International student levy could lead to £1.8bn loss in first year, report warns

The Government’s proposed international student levy could mean a £1.8 billion loss to the economy in the first year alone, analysis has suggested.

A report by policy consultancy Public First has estimated nine out of 12 regions in the UK would face a wider loss of more than £100 million in the first year of a levy because of the likely loss in international students.

The impact would be largest in London, at £480 million, followed by Scotland (£197 million) and then the South East (£163 million).

The 10 parliamentary constituencies most affected by the proposed levy would lose an average of £40 million in gross value added (GVA), modelling suggests.

Holborn and St Pancras is estimated to face the biggest loss at £72 million, followed by the cities of London and Westminster (£57 million), and then Coventry South (£44 million).

Of the 50 most impacted constituencies, 37 are held by Labour, researchers said.

Mark Hilton, policy delivery director at Business LDN, said: “At a moment when the Government is rightly making growth its number one mission, a new higher education levy will hit one of our key export sectors to the tune of hundreds of millions of pounds.

“This levy would mean further cuts across universities in London and across the UK when they are already financially stretched, with world-leading research programmes a likely casualty.”

Earlier this week, Public First said 16,100 international students in the first year, and more than 77,000 in the first five years, could be deterred by a raise in university fees to cover the cost of levy contributions.

This could result in 33,000 fewer places in the first year of a levy for domestic students because of how international fees cross-subsidise domestic fees, findings suggest, growing to 135,000 across five years.

Henri Murison, chief executive of the Northern Powerhouse Partnership and chairman of the Growing Together Alliance, said: “The international student levy is opposed by all of England’s major regional employer organisations, from the west of England to Cambridge and the central south to the North West, because the resulting decline in international students would be hugely damaging to all the regions of the country.

“In the north alone, constituencies including Manchester Rusholme, Leeds Central, Sheffield Central and Newcastle upon Tyne Central and West would lose around or significantly more than £30 million of GVA apiece alongside seats in Scotland, the West Midlands and London.”

CBI Yorkshire and Humber regional director Beckie Hart said the impact of a levy would go “far beyond lost tuition fee income” as regions see a hit to the spending and tax contributions international students would have made in local businesses.

The impact of fewer international students could see the UK economy lose £2.2 billion in international fee income alone in the first five years, the report, which was commissioned by a consortium of universities, found.

Jonathan Simons, report author and partner at Public First, said the impact of a levy on international student numbers “will hit our universities, around 40% of whom are already in deficit, and that could lead to a further loss of jobs, a loss of university places for UK students and a loss of vital research investment.”

Vivienne Stern, chief executive of Universities UK, said the findings “raise further concern with possible proposals for an international student levy and show the multi-billion pound hit to the economy which could be felt as a result”.

“The report is also a reminder of the importance of international students to high streets, workplaces and campuses across the country,” she added.

The Government’s immigration white paper, published in May, said ministers would explore introducing a levy on higher education income from international students.

Current proposals are understood to be looking at a 6% levy on universities’ income on international students.

After the white paper was published, which also said the Government would reduce graduate visas to 18 months, sector leaders warned the plans could deter international students from coming to the UK and exacerbate financial challenges for universities.

A Government spokesperson said: “This Government is determined to ensure that investment in our higher education and skills system is more widely shared, and its contributions felt throughout our communities.

“We have taken tough but fair decisions to put universities on a secure financial footing through our plan for change, increasing tuition fees for the 2025/26 academic year in line with inflation and refocusing the Office for Students to monitor the financial health of the sector.

“We will fix the foundations of higher education to deliver change for students, restoring universities as engines of aspiration, opportunity and growth.”