Written evidence by University of York (HEF0041)

Education Committee

Higher Education and Funding: Threat of Insolvency and International Students

Executive Summary

The University of York's response to the Education Select Committee highlights the multifaceted benefits of international students to the UK. International students are a significant, undervalued export sector, contributing over £20bn in direct export value (May 2025 data). This places higher education among the UK's largest export industries, comparable to the motor and pharmaceutical sectors, but currently receives considerably less government recognition and promotion.

Beyond export value, our submission emphasises the direct positive impact on domestic living standards. Research by Public First, commissioned by the University of York, indicates that every UK resident is, on average, £355 a year better off due to international students, and working adults benefit by £466 annually. These benefits are widespread, with some constituencies seeing an average gain of over £2000 per person.

We therefore caution against future policies that could introduce more instability into an already strained sector. This includes our early stage research that demonstrates that the proposed 6% levy on international student fees will further harm institutional finances and importantly negatively impact the wider economy. Our submission also elucidates the work the University of York is developing with Public First, with support from global education technology leader, QS Education, to examine the sustainable future of the UK university sector. This includes highlighting the foreseeable (but not yet nationally interrogated) issues that will arise from the projected increase in demand for skilled labor set against a known demographic decline in domestic 18-year-olds, alongside the impacts generative AI will have on the labour market that will profoundly reshape global and UK national labour markets.

All of this means that international students need to be considered in the context of a wider system level analysis that would answer the question:

‘what does the UK need from its HE sector to deliver its stated economic growth ambitions’.

Finally, we have set out our views on the responsibilities that universities must undertake to maintain social license, including supporting visa compliance, to ensure high-quality student environments, and facilitate access to higher education for disadvantaged British young people and adults. Our submission concludes by urging the committee to protect the role of international students as a valuable asset to the UK, acknowledging the public desire for reduced migration but emphasizing the significant economic and social downsides of ill-informed policy changes that will directly and tangibly harm the economic wellbeing of areas of the UK that are already seeing significant economic constriction. We would be delighted to discuss our findings with the Committee including having the VC, Professor Charlie Jeffery present our work to the Committee.

Introduction

1.       Thank you for the opportunity to respond to the committee’s one off "mini inquiry” into the threat of university insolvency and international students.

2.       This response from the University of York is focussed very specifically on the impact of international students - but looking at the wider benefits to the UK, economically and socially, rather than just benefit to universities which we expect will be well covered by other submissions.

3.       The evidence base for much of our argument comes from two pieces of work which the University commissioned earlier this year from research and strategy consultancy Public First. These reports - “Global Talent, Local Growth: The Export and Jobs Benefits of International Students”[1] and “Global Talent, Local Growth Part II: The Positive Impact of International Students on Domestic Living Standards”[2] - provide a data-driven analysis of how international students contribute to the UK’s economy and society.

4.       Crucially, the findings address two of the main public policy concerns around international students, which is that they may contribute to UKplc in the abstract, but that their role as a major UK export market is under valued, and secondly that international students’ impact extends far beyond the fees they pay to universities and in fact delivers broad domestic economic and social benefits.

5.       Our contention overall in this submission is that:

a.       International students are an export sector - one of the biggest export sectors for the UK - and insufficiently credited in Whitehall for that, certainly when set against other sectors of broadly comparable export value.

b.      International students also directly benefit - rather than harm - domestic industry and workers. One of the aspects often debated in political and policy discourse is that while international students contribute to UK GDP in the aggregate, they reduce GDP per capita. While this may be true, it is irrelevant to the real question, which is are domestic residents (working and non working ) better off or worse off because of international students. We show that domestic wages rise because of international students, and domestic income for non working residents also rises.

c.       The policy environment around international students has been hostile for some time - in reality, if not in rhetoric - and further destabilisation, especially through a proposed international student levy, threatens the benefits to exports and wages that our research identifies.

d.      Future labour market analysis suggests the need for a more active role around future size and shape of the UK higher education sector, when set against demographic changes, but this must always include international students for the benefit of UK plc.

e.       A period of stability with regard to international students does not mean that more should not be done by the higher education sector. Instead, we propose a series of actions that should be taken by universities to maintain social licence to operate and to continue to educate students from around the world.

6.       We cover each of these points in more detail below. We would be pleased to provide more evidence to the committee, or indeed for the University’s Vice Chancellor, Professor Charlie Jeffery, to be asked to give oral evidence on these points specifically.

