International students are a good thing. They contribute economically to the UK and to “levelling up” deprived regions of the country while studying here.
Those who stay on in the country contribute more to the public purse after graduating than they cost it. Those who leave the country boost the UK’s soft power. The fees they pay subsidise research and the teaching of home students.
These are convincing arguments, ones the sector has been right to make in response to the government’s efforts to cut the number of international students entering the UK, helping to ensure that the Migration Advisory Committee – thankfully – did not recommend to scrap the graduate route.
But, as my colleague Jonathan Thomas points out in a recent report, in conveying this message, the sector has sometimes appeared to brush over concerns that have been raised about the scale and speed of the expansion of student migration since 2019, labelling them “myths” or “assertions”.
While the sector’s defence of international students is warranted given their importance for the sector’s financial stability, the benefit to the UK, and the populist nature of some of the attacks on student migrants, there is also a risk that dismissing some of the criticism too readily could undermine the sector’s own case.
Rooted in fact
For instance, a briefing from the International Higher Education Commission (IHEC) in May this year made the case that universities’ reliance on international student fees does not reduce the places available for home students because the proportion of full-time first degree home students has remained flat since 2010.
But the briefing itself acknowledges that “the recent growth in overseas students has been overwhelmingly in post-graduate taught programmes” and the proportion of home students in the overall student body has declined from 80.6 per cent in 2017/18 to 76.2 per cent in 2021/22 due to this increase in international postgraduate taught students.
And while, positively, the overall number of home students has been growing, there are some specific examples of displacement at provider level. The University of Nottingham’s 2023 strategic review aims to “gradually increase the mix of international students as a proportion of total students” while keeping the total population constant.
This seems at odds with IHEC’s conclusion that “there is no evidence that universities are pursuing financial returns from international students to the disadvantage of UK students or stakeholders”.
Meanwhile, the sector acknowledges that international students are contributing to accommodation shortages. The number of new beds in purpose-built student accommodation has fallen from 32,000 a year in 2019/20 to just 8,760 in 2023/24. And the vast majority of this dwindling number of new beds has inevitably been built by the private sector – in the five years up to 2023/24, cash-strapped universities only contributed 15% of new beds.
The value of international students, both in soft power and monetary terms, is undoubted but in preserving this important lifeline it is important not to appear to brush over the costs and side effects of international students. Doing so harms, rather than helps, the sector’s case in the long run.
While the public have historically been supportive of student migration, polling conducted this year for UK in a Changing Europe suggests that recent inflows have undermined this support, with 71 per cent in favour of government limits on universities’ recruitment from abroad.
Reliant on international fee income
The critical role international fees play in cross-subsidising domestic teaching and research understandably lies at the heart of the sector’s case. The rapid growth of international student numbers has made UK universities heavily reliant, with fees growing from 17.6 per cent of total income in 2018/19 to 22.9 per cent in 2022/23, a trend that the Office for Students has identified as a key financial risk for the sector for two years running.
This leaves universities exposed to income volatility due to factors outside their control, such as immigration policy or fluctuations in the growth of overseas markets.
The growth in income from international student fees has largely come from taught postgraduate students, whose fees are only guaranteed for one year. In many ways, these are the antithesis of the picture painted by politicians when criticising migrant flows – they are highly educated, with high earning potential, able to make choices about where they want to settle in the world, and if they choose the UK for their postgraduate course, may also choose not to stay for long.
However providers’ international student populations are also increasingly drawn from a small number of countries, leaving universities’ financial position exposed to domestic developments within key countries of origin.
This year has seen a sharp decline in deposits placed with Enroly for students from Nigeria following the depreciation of the naira against the pound. And the recent growth in students from India, combined with stagnation in numbers from China, means students are now more likely to fund their studies through loans rather than family income and savings. This means that these flows are potentially volatile and due to circumstances outside of the UK’s control.
Yet in spite of the risks, the sector’s medium-term financial health is dependent on increasing this reliance. Forecasts submitted to the OfS project that the share of international fees in English universities’ income is due to increase from 23 per cent in 2022/23 to 28 per cent by 2026/27.
These forecasts depend on continued fast growth of international student numbers and rising course fees, assumptions that the OfS considers “significantly optimistic”. If faced with stagnation of international (and domestic) student numbers, 64% of providers would report deficits and 40% would report net liquidity of under 30 days. It is perhaps no wonder then that the danger of a higher education institution collapsing was a risk that Sue Gray, Keir Stamer’s Chief of Staff, placed high on the ‘shitlist’ of immediate challenges a Labour might government might face.
A new path forward?
The status quo is unsustainable, but cutting international student numbers with no regard for the wider consequences, as the current government has sought to do, would cause more harm than good. A more subtle approach is needed to prevent overexpansion of international student numbers while reducing the reliance on international fees and maintaining the UK’s attractiveness to international students.
What this might look like is set out in a briefing I wrote for the Social Market Foundation. First, temporary limits could be imposed on the rate of growth of international students in locations where housing shortages are identified. UK Visas and Immigration has until recently taken a fairly lax approach to student visa approvals, partially because it cannot verify universities’ infrastructure plans.
It should take a more strategic approach going forwards by using information provided by organisations reporting on the purpose built student accommodation market to identify accommodation shortages. Since the institutions cannot alone solve those shortages, the government should make it part of its industrial strategy for growth and its ambitious targets for housebuilding that these shortages are targeted and resolved.
Second, universities should be compensated for the loss of income from international students with an increased teaching grant tied to inflation to a level that covers the costs of teaching home students. Opponents of the sector would say the government has no money but Labour, most likely to end up in office, has been clear that it is in the business of pursuing growth and the investment in this area should be seen as a downpayment on the country’s future growth. And also as a way to stop Sue Gray’s fears of an institutional collapse from coming to life.
Third, the International Education Strategy should be updated to enable and encourage the diversification of international student nationalities and levels of study, so that we are not too dependent on particular markets. Finally, tweaking the student and graduate visa regime to allow applicants to spread the cost of application fees, which are much higher than in competitor countries, across multiple instalments could increase the UK’s attractiveness as a destination.
It’s true that international students bring many benefits to the UK. But being honest about their critical importance for the sector, diversifying the flows to mitigate risks, and addressing some of the pressures can help secure these benefits for the UK in a sustainable way for the future.
