It is difficult to ignore the intertwined nature of the commercialised UK higher education model and its reliance on international student fee income. One in four students enrolled in higher education courses in the UK in 2023-24 is of non-UK origin. This is an increase from just over one in five in 2019-20. A total of over £10 billion of universities’ student fee income is raised from non-UK students.

Recent reports that Sheffield Hallam University stymied an academic’s research as a result of pressure from China has thrust the influence that foreign nations may have on UK universities into the spotlight.

Sheffield Hallam has denied that commercial interests played a part in the decision. “For the avoidance of doubt, the decision was not based on commercial interests in China,” a university spokesperson said. “Regardless, China is not a significant international student market for the University.”

For many UK universities, though, international student fees are a vital part of their income. This has followed the reduction of government financial support for universities and successive steps towards marketisation of the higher education sector.

Marketisation means universities compete with each other to attract students, who pay fees for their education. However, fees in the UK are regulated (and Scottish and Welsh governments