Section 1: The value of higher education as an export market

7.       Higher education is a significant direct export for the UK. In May 2025, Public First calculated that the direct export value of higher education from international students was just over £20bn - something which has subsequently been confirmed by DfE’s own publication[3].

8.       The value of exports from higher education as an industry can be compared with our largest export sectors. The motor industry sector exports is the largest, at £31.7bn, with medical and pharmaceutical products exporting £24.7bn worth of goods. (All export figures are for 2022, in 2022 £s)[4]. These sectors receive considerably greater prominence and promotion by the UK government as an export market than higher education. It is also worth noting that these are gross export numbers. While (almost) all of higher education export value is domestically produced, a notable proportion of car exports in particular consist of components imported as part of global supply chains. The net impact of higher education as an export is therefore likely to be higher than for these other sectors.

9.       Secondly, Public First found that these benefits are widespread across the UK. Specifically, they calculate that in 26 constituencies in the country, higher education (and directly associated exports) is the single largest export sector in that constituency, and is in the top 3 in 102 constituencies. If this is again compared to car manufacturing, and pharmaceutical products, higher education is the most widespread top export, with car manufacturing being in the top 3 exports in 95 constituencies, and pharmaceuticals in the top 3 in 87[5].

10.   Higher education is insufficiently recognised as an export market within Westminster and Whitehall, certainly when compared to other major export industries. To give a few specific examples, universities were almost totally absent from the recent Industrial Strategy Green Paper, and belatedly recognised in the final Industrial Strategy document itself (including through citing the University of York / Public First figures covered above)[6]. The updated International Education Strategy promises a refreshed focus on the higher education market but may focus on number controls on international students coming into the UK, and substituting that for education delivered outside of the UK territorially. There are not regular Ministerial speeches or strategies or funding pots designed specifically to amplify the value of this export sector.

11.   All of this is indicative of a sector that is little recognised as an export sector- perhaps because it is an invisible export, perhaps because it is diffuse, perhaps because instinctively politicians and officials think of exports as things leaving the country whereas HE as an export involves people entering the country (the reason both are exports is that the definition of an export is something which results in foreign currency coming in to the UK in exchange for goods or services, which happens with international student fees). But as Jonathan Simons, Partner at Public First, said when publishing the report “in many towns around the country, higher education is the steel mill or the car plant or the pharmaceuticals factory.”[7]

12.   We would urge the committee to take note of this new research, and to recognise the wider benefit to UK plc of higher education as an export market.

Section 2: The domestic benefit of UK international students

13.   The evidence that international students contribute positively to UK GDP (technically GVA) in the aggregate is uncontested, even among those who argue for a reduction in international student numbers.[8] The second University of York / Public First piece of research therefore looked at the question as to whether international students raise or lower GDP per head for the existing population - as per the critique of some of those calling for lower international student numbers.[9]

14.   This work concluded that the issue under consideration is the effect of international students on living standards of those people who are already in the country. GDP per person does not do this, because it includes the students in both the numerator and the denominator. The research shows that it is entirely possible - indeed, quite likely - that international students both decrease GDP per head, and also raise living standards for domestic residents, due to increased expenditure from such students.

15.   The research concluded that in every single constituency in the UK, domestic living standards rise as a result of international students. It found that every UK resident person - man, woman, child; working, non-working and retired - is £355 a year better off on average as a result of international students, and secondly that every UK resident working adult - on a full time equivalent basis - is £466 a year better off on average as a result of international students (again, all in 2022 prices).[10]

16.   As with previous research on exports, the research showed that these benefits are widespread around the UK - concentrated in constituencies where universities are present, but also dissipating across multiple neighbouring constituencies as well. The research found that there are more than 20 constituencies where the average person is more than £2000 better off (whether working or non working), and more than 60 where they are over £1000 better off.[11]

17.   When looking at wage benefits directly - which flow to those in work - the research identified  the average wage value for the 100 constituencies with the highest impact to be £1,600, in 2021/22 numbers. Median weekly wage for a full time UK worker in May 2022 was £615. In other words, international students in 100 constituencies bring direct wage benefits which flow through to an FTE domestic worker as more than two and a half week’s worth of extra wages.[12]

18.   As subsequent sections of this submission make clear, the political contentiousness of international students remains very high, and there are debates about how to reduce overall numbers. While this would have an impact on university balance sheets, this research also shows that it would have a negative impact on every domestic resident - working and non-working. We urge the committee to take heed of the wider domestic economic benefits of international students identified in this research.

