UK universities, long dependent on international students for their inflated tuition fees, are now grappling with a potential financial crisis due to a significant decline in international enrolment. Experts warn that this downturn could lead to the unprecedented bankruptcy of some universities, marking a critical moment in the history of British higher education.

Decline in International Student Enrolment

The United Kingdom has been a leading destination for international students, drawing talent from across the globe, including a significant number from India. According to data from Universities UK, as of March 2024, there were 446,924 sponsored study visas and 139,175 graduate-route visas issued to international students. However, recent trends indicate a sharp decline in these numbers, a shift that many attribute to policies introduced under former Prime Minister Rishi Sunak’s administration.

This decline is particularly troubling for UK universities, which have increasingly relied on the higher tuition fees paid by international students to subsidize the education of domestic students. The decrease in enrolment not only threatens the financial stability of these institutions but also raises concerns about their ability to maintain the quality of education and research for which they are known.

Impact of Government Policies

The decline in international student numbers can be traced back to several factors, including increased tuition fees, rising living costs, and restrictive visa policies. These challenges have made the UK less attractive to prospective students, leading to a significant drop in applications. For instance, the UK’s Home Office reported receiving 28,200 applications for sponsored study visas in June, a nearly 28% decrease from the 38,900 applications received in June of the previous year.

Enroly, a service that assists international students with university enrolments, observed that key metrics for the January 2024 intake were down by about a third year-on-year. Overall deposit payments decreased by 34.95%, CAS (Confirmation of Acceptance for Studies) issuance dropped by 32.12%, and visa issuance fell by 33.11%. These figures highlight the broader trend of declining international student interest in UK institutions.

The situation is particularly dire for Indian students, who have historically been a significant demographic in UK universities. The percentage of CAS issuance for Indian candidates decreased by 32.55%. Even in November 2023, predictions indicated a substantial drop in the number of Indian students, with deposits down by 52% and CAS/visa issuance down by 66%. Additionally, the number of Indian applicants through UCAS decreased from 12,920 in 2023 to 12,750 in 2024.

Financial Consequences for Universities

The financial implications of this decline are profound. A report by PricewaterhouseCoopers and another by the Office for Students (OfS), the higher education regulator for the UK, have warned that 40% of England’s universities could face budget deficits this year. These concerns are supported by recent financial reports from institutions like the University of York, which noted a small deficit of less than 3% of overall turnover.

Vice-Chancellor of the University of York, Charlie Jeffery, highlighted the precarious situation many universities find themselves in. “It is only because of the international student fee income that we can afford to teach home students,” Jeffery stated. The loss of this critical revenue stream could force universities to introduce cost-containment measures, potentially compromising the quality of education and student experience.

The stagnation of tuition fees for domestic students is a key factor contributing to this financial strain. Tuition fees for domestic students have been capped at £9,250 ($11,925) since 2017, with only a £250 increase in the past 12 years. This has led universities to rely heavily on the higher fees charged to international students, which can be up to three times higher than those for domestic students. However, with the recent decline in international enrolment, this revenue stream is shrinking, exacerbating the financial difficulties faced by many institutions.

The Role of Inflation and Government Policies

Inflation has further compounded these challenges. The costs of running a university have risen significantly, while the real value of tuition fees has decreased. Lord Karan Bilimoria, a member of the House of Lords and an advocate for graduate visas, explained that the real value of undergraduate tuition fees, when adjusted for inflation, is now closer to £6,000. At the same time, the costs associated with running universities have continued to rise, squeezing institutions from both sides.

“The problem is that we have continually made damaging, retrograde steps to our universities, which has affected our universities’ ability to continue to be the best,” Bilimoria said. He emphasized that the combination of lower revenue and higher costs is creating a perfect storm for UK universities.

The decline in international student numbers is particularly troubling because these students have traditionally subsidized the cost of educating domestic students. As universities face the dual challenges of declining revenue from international students and rising operational costs, the threat of financial insolvency becomes more real.

Student Perspectives and Concerns

For prospective international students, the prospect of higher tuition fees is a significant concern. A 21-year-old student planning to apply for an MA in International Business at a UK university expressed dismay at the potential increase in costs. “I am already taking a huge loan, and I am sure that other aspirants are also doing the same, or some parents might be investing their life savings. To think that there can be an increase in the tuition fee is just appalling. It will become completely unaffordable for second and third world countries’ students in such a case,” the student said.

Despite these concerns, experts argue that the gap between domestic and international tuition fees is necessary to sustain the quality of education offered by UK universities. “While it is true that the cost of tuition for international students is nearly twice that of domestic students, the government has frozen the UG price and provides subsidies for a portion of it, but the true expense of offering a top-notch programme remains unpaid,” one expert noted. This discrepancy, they argue, is not hidden from students, as universities clearly display the different fee structures on their websites.

Future Outlook: Hope from the Labour Government?

As the UK grapples with these challenges, some are looking to the new Labour government for solutions. Learning from the damage caused by Rishi Sunak’s anti-immigration rhetoric, the Labour government has been sending more positive signals to international students. The outcome of the MAC review in May 2024, which supported the continuation of the graduate-route visa, has been particularly reassuring for universities and students alike.

Dan Herman, India country manager at the University of Manchester, noted that “the outcome of the MAC review in May 2024 supporting the continuation of a graduate-route visa was reassuring. Post-study work in the UK remains a viable option for Manchester graduates, who are popular with employers in the UK and around the world.”

However, some experts caution that a quick recovery is unlikely. The new government has inherited a range of fiscal challenges, and it may take time to see significant changes in the sector. At the University of York, for example, the administration is implementing measures to return to a surplus and ensure continued stability and resilience.

Conclusion

The decline in international student enrolment poses a significant threat to the financial stability of UK universities. As these institutions grapple with rising costs and shrinking revenue, the prospect of bankruptcy looms large for some. While there is hope that the new Labour government may bring more favorable policies for international students, it is clear that UK universities will need to navigate a difficult period in the coming years. The future of British higher education may well depend on their ability to adapt to these challenges and find new ways to sustain their operations.