while Southampton Solent (11.9 per cent) does better, according to 2009-10 figures from the Higher Education Statistics Agency.

As well as trying to inspire pupils from poorer areas to consider university study and help raise their attainment levels, universities can build fruitful relationships with deprived communities in other ways.

Paul Benneworth, senior researcher at the Center for Higher Education Policy Studies at the University of Twente in the Netherlands, has studied how 33 universities in Scotland and the North East and North West of England behave towards what he calls "excluded communities".

These areas, often in inner cities, are where people lack access to housing, transport, health services and other elements of the state system, and each problem can exacerbate others.

But even in these communities, universities can nurture good relationships, he says. They can open their sports facilities and campuses; provide non-accredited education; help drive urban regeneration by opening new campuses; and encourage students to act as reading buddies and classroom assistants.

This kind of engagement does not spring entirely out of the goodness of vice-chancellors' hearts. Students, particularly those studying medicine, social work or teaching, can get experience in the communities they will work with once they leave university, says Benneworth.

However, the universities Benneworth studied were nervous about having representatives from those communities on their boards, senates and courts, even though it made sense in many cases, he says. Only one of the 33 institutions surveyed did. In contrast, "businesses have very narrow private interests but they still contribute to universities" and have places on institutional boards, Benneworth found.

So do universities make much of a mark on those living in deprived communities? The AHRC's Rylance fears that their efforts do not always go far enough. "In terms of direct effect, I think there's a real challenge here because universities tend not to reach as far as they ought," he says.

Given the scale of change facing the higher education sector, and pronouncements from ministers that universities should be "allowed to fail", the idea of universities vanishing may feel a little close to the bone. But many analysts believe that outright closure would be too politically unpalatable for ministers to allow it to happen. And, of course, this scenario isn't restricted to cities. If a university were to disappear overnight, "it would also be a disaster in rural areas", Rylance points out.

Even the most hawkish commentators would rather see merger than closure. In a provocative 2009 report entitled Sink or Swim? Facing up to Failing Universities, the Conservative-favoured thinktank Policy Exchange said mergers would "almost certainly be the preferred option" for a struggling institution outside the university-crowded capital. But the report added that "there are many who would argue that the very notion of a university ever going under is an outrage that should not be discussed. We disagree."

If an institution begins to looks vulnerable, Newcastle's Goddard thinks that the links it has built up with its city will become crucial. He is therefore perturbed that nobody in government appears to be concerned about the academy's symbiotic entanglement with the city. "The Department for Business, Innovation and Skills is not interested in the geography of higher education. And the Department for Communities and Local Government is not interested in universities," he says.

Regional development agencies, scrapped by the coalition government last year, had both a social and economic remit and bankrolled several successful university mergers. In contrast, local authorities "have no funding streams to deal with the consequences" of needing to construct a university merger, Goddard says.

Hefce, however, is publishing a report on how universities should develop new collaborations, alliances and mergers in the new year.

When Chris Brink, the vice-chancellor of Newcastle University, gets in a cab, he conducts a small experiment. He tries to find out whether the driver has some idea of the good work a university is doing in the local area.

This test needs scaling up, according to the National Co-ordinating Centre for Public Engagement's Manners. The centre was set up in 2008 in recognition of a looming crisis in public trust and understanding of higher education. "Other sectors have got used to having to face a hostile press, a sceptical public and a squeeze on funding," Manners says. "Universities have been relatively immune until recently - but now the heat is very definitely on.

"We can't assume that people trust or value our work, or understand its relevance. The solution isn't to craft public relations messages or rely on figures of economic impact as a magic bullet. We need to get better at talking to people about our work, to take account of their perspectives, and to find ways to make our research and educational activities as relevant as possible to wider society, while holding on to the things we most value."

It is a simple idea - but it seems that the results of the "taxi-driver test" may take on a new significance in the coming years.