Section 3: The negative impact of a proposed possible levy on international student fees

19.   The Immigration White Paper proposed a potential 6% levy on the receipts from international student fees, with a vague commitment to have the receipts “be reinvested into the higher education and skills system.”[13]

20.   Given the significant and growing competition for international students including from markets beyond the “Big 4”[14], it is highly unlikely that the assumption within the White Paper, that such costs can be fully recovered by raising fees on international students, is plausible. Forthcoming work from the University of York and other institutions with Public First will provide authoritative estimates on the elasticity of demand for UK courses from international students (broken down by EU vs non EU students, undergraduate vs postgraduate provision, and elasticity of demand from students from a variety of different countries) and will show the likely deleterious impact on institutional finances. Given the extent of cross subsidy that international student fees already do in the system- as confirmed from TRAC data - it seems inevitable that any levy will lead to a reduction in cross subsidy, and a hampering of any institution’s financial viability. We will share drafts of such work with the committee when it is published.

Section 4: The future size and shape of the UK university sector, and the role of international students

21.   The current size and shape of the UK university sector is being driven by four forces - and the role of international students is underdeveloped as part of this.

22.   Firstly, all of the projections for the UK labour market for the next 20 years show a projected increase in the demand for skilled and / or graduate labour in the UK, due both to replacement of existing workers and expansion of graduate professions in both the public and private sector. Data from JISC, for example,[15] shows significant growth in the UK labour market projected demand between 2020-2035 in a range of occupations, some of which are non graduate - but the biggest net growth, are in roles requiring graduate level qualifications.  Labour market data also shows[16] that the UK already reports (longstanding) shortages against some of these areas (including in engineering, and health and social care). There are currently 37,000 vacancies in IT, 35,000 vacancies in financial services, 83,000 in professional services, 142,000 in health and social work, 53,000 in education, 37,000 in public administration, 18,000 in the arts - almost all of those jobs are graduate level. None of the rapid changes to the economy in the last 40 years: neither a shift from manufacturing to services, nor offshoring, nor globalisation, nor mass adoption of technology, nor global pandemics, have fundamentally affected this outlook of steadily increasing demand for highly qualified (graduate) labour to serve the UK economy. 

23.   Secondly, the Industrial Strategy shows a misalignment between where it forecasts additional skills will be needed, especially in the frontier subsections of the 8 key Industrial Strategy areas (henceforth the IS-8), and the number of students currently undertaking study in these areas. Forthcoming work from the University of York and Public First, supported by QS, shows the extent of this mismatch. For example, we estimate significant projected increases in demand for all types of engineering to meet the identified growth in Advanced Manufacturing including identified frontier subsectors such as advanced materials, aerospace, battery manufacturing and space. We identify courses (at CAH3 level) to meet this need will include mechanical engineering, aeronautical and aerospace engineering, production and manufacturing, mathematics, chemical engineering, computer science, physics, and chemistry. Yet the sum total of all engineering students in identified CAH3 courses is fewer than 140,000, with a further 36,000 in maths and around 22,000 in each of physics and chemistry. This compares, for example, to 145,000 students in law, and over 300,000 in some form of business and management[17].

24.   Yet at the same time, thirdly, demographic shifts in the number of 18 year olds mean that the overall supply of UK home undergraduates (and then graduates) is not static - and indeed is forecast to decline in coming years. Projections from HEPI show a potential drop of around 7% in home undergraduate students between 2030 and 2035, with an even steeper decline of up to 20% anticipated by 2040[18] (though set against this however, is a continued rise in demand of older adults. A variety of data adults already in the labour market who may require retraining.sources suggest something between 25% and 90% of the current labour market will need to upskill or retrain at some point in their career, likely to be exacerbated by the rise of generative AI and wider technology adoptions and advancements).[19]

25.   And fourthly, well known financial constraints on the university sector, which we do not summarise here, are also resulting in a significant amount of course closure and other means of subject rationalisation as a way of reducing costs[20]. Yet because each university is undertaking these actions independently, there are many well known instances where neighbouring institutions are making similar changes - meaning an aggregate loss of supply in some areas greater than is needed to reduce excess aggregate supply over aggregate demand[21]. This is both inefficient, and may well result in overall closure (or loss of access to) certain key subject areas for undergraduate study regionally or even nationally.

