Written evidence submitted by International Higher Education Commission (HEF0074)

 

Education Committee

Higher Education and Funding: Threat of Insolvency and International Students

About the IHEC

The International Higher Education Commission (IHEC) is an independent, cross-sector body established to develop a long-term strategic vision for the UK’s international education sector. Chaired by the Rt Hon Chris Skidmore OBE, the Commission brings together university leaders, business representatives, regional stakeholders, and student voices to ensure the UK remains a globally competitive and inclusive destination for international learners. This submission is informed by the Commission’s extensive engagement with higher education institutions, policymakers, and market intelligence providers. We offer this evidence in response to the Committee’s call to highlight the systemic financial risks linked to international student enrolment and propose strategic, actionable recommendations to improve the sector’s sustainability.

Introduction

IHEC has consistently argued – in its engagements with the sector and in media commentary – that international students must not be treated as “cash cows.” The prosperity of our education sector should never come at the expense of the student experience.

We were pleased to frame international education as a mutually beneficial exchange: ensuring international students have a positive experience is both an ethical imperative and critical for word-of-mouth advocacy. If international graduates leave the UK feeling well supported and valued, they become our greatest ambassadors, enhancing the country’s reputation and encouraging future students to follow in their footsteps.

By demonstrably prioritising student experience and success, we can dispel any notion that international students are merely here to finance the sector and instead affirm that they are valued members of our academic community with whom we seek a lasting, positive relationship.

Responding to the risk of insolvency in the HE Sector

a. Financial Fragility and Structural Dependency

UK higher education is structurally underfunded. Domestic undergraduate fees have lost around one-third of their real value since 2012. Most universities now face annual teaching deficits of £1,000–£2,500 per home student. Overseas fees are used to cover this shortfall and also subsidise research, which itself runs at a loss of around £4bn annually.

Non-EU fee income is projected to rise from £7.9bn in 2021 to £12bn by 2025, despite only a 35% increase in student numbers. This highlights rising price, subject-mix and volume. Any significant reversal in recruitment would create immediate cash flow challenges. For example, a 30% drop in a January intake at a mid-sized university could produce a £25m shortfall and without restricted reserves or borrowing headroom, the institution would breach banking covenants within six months.

b. Regional and Economic Consequences

International students support around 400,000 UK jobs and generate £37bn in gross value added. Institutions in the North-East, Yorkshire & Humber, and the West Midlands are particularly exposed. Institutional collapse would reverberate widely:

·       Stranded students and unfunded “teach‑out” elsewhere; 

·       Research contracts, NHS placements and SME knowledge‑exchange disrupted; 

·       Regional graduate retention and skills pipelines damaged; 

·       Pension scheme covenants weakened, raising costs for surviving institutions. 

c. Concentration Risk

In 2021/22 54% of non-UK enrolments came from just two countries: China and India, compared to 29% a decade earlier. Universities in the former polytechnic sector are also very exposed to Sub-Saharan Africa, particularly Nigeria which has been very volatile. Visa or geopolitical disruption in a few key source market will feed directly through to institutional balance‑sheets.

2. How recent policy has amplified financial risk 

  1. While not advocating a re-introduction of dependents’ visas for PGT entrants, the abrupt removal of this route has significantly affected recruitment to the UK, which needs to be recognised and managed.
     
  2. Repeated reviews of Graduate Route have increased uncertainty and the number of multi‑country and multi‑applications, as students hedge their bets. This makes institutional unreliable.

 

  1. The current system lacks fir-for-purpose data to support early intervention. HESA enrolment data is published with a two-year lag; the Graduate Outcomes Survey now captures just 18% of international alumni and Home Office visa data is neither granular nor shared.  Governors, regulators, and institutions are therefore unable to detect early warning signs. As the IHEC Data Matters report notes, “we are not only attempting to drive a car by looking in the rear-view mirror, but we have also lost the map, we don't have a designated driver the instrument panel is not fit for purpose – it is an analogue anachronism in a dynamic, digital age” 
     
  2. Study UK (the sector’s major marketing vehicle) has insufficient resources. In the absence of an effective joined‑up destination marketing campaign. We have seen major falls in overseas recruitment to many UK universities.
     
