By Jasmine Norden,Lucinda Cameron,Peter A Walker

Copyright insider

The UK Government’s proposed international student levy could mean a £1.8bn loss to the economy in the first year alone.

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 £100m in the first year of a levy, due to the likely loss in international students.

The impact would be largest in London, at £480m, followed by Scotland (£197m) and then the south east of England (£163m).

The 10 parliamentary constituencies most affected by the proposed levy would lose an average of £40m in gross value added (GVA), modelling suggests. Of the 50 most impacted constituencies, 37 are held by Labour, researchers said.

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.

The impact of fewer international students could see the UK economy lose £2.2bn 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.”

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 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 UK Government spokesperson said: “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.”

Meanwhile, the University of Glasgow’s principal has said there needs to be a review to look at the “shape and size” of the sector in Scotland.

Professor Sir Anton Muscatelli said it is “imperative” the sector does not “stumble from year to year” and it is important to consider how it will be resourced.

Scotland’s universities are facing financial challenges which have led to strike action at some institutions and fears of job losses.

Dundee University is seeking to cut up to 300 full-time jobs as it addresses a £35m deficit, and the University of Edinburgh is looking to make £140m-worth of cuts.

Muscatelli retires this autumn after 16 years as principal of the university, where he is also vice-chancellor.

“It really is imperative that we don’t stumble from year to year, [but] think about how this is going to be shaped or resourced,“ he told The BBC. “We need a strategic plan as a country, which is why I suspect after 2026 there will need to be a look at the shape and size of the Scottish [university] sector.

“I hope this is done in a rational way, I strongly believe in a publicly-funded sector, I hope that can be achieved, but let’s start with the question: what sector does Scotland need?”

Business minister Richard Lochhead was questioned about university funding in an interview on BBC Radio Scotland on Thursday, and he said the Scottish Government is “very open to discussing with the sector future funding models”.

He was asked about a study by Professor David Bell of Stirling University, which found Scottish Government funding for university students had fallen 22% between 2019-20 and 2023-24.

With inflation pushing up the cost of educating students, Lochhead was asked whether the government needs to either match that or perhaps look at not funding all Scottish university students’ education.

“We’re very open to discussing with the sector future funding models, of course, there’s another budget coming up shortly in the Scottish Parliament, once we know what the UK Budget is in the next few weeks,“ stated Lochhead.

“But in terms of the pressures on our higher education sector, in particular if you look at the UK immigration policies – the immigration policies that they are broadcasting to the rest of the world are putting off international students coming to Scotland.

“That’s hugely damaging to our universities, overseas students are extremely valuable to our economy in Scotland.”

Lochhead said some UK Government policies, such as the rise in national insurance contributions, are making life difficult for Scottish universities.

“We as a Government in Scotland have to continue our conversations with the sector over our funding model,“ he added. “But of course, other policies from outside of Scotland are causing huge damage as well.”

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