26.   Taken together, these four forces are leading to a UK university sector which is engaged in financial “right sizing” due to both financial constraints and forthcoming demographic dips of home students, and which is not able to supply high level graduate skills for current aggregate demand at present, let alone the frontier subsectors which the IS-8 will require in the next 10-15 years.

27.   Part of the answer can and should be a sector which remains open to international talent to meet needs both of future academia in these areas, but also to supply the UK labour market. But the UK does not operate in a contained system when it comes to recruiting international students. Data including from QS “Destination UK” suggests that students are very mobile, and prioritise not just a high quality education but also costs, and their ability to stay and work post graduation[22]. They are often indifferent between multiple markets for their study. Domestic circumstances, such as currency fluctuations, can also make a significant difference to international student flows. While the UK remains a top tier destination, it cannot be assumed that this will always remain the case, particularly as “exporting countries” may make changes to keep a higher proportion of those students[23].

28.   We would urge the committee to draw attention to the links between these areas: the need for strategic alignment of the UK university sector in the context of financial retrenchment and demographic changes; the advantages of international students to meet UK labour market needs; and the increasing competitiveness for such students. In this context, discussions about future international flows of international students are not simply limited to questions of individual institutional finance, but relate to wider government goals around industrial growth and regional development - and nor can we assume that demand for places from international students will always match what we deign to supply.

Section 5: Actions that UK universities must take around international students

29.   If universities want to be part of a system in which we can continue to recruit international students - notwithstanding the wider benefits to the UK economically and socially - we need to accept a responsibility for addressing the perceived - and real - costs of such provision. For too long, too much of the sector has presented international growth as an unalloyed good, and been comfortable with too many negative externalities.

30.   From the perspective of the University of York, universities need to participate in - and ideally lead - a programme of reform which justifies the social licence of our institutions to continue to recruit such students.

31.   We urge the committee to make a case for universities having both rights and responsibilities when it comes to international students. As such, we present the following to the committee as areas of greater focus and responsibility for the sector.

32.   Firstly, universities must play a full and active role in supporting legitimate efforts by the UK government, through the Home Office and UKVI, to maintain overall standards when it comes to visa issuance. The Immigration White Paper makes a number of sensible suggestions around ensuring a higher level of Basic Compliance Assessment for visas to 95%, for example. We must maintain the highest standards of English proficiency testing for all students who wish to come here. We must only use agents that are reputable, and should be transparent about their fees and our arrangements with them. We must ensure that a Graduate Route visa leads to graduate work (while resisting efforts to shorten its duration). And when students’ visas expire (whether study visas or Graduate Routes), they must either change visas, or return to their home country, and we should play our part in ensuring compliance and record keeping. York is committed to maintaining the highest standards in international student recruitment and has implemented credibility interviews since 2023 in alignment with identified UKVI best practices. York has also been one of the universities that has called for the restoration of visa exit checking to provide more robust data to further demonstrate the high level of compliance of international students to visa rules.

33.   When students are here, we should maintain a high quality environment for them. We should be more concerned about expansion of international (and indeed domestic) places when housing supply does not grow in parallel. We might consider whether expansion of international places beyond a certain level might be contingent on demonstrating housing sufficiency, for example. We must collectively maintain a greater understanding of where the international students who have come here to study are, and that they are indeed studying - while recognising the need of many to also work part time while here (and we must be honest about the costs of studying and living in the UK). We should support and promote UK norms and UK law to all our students from wherever they come  - and provide freedom of speech for all international students, and resist efforts by some international students to constrain the rights of speech and assembly of other international students while also protecting minority rights and minority student groups. The University of York’s Dignity and Respect policies, our widely publicised report and support pathways to enable students to raise issues in safety and our extensive collaborative work with our Student Union, and our College student committees enable us to continuously foster an environment where students feel empowered, protected and supported. This has also included campus wide listening exercises co-curated with our students to enable us to understand and communicate the nuance and complexity of these issues.

