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International students return net benefit of £2.3 billion to London universities

London has more top-ranked universities than any other city in the world, and it consequently is a magnet for international students. A new report produced by the UK-based business advocacy group London First and PwC, London Calling: International students’ contribution to Britain’s economic growth, has found that the tuition fees paid by international students (£1 billion per year, or about US$1.5 billion) represent 39% of the total fee income of London’s universities and return a net economic benefit of £2.3 billion (US$3.5 billion) to the UK economy.

These are only some of the striking findings from the London Calling report, which aims to quantify the economic costs and benefits of international students in London. The report reveals a sharp disconnect between the financial and other benefits generated by international students in London and the UK’s immigration policies, the latter which consider international students “immigrants” and thus included in targets to reduce net migration to the country.

The expressed aim of the report is to present hard data about the economic impact of international students in order to convince politicians and policymakers to abandon the classification of international students as immigrants. The report advocates instead that the government consider international students to be temporary visitors, the approach used in Canada and Australia. The rationale for this is explained in the report:

“They are here for a short time only and by choosing to study in the UK, they are contributing to jobs, growth and cultural understanding in this country. By classifying them as migrants and including them within the net migration target we are implying they are unwelcome.”

The feasibility of such a change – from immigrant to visitor – is underlined in the report’s citation of a 2014 poll conducted by the think tank British Future, that showed that only 22% of Britons think of international students as “immigrants.”

The report also recommends that British policymakers make it easier for international students to work after graduation.

London Calling is based on a survey conducted jointly by London First and PwC among current and former international students from roughly 70 countries, and it focuses on non-EU students only, since EU students are exempt from British immigration controls. These students were studying (or had studied, in the case of alumni) at ten of London’s 39 Higher Education Funding Council for England (HEFCE) universities. The report also draws on secondary data from Higher Education Statistics Agency (HESA).

Key findings

As of 2013/14, there were 67,405 non-EU international students studying in London’s universities (compared to 40,000 from the EU), representing over one-fifth (22%) of the international students in the UK as a whole. They make up 18% of the total university population in London universities, and as we have reported, the non-EU student group has been critical in helping to offset declines in domestic and EU enrolment in recent years.

London Calling finds that international students contribute a total of £2.8 billion per annum to UK Gross Domestic Product (GDP), broken down into tuition fees, living costs, and visitor spending (including by friends and family):

  • £1.32 billion as a result of the fees they pay;
  • £1.36 billion as a result of subsistence spending;
  • £121 million through visitor spending.

This spending supports 70,000 jobs in London. The costs of hosting London’s non-EU students are estimated at £540 million per year, while their net economic benefit to the city, and the country, is therefore calculated to be £2.3 billion.

A small proportion of international students (12%) remain in the UK to work after graduation, with 88% returning home directly after their studies. The vast majority of survey respondents said that they had trouble securing work after graduation, and many noted that employers had to jump through too many bureaucratic hoops in the process of sponsoring international students to come work at their companies.

This, the report argues, is a missed opportunity both for international students and the British economy, since 60% of respondents said they would be more likely to do business with the UK as a result of studying there. Three-quarters of respondents said they felt welcome while studying in London, but more than one-third of respondents said that Britain’s complex immigration system had negatively affected their study experience.

In a related finding from the British Future poll, 75% of Britons indicated they would be in favour of the government allowing international students to work in the UK for a period of time after graduation.

International students as immigrants?

Jo Valentine, Chief Executive of London First, argues that international education is a “modern-day export,” given the tuition international students pay and their other spending, not to mention the latent economic benefits they represent were they more able to work after graduation. And as mentioned, she recommends in the report that international students be considered temporary visitors rather than immigrants.

But in response to the report, Immigration Minister James Brokenshire has said:

“The independent Office for National Statistics (ONS) uses the United Nations definition of net migration – just like all of our international competitors – which includes students. And it is right to do so. All immigrants who are in the UK have an impact on our communities, on housing and on our public services. The latest ONS estimate shows that while 133,000 non-EU students came to Britain in the last year only around 48,000 left the country – a gap of 85,000.”

Mr Brokenshire voiced a strong commitment to “pursue further reforms to tackle abuse while continuing to attract the brightest and the best to our world-class universities.”

Critics of the government’s immigration policies, however, say that the government is not distinguishing between fraudulent students and genuine ones, and that this is jeopardising the country’s competitive position internationally. Nick Hillman, Director of the Higher Education Policy Institute, said last spring:

“It is notable that this latest crackdown has not been matched by a sensible liberalisation – like removing genuine students from the net migration target, which has been called for by half a dozen cross-party select committees.”

The government counters such positions with data showing the international student population is not decreasing in the UK. Minister Brokenshire noted in his reaction to the London Calling report that:

“The latest figures show this strategy [cracking down on fraud and at the same time working to attract top international students] is working – university applications from overseas students are up by 18% since 2010, with applications to our world-leading Russell Group institutions up 30%.”

But recent HESA data show a less bullish reality: enrolment by non-EU students increased by 3% in the 2013/14 academic year, but after having fallen the previous year for the first time in 29 years. To the news of the slight increase, Gordon Slaven, the British Council’s Director of Higher Education, said:

“While the UK sector can be pleased that the overall numbers have increased, our competitor countries such as the USA and Australia have shown much more significant increases.”

UK universities are ever more dependent on the tuition fees of non-EU students as domestic enrolments have declined in recent years from a high point in 2010/11. Coinciding with the introduction of new tuition fees and restrictions on accessing student loans for EU students, enrolments by EU students dropped by a dramatic 20% between 2011/12 and 2012/13 alone.

One finding from the report in particular bears repeating: the £1 billion of direct spending on tuition fees paid by international students represents 39% of the total fee income of London’s universities. This – along with the significant inputs international students contribute to the overall economy, plus the longer-term benefits of British partnerships with other countries and its own labour market requirements – adds urgency to the report’s call for evidence-based decision making.

“While politicians recognise the importance of international students, there has been considerable debate over the economic value,” said Julia Onslow-Cole, PwC’s Head of Global Immigration. “This is the first study to quantify the benefits of student migration. We need more hard data like this to inform immigration policies and targets.”

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