  3. It is likely that we will see the re-emergence of wide-spread industrial action by academic and professional services staff citing concerns related to pay, job security, and workload issues that will exacerbate the current localized disputes around the UK

3.  Insolvency regime – current gaps 

The Higher Education and Research Act 2017 created an insolvency framework modelled on further education special administration, but operational regulations, trigger criteria and funding for “teach‑out” have not been enacted so there is absence of the necessary legislative provision.

It is also a concern that regional contingency planning is absent.  There is no mechanism equivalent to NHS Trust “capability reviews” that would map downstream impacts – housing, NHS demand, local skills – and coordinate mitigations if a university fails. 

4. The Impact of International Students on Institutional Finances and the Economy

a. Direct Contributions

International students contribute nearly £13bn in tuition alone, accounting for around half of all fee income in England. They subsidise high-cost STEM subjects, research, widening participation, and core elements of the student experience.

b. Local Economic Impact

Off-campus expenditure by international students supports jobs, rental markets, and small businesses. Sudden withdrawal of these students can lead to acute economic consequences, such as housing market destabilisation and landlord mortgage defaults.

c. Reputational and Strategic Value

International students enhance the UK’s global soft power, future trade links, and research partnerships. However, if their experience is poor or their presence is perceived as exploitative, the UK’s international standing is jeopardised.

5. Principles for a sustainable solution 

IHEC’s final report *Resilience, Purpose and Precision* argues for a “living” International Higher Education Strategy, refreshed regularly, anchored around five mutually reinforcing pillars: competitiveness, diversity, employability, perception‑management and delivery excellence.  Translating those pillars into the Committee’s terms of reference suggests key organising principles:

The IHEC final report detailed how such a framework would be supported by a number of strategic pillars:

The benefit is that this modest investment will help the sector to “trade out of trouble” securing the continued economic contribution estimated to approach £300 billion per annum from the broader impact across Higher Education and which significantly impacts the economic, social and cultural capital of young people in cities and towns across the UK.

6. Recommendations to improve financial stability 

IHEC sets out four flagship recommendations that we offer up to the committee as practical, actionable and effective means to make a difference to the overseas recruitment success of the UK and in doing so to deliver the key requirement that the sector is enabled to trade out of trouble.  This will provide the necessary “breathing space” for a more sustainable basis of operation for UK Higher Education to be developed over the next 5 years.

i)                    Regional Champions for International Engagement

 

 

 

This responds directly to the objectives in the Devolution Bill and ties international recruitment and partnerships to regional development goals, aligning with the government’s broader agenda of sharing prosperity across the country.

 

Impact:

 

 

ii)                   Transnational Education (TNE) Academy

The UK has a global leadership position in TNE – it has more students studying on TNE programmes than any other country and a more extensive offer – by country, by programme and by type of TNE.  However, this is an area where Australia is upping its game and other major education nations are increasingly seeking to develop their offer, to the extent that previous education importers like Malaysia and China and now becoming TNE players.

UK institutions are more eagerly pursuing transnational education and some believe TNE expansion could help solve challenges facing the sector.  This is facilitated by changing market dynamics as the costs of studying in one of the 4 major English speaking destinations has increased significantly, in addition to barriers from the concerns about securing a visa and, post-covid, there has been a change in how students perceive TNE, with greater acceptance and increasing interest in regional higher education hubs and in-country provision.

However, currently there is a lack of coordination and shared learning in this area. There are no active groups for sharing intelligence or funding external expertise to help institutions improve TNE operations and in particular to develop robust business cases to ensure these developments do succeed and make money rather than proving to be a drain on the resources of the home campus as has proved to be the case in many past implementations

A TNE Academy would offer training, shared resources, and advisory services to institutions looking to expand abroad. This represents creative thinking not coming from any other quarter – it is independent and additive – and does not conflict with other sector efforts (such as shared services or “multiversity” collaborations being discussed by the UUK Transformation Group

A modest amount of government support or seed funding would make a big difference in launching the TNE Academy. And there is a precedent: the Department for Business and Trade grant to the Quality Assurance Agency (QAA) to help universities overcome regulatory barriers to establishing programs overseas. If the Department for Education were to endorse or partially fund a TNE Academy – perhaps on a time-limited basis – it would lend authority (a clear mandate) and some resources to convene the sector around transnational education.

