A slump in visa applications from overseas students is threatening to hit the finances of some universities in London and other parts of Britain, leading economists are warning.
The Institute for Fiscal Studies highlighted Home Office figures showing 17.1 per cent (25,200) fewer applications for visas to study in the UK in August than in the same month last year.
It stressed that this continues the trend seen over recent months, with 16.6 per cent (55,500) fewer total applications in the year to date, compared to at the same point last year.
Kate Ogden, senior research economist at the IFS, said: “The latest figures on student visa applications, down by one-sixth compared to last year, suggest that UK universities may no longer be able to rely on recruiting ever-increasing numbers of international students to make up for real-terms falls in the resources available for teaching domestic undergraduate students.
“Much of the sector is in reasonable financial health and should be able to adjust.
“But for some less-selective providers which rely heavily on international student fees and are facing greater competition for domestic students from more-selective competitors, the next academic year could be a difficult one.”
Most overseas students have been banned from bringing dependants since January as part of Government moves to reduce immigration.
Individuals exempt from this restriction include foreign students whose course is a full-time postgraduate level research degree, or if they are on a government-sponsored course.
The Home Office data showed there were 15,500 applications from dependants of students between January and August 2024, 83 per cent fewer than in the same period last year.
There were 278,700 applications from main applicants in January to August 2024, 17 per cent lower than compared to these months last year.
The Home Office stressed: “The number of sponsored applications to study in the UK tend to peak between July and September before the start of the academic year.
“It will be necessary to see the result of this peak in student applications in the Autumn before we can assess the full extent of any changes this year.”
But Dr Diana Beech, chief executive at London Higher which represents universities and colleges in the capital, warned: “Any further slowdown in international visas or other financial headwinds could have potentially significant economic costs.
“The picture in London is mixed, with some older, more established universities continuing to recruit well, but with other institutions having a tough recruitment cycle.”
She added: “Any significant drop in recruitment could push many vulnerable universities into serious financial difficulty.
“London institutions are talent pipelines for many vital industries, which support the whole UK economy, so the consequences of a London institution failing could be nationwide.”
The IFS explained that assuming September’s figures follow the pattern of recent months, it can be expected that there will be fewer international students enrolling in UK universities in the academic year that is about to start.
The highly-respected think tank stressed that universities in the UK had become increasingly reliant on international student fees to make up for falling funding for domestic undergraduate students.
Universities themselves have warned about the impact of fewer foreign students.
Nearly £11 billion, or around a fifth, of all UK universities’ income came from fees charged to international students from outside the EU, which are not subject to the same caps as fees charged to domestic undergraduates, the IFS stated.
It emphasised that the university sector “as a whole appears to be in reasonable financial health”.
While around one in five had a deficit in 2022/23, these tends to be “relatively small” compared to their net assets.
But it warned: “Recent UCAS data shows that less selective universities had received 19,200 (2.5 per cent) fewer applications from domestic students by the June deadline for the coming academic year, whereas applications to more selective providers held up much better.
“If these universities also find their international recruitment is more impacted by the curbs on dependent visas, they would face a bigger financial hit.”
There has also been a fall in the number of applications for care and health visas.
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