UK economy faces £2bn hit from weaker international student demand, study finds

12 Jan 17

Brexit and government plans to increase regulations faced by international students applying to UK universities could cost the country up to £2bn every year, the Higher Education Policy Institute has said.

This is the conclusion of research on the impact of Britain’s exit from the European Union on overseas student numbers in the UK, commissioned by the HEPI think-tank and Kaplan International, a for-profit higher education training provider.

The analysis, carried out by London Economics and published today, portrays a highly uncertain future for the sector, as the UK government pursues its policy of cutting net migration, and with the nation’s post-Brexit status being far from clear.

According to the UK Council for International Student Affairs, there were over 400,000 international students studying at UK higher education institutions in 2014-15, making up 19% of the total student population.

As the UK leaves the EU, the fees that higher education institutions charge international students from within the bloc are likely to increase bringing a £187m income boost the first year.

However, demand from EU students is likely to reduce. If their fees are brought into line with those charged to non-EU students, enrolments from EU countries are predicted to fall by around 30,000, or 57%, amounting to a loss of £40m in the first year.

Other factors, such as the depreciation of sterling, may offset these increased fees somewhat, but the research concludes that, taken together, factors point to a  reduction in the number of international students coming to the UK.

Not all institutions will be affected by the changes in the same way, the report predicts. More prestigious institutions, such as Oxford and Cambridge, stand to gain around £10m more in fee income each year on average. However, those that are less prestigious could lose around £100,000 annually.

Meanwhile, Home Office plans to make it harder for international students to come and study in the UK also pose a risk, as they could deter up to 20,000 extra students a year attracted by the depreciation of sterling and likely to offset the losses triggered by Brexit.

The report concludes that the total loss to the UK economy could amount to almost £2bn annually in steady state, made up from a drop in tuition fees income of £463m (accounting for a full-three year study period), non-tuition fee expenditure (£604m) and the detrimental impact on an institution’s supply chains (£928m).

Nick Hillman, director of the Higher Education Policy institute, claimed the research showed that British universities were in “choppy waters”, but much depended the government’s plans.

“Were the Home Office to conduct another crackdown on international students, then the UK could lose out on £2bn a year just when we need to show we are open for business like never before,” he said.

“Removing international students from the net migration target would be an easy, costless and swift way to signal a change in direction.

“Above all, it shows the hard facts mean any further crackdown on international students will not only damage our fantastic educational institutions but also the whole economy – and therefore the lives of those who voted Leave as well as those who voted Remain,” Hillman concluded.

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