Impact: Boosts UK global influence, diversifies revenue streams, and promotes innovative practices that can be imported into UK campuses

 

iii)                 Strategic UK Brand Awareness Campaign


Up to now, much of international student recruitment and TNE development has been driven by individual universities pursuing their own strategies. While institutional autonomy and competition can spark innovation, it has also led to fragmentation and short-term thinking across the sector. Without a unifying strategy, or means to implement it, universities often end up clustering in the same markets and neglecting collaboration.

Recognising that Study UK has a limited focus and limited resources, IHEC recommends significant additional investment in marketing, to exercise effective portfolio management, not as a simplistic allocation of monies to drive volume in ways that would exacerbate many of the current issues, indeed it might not seek to drive overall volume at all, but be employed as a strategic means to manage the portfolio – this would also provide a means to control the narrative so it is not at the mercy of statements made for different purposes in the mainstream media.  It would make it clear what sort of students we didn’t want, rebalance the portfolio in favour of UG students, support increased geographic diversity.  This would allow the UK to vault over the currently much more sophisticated Australian destination marketing campaigns.

To reiterate, this is not about indiscriminate growth, but about steering demand in beneficial ways – eg geographic and subject diversification, more undergraduate and high-talent students, etc.

There will be significant economic gains even if overseas numbers do not increase – for example attracting better quality students will increase retention; a move to more undergraduate students will reduce the Cost of Acquisition for universities, increasing profitability and reduce the number of visa’s issued (1 visa for 3 years of study as opposed to 3 visas for equivalent “student income” from 3 Master’s students); and it will help to deliver the challenging BCA metrics proposed in the Immigration White Paper.

A stable message that “students are welcome and our policies are sensible” would help.

Impact: Reduces overreliance on narrow markets, steers demand to underserved regions and subject areas, and combats misinformation.

 

iv)                 Rebuilding Public Confidence through Transparency and Positive Engagement and giving universities the tools to better manage their overseas recruitment

This proposal directly targets the crux of recent public discourse: the fear that international students are contributing to uncontrolled immigration. By proposing a technological fix (real-time monitoring) rather than harsher immigration rules, it offers a solution that can satisfy calls for “control” without sacrificing the benefits students bring.

IHEC recommends upgrading the UK’s capability to monitor student visa holders in a sensible, technology-driven way and highlight Australia’s PRISMS system as an example of how to do this effectively. Upgrading the e-visa system would help address political concerns about overstaying without resorting to blunt measures that affect all students. In fact, and we note that Yvette Cooper has signaled interest in an approach like this.

PRISMS is a concrete example of where this works – it has long allowed Australian authorities and institutions to track foreign student enrolments and compliance, helping maintain public confidence in their student visa program

Recognising that the above is a major undertaking, we recommend as an immediate action forming a public-private data working group under the Department for Education. This body would gather experts from government, universities, and companies who hold data on students (like Enroly, IDP, Studyportals, QS) to systematically share and analyse data on international students and programs. The aim would be to spot trends or issues early and inform policy or institutional responses.

An effective monitoring system would enable engagement with the Home Office to provide the confidence to keep the Graduate Route open or even expanded, because they can swiftly identify any abuse.

It is proposed that a working group is established to include representatives of all key departments (Home Office, Education, Business/Trade, Foreign Office, etc.) so it became a foundational piece of the “joined-up strategy” the government seeks.

We would suggest that the IES commit to quarterly public updates of student data to visibly demonstrate oversight and accountability.

This recommendation also links to the “Regional” agenda above, giving an unrivalled picture of “where students are going” geographically and academically – that can feed into policy formulation and dashboards to provide the transparency necessary to rebuild public confidence.

By having a collaborative forum for data, both the government and the sector would move from anecdote-driven decisions to evidence-based strategies and this would demonstrate to the public that universities and the Government are acting in concert based on data

The proposed Brand Awareness campaign would be linked to this – to demonstrate that there is a means to at least influence demand and the type of student choosing to come to the UK.

This not only helps make smarter policies but also builds trust – universities and officials working side by side on factual information will reduce misperceptions on all sides.

Impact: Enables evidence-based decision-making, maintains public trust, and supports stability of the Graduate Route.

 

7. Final Note

This submission aligns directly with the four pillars outlined in the Committee’s call for evidence. By focusing on policy predictability, diversification, data-driven governance, and regional coordination, these recommendations offer a roadmap from vulnerability to resilience.

 

September 2025