A Sharp Fall In Overseas Students Is Hitting University Finances, Accounts Show
6 min read
Some universities have seen income from overseas students drop by as much as £10m year-on-year as a result of a fall in applicants, PoliticsHome analysis of newly published accounts shows.
Other institutions have continued to see the number of overseas students enroll increase, but fall far short of targets set in budgets — meaning a negative impact on finances.
For several years, fees collected from international students were able to mitigate the impact of a real-term decrease in the value of domestic student fees for universities. Overseas students pay more to study in the UK than their domestic counterparts.
However, restrictions brought in by the previous Conservative government as part of a wider effort to reduce net migration have resulted in many universities reporting a drop in applications from abroad.
The Tory government led by Rishi Sunak banned most foreign students from bringing family members to the UK with them, something the sector said would deter overseas students from applying to study in Britain.
The changes came amid an already increasingly competitive landscape for international student recruitment.
Vivienne Stern, Chief Executive of Universities UK (UUK), told PoliticsHome the downward trend reflected in newly published accounts would become more severe in around 12 months.
“The very, very sharp downturn in enrolments will be the accounts that are published this time next year," she told PoliticsHome.
At the University of Portsmouth, accounts show that a reduction in international student recruitment was the main driver behind a fall of £9.4m in the institution's income. Overall income from full-time international students fell by more than £10m compared to the previous year, according to financial statements.
The university said the reduction was partially offset by higher cash balances during the year and higher interest rates than expected.
The University of Central Lancashire's (UCL) accounts showed that international student income had fallen by £1.7m (2 per cent) compared to the previous year.
UCL said that the fall was the product of “the uncertainty generated by the change in government policy surrounding visa arrangements for students and graduates”.
Overseas enrolments were down by approximately 35 per cent at the university when compared with the previous year.
The University of London in its 2023-24 accounts said that in a plausible worst-case scenario it would suffer a £2.4m income hit as a result of missing worldwide student numbers by 1,000.
At Loughborough University, which cited an increasing challenge in attracting international students, income from full-time international students fell by more than £8m year-on-year.
While not all universities are seeing a year-on-year drop in international student intakes, a shortfall between a target budgeted for and actual numbers has had an impact on finances.
The University of Sheffield said that itself and other institutions across the country “are having to put in place measures to mitigate the financial impact caused by a decline in international student numbers”.
The accounts noted that “difficult decisions” will need to be made to “address the challenges ahead”.
It is a similar story in the accounts newly published by the University of Sunderland. Its figures “reflect the start of the impact of the downturn in international student numbers”.
Sunderland's accounts show an underlying operating surplus of £7.7m lower compared to the previous year “against a backdrop of a less favourable level of income growth than that achieved in recent years, due to the decline in international student intakes”.
But the report also noted: “The impact of the decline in intakes was in the second half of the year and is reflected in the reduced income shown in 2023-24. A proportion of the associated fees would have been carried forward into, and reported in, 2024-25 and so part of the financial impact of the decline will also be felt in 2024-25 and beyond”.
The university said the impact on underlying operating expenditure had "been mitigated to a large extent as active expenditure control has been successfully exercised over the year in response to continued market challenges".
London's Queen Mary said recent policy changes around international students had become “the major financial risk facing Queen Mary”.
“[The] education sector has experienced a challenging climate for international students over the past 12 months, and this looks likely to continue into the next academic year and beyond."
Some universities saw growth from international fees increase year-on-year despite a decrease in numbers due to a rise in fees or the continued income seen from previous years.
UUK's Stern stressed that the restrictions came into force halfway through the accounting year, meaning that while universities “may in some cases have other intakes through the year, the biggest impact would fall in the financial year that we're now in”.
Stern said that it will be the 2024-25 accounts — set to be published towards the end of 2025 and the start of 2026 — that will more clearly show the impact of the changes to the dependent visa.
“The very, very sharp downturn in enrolments will be the accounts that are published this time next year."
However, she said it is hard to say there was no impact on the 2023-24 year because "during last autumn, the rhetoric around the government's planned policy changes was already starting to have an impact on demand [in the January intakes]".
Stern said universities "have seen this coming now" and have had a year to make "very significant cuts".
"The decrease in international income will show up in the next year's accounts, but then also all things going well you should also see all of that mitigating action which we hope will reduce the number of institutions that are reporting a deficit."
Restrictions on dependents were brought in by former Tory home secretary James Cleverly (Alamy)
Institutions have also warned that a fall in overseas applications will lead to even more “intense” competition between universities — both for international students and for domestic students to make up the shortfall in overseas applications.
This, higher education figures believe, will result in Russell Group universities taking steps like lowering grade requirements to attract students.
The University for the Creative Arts England's accounts showed that the proportion of fees collected from overseas students fell from 51 per cent to 36 per cent, while the proportion of foreign students at the university had dropped to 20 per cent from 33 per cent.
“Competition within the sector remains immense, and the university is working to ensure that it is recruiting from a diverse range of countries in order to reduce overreliance on any one market,” it said.
The university also pointed to a “knock-on effect on domestic recruitment, as competition grows to replace overseas students”.
Oxford Brookes University's accounts said: “Competition from the Russell Group for home undergraduates as they seek to offset the drop in international student numbers.”
The University of Brighton said “another hugely challenging year for the UK higher education sector" had been “further compounded by the change in government policy over-dependent visas, leading to a significant decrease of the international student intake in January”.
The same accounts showed that many universities are also struggling to afford the rising cost of contributing to staff pensions, PoliticsHome reported on Friday.
However, while there is concern for the future, some institutions like Buckinghamshire New University said that "the change of government led to a welcome change in rhetoric which has already had a positive influence on international student demand".
A Department for Education spokesperson told PoliticsHome: “We will create a secure future for our world-leading universities as engines of opportunity, growth and aspiration, which is why the Office for Students has rightly refocussed on monitoring financial sustainability.
“Whilst institutions are autonomous, this government has taken tough decisions to fix the foundations of higher education and deliver change for students.”
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