The UK Government’s proposal to introduce a levy on higher education income from international students could have substantial economic repercussions, with analysis suggesting a potential £1.8 billion loss to the economy in the first year alone. This figure emerges from a report by policy consultancy Public First, which estimates that nine out of twelve UK regions would each face economic setbacks exceeding £100 million due to a drop in international student numbers. London stands to suffer the largest blow at £480 million, followed by Scotland and the South East, facing losses of £197 million and £163 million respectively.

The levy, currently proposed at around 6% of universities' income from international students, is anticipated not only to impact regional economies but also to have political ramifications. Modelled figures highlight that the ten parliamentary constituencies worst affected would lose an average of £40 million in gross value added (GVA), with Holborn and St Pancras facing the severest impact at £72 million. Notably, 37 of the 50 most affected constituencies are held by Labour, underscoring the political sensitivity of the levy’s consequences.

University funding is already under strain, with many institutions operating at a deficit, and this levy threatens to exacerbate financial challenges significantly. Mark Hilton, policy delivery director at Business LDN, warned that the levy could result in further cuts, particularly hitting world-leading research programmes. Such financial pressures could also reduce the number of places available for domestic students, as international fees cross-subsidise home tuition. Public First’s research suggests that 16,100 fewer international students could enrol in the first year, potentially leading to 33,000 fewer places for UK students initially and increasing to 135,000 fewer places over five years.

The report commissioned by a consortium of universities also outlines broader economic impacts, projecting a £2.2 billion loss in international fee income alone over five years. Beyond tuition fees, the presence of international students supports local businesses and tax revenues. Beckie Hart, CBI Yorkshire and Humber regional director, emphasised that the ripple effects would extend far beyond lost fee income, affecting spending in communities and local economies. This view is echoed by Henri Murison, chief executive of the Northern Powerhouse Partnership, who noted resistance to the levy among major regional employer organisations due to the damage it would inflict across the country’s regions.

The wider significance of international students to the UK economy is substantial. A report from Universities UK International (UUKi), in collaboration with the Higher Education Policy Institute (HEPI) and other partners, revealed that international students contributed £41.9 billion to the UK economy in the 2021/22 academic year—a 34% increase from 2018/19. This contribution includes tuition fees and expenditure on accommodation, living costs, and ancillary services, which collectively support a multitude of jobs and businesses across the UK.

The potential financial losses from the levy would thus represent a significant reversal in this economic contribution. Jonathan Simons, partner at Public First and the report's author, warned that cutting into international student income could lead to further job losses, diminished university places for domestic students, and cuts in vital research funding. Vivienne Stern, chief executive of Universities UK, highlighted that the findings raise serious concerns about the levy, underscoring the central role of international students in sustaining not only universities but also local high streets and workplaces.

In response to the critique, a Government spokesperson reiterated the intention behind the policy: to ensure investment in higher education and skills is more widely shared across communities. The Government maintains that its plan includes increasing tuition fees in line with inflation while reforming oversight to secure the financial health of the university sector. However, university leaders caution that this approach risks undermining growth at a time when the sector is already financially stretched, potentially jeopardising the UK’s competitive position in global higher education.

As the debate unfolds, the proposed international student levy stands as a contentious measure fraught with economic risk and political complexity, with sector leaders and regional stakeholders calling for careful reconsideration of its broader implications.

📌 Reference Map:

Source: Noah Wire Services