UK's clampdown on international students has exposed how much universities depend on foreign money

More of Britain’s universities feature among the world’s top-ranked than any other country outside the US. It should be worrying, then, that their funding model is in crisis. Prime Minister Keir Starmer’s Labour Party acknowledged as much in its recent campaign but stopped short of offering solutions.

Doing nothing isn’t an option. A report from the sector’s regulator earlier this year noted that 40% of England’s universities will operate at a deficit this academic year, with insolvencies likely for the first time. To compete in an increasingly competitive global market, some changes will be needed fast.

The financial crunch results partly from the previous government’s politically driven decision to reduce immigration figures by preventing most international graduate students from bringing family members with them, along with raising the salary threshold for work visas.


The “not welcome here” message worked. In the first quarter of this year, international student-visa applications dropped by 44%, with an 80% drop for dependents. That the change in demand also led to a funding crisis should not have come as a surprise. Many universities make a loss on domestic students but fill the gap with international ones, who generally pay more than double the tuition.

This has accustomed locals to getting a much cheaper education than they would otherwise. Fees for domestic students at English universities were capped at £9,000 ($11,554) in 2012 and have been held at £9,250 since 2017. Had those fees kept pace with inflation, they’d be set at more than £12,000 today. One study found that a 16% drop in international applications would cost the sector nearly £1 billion in revenue.

All this has compounded years of underfunding, including in much-needed infrastructure improvements. Given current budget constraints, and the desperate need for investment in education and training for the roughly half of Britons who don’t go to a university, it’s unrealistic to expect the taxpayer to make up these shortfalls entirely.

Relying too heavily on foreign students comes with market risks as well as political ones. But the government should be clear that being among the world’s top hosts for international students remains in Britain’s interests — not least through the substantial economic boost such students bring to the economy. They also are an important source of soft power, fostering academic, cultural and commercial ties that the country can’t afford to lose post-Brexit.

A combination of fixes is needed. Labour should allow tuition fees to be set realistically to cover basic costs and to rise with inflation while offering support for those least able to afford it. It should look for ways to ease visa restrictions while addressing potential abuses by conducting more audits, closing bogus programs, and requiring better data collection and reporting by universities to monitor compliance. It should also try to cut the costs and bureaucracy involved in obtaining visas for international faculty.

Ultimately, though, Britain’s universities will need to reckon with hard budget constraints and a changing market. Many will need to find new sources of income, build stronger ties with industry and partnerships with other institutions, and get savvier about alumni relations. But not all will prove viable. Some mergers or insolvencies may be inevitable, and indeed healthy if managed properly.

One thing should now be clear: Shortsighted policy will only make the necessary adjustments harder.