34.   We must also redouble our efforts to open up pathways to learning, including university, for British young people and adults in our most disadvantaged areas. We should take seriously the government's desire to have more adults retrained, and the forthcoming Lifelong Learning Entitlement to fund this. We should take action to address the wide discrepancies in 18 year old participation from different regions of the country, and ensure that we are not simply finding it easier to fill our places with international students. The University of York has raised over £5m in philanthropic funding over the past 3 years - most from local and regional donors - to establish four community learning centres, working with a charity called IntoUniversity and the University of Hull. Those centres in Marfleet, Grimsby, Bridlington and Westfield in York are designed to be whole family engagement and learning centres in areas where there is an extremely low participation rate in higher education and with serious deprivation indices. IntoUniversity has an astonishing track record in increasing attainment and aspiration across the UK in areas of participation in HE moving from rates of less than 10% to more than 40%. York remains committed to its founding principles of ensuring that anyone who can benefit from a York education should be able to do so regardless of background, belief or economic circumstances. Our extensive access programmes are designed to engage young people and their families in believing that they can and should aspire to optimising their educational opportunities. We have now launched our University of Opportunity philanthropy programme to ensure that not only can we support more students from non traditional backgrounds to ‘get into university’ but that they can also succeed when they are here as a student - that means finding financial support to enable students to engage in the many life affirming extra-curricular and employability training programmes that are available and to ensure that they are active members of our recently launched York for Life digital community networking our global alumni community of 178,000 in 180 countries. A platform that offers mentoring, educational products and services and networking opportunities long after they leave York.

35.   The second example is our annual Festival of Ideas, a fortnight of more than 200 free events in York bringing together experts to discuss the pressing issues of the day. The key ethos of the festival is to ensure that we can demonstrate the relevance, impact and accessibility of education, research and ideas to audiences drawn from diverse backgrounds. In 2025, one of those events was an online reading by children’s author Michael Morpurgo. 19,000 primary schoolchildren from Aberdeen to Isle of Wight logged on, most having, through Michael and the Festival, their first encounter with a University.

Conclusion

36.   The British public is clear that it wishes to see migration numbers to this country fall. That is their right - and it is legitimate for the Government to respond to that clearly expressed desire. Students make up 48% of entry visas to the UK in the latest Home Office data[24] and it is right that they are part of a discussion on overall UK migration numbers.

37.   But this submission makes clear that the downsides of precipitate or ill-informed action on international students are not just to the viability of some HE provision; but have wider consequences to the UK economically and socially, as well as cutting against wider Government priorities on industrial growth and regional development.

38.   We urge the committee to take full account of the competing priorities, and to protect the role of international students as an asset to this country, which many other countries would dearly love to have, and are actively raising their game to compete with the UK on[25].

Executive Summary

The University of York's response to the Education Select Committee highlights the multifaceted benefits of international students to the UK. International students are a significant, undervalued export sector, contributing over £20bn in direct export value (May 2025 data). This places higher education among the UK's largest export industries, comparable to the motor and pharmaceutical sectors, but currently receives considerably less government recognition and promotion.

Beyond export value, our submission emphasises the direct positive impact on domestic living standards. Research by Public First, commissioned by the University of York, indicates that every UK resident is, on average, £355 a year better off due to international students, and working adults benefit by £466 annually. These benefits are widespread, with some constituencies seeing an average gain of over £2000 per person.

We therefore caution against future policies that could introduce more instability into an already strained sector. This includes our early stage research that demonstrates that the proposed 6% levy on international student fees will further harm institutional finances and importantly negatively impact the wider economy. Our submission also elucidates the work the University of York is developing with Public First, with support from global education technology leader, QS Education, to examine the sustainable future of the UK university sector. This includes highlighting the foreseeable (but not yet nationally interrogated) issues that will arise from the projected increase in demand for skilled labor set against a known demographic decline in domestic 18-year-olds, alongside the impacts generative AI will have on the labour market that will profoundly reshape global and UK national labour markets.

All of this means that international students need to be considered in the context of a wider system level analysis that would answer the question:

‘what does the UK need from its HE sector to deliver its stated economic growth ambitions’.

Finally, we have set out our views on the responsibilities that universities must undertake to maintain social license, including supporting visa compliance, to ensure high-quality student environments, and facilitate access to higher education for disadvantaged British young people and adults. Our submission concludes by urging the committee to protect the role of international students as a valuable asset to the UK, acknowledging the public desire for reduced migration but emphasizing the significant economic and social downsides of ill-informed policy changes that will directly and tangibly harm the economic wellbeing of areas of the UK that are already seeing significant economic constriction. We would be delighted to discuss our findings with the Committee including having the VC, Professor Charlie Jeffery present our work to the Committee.

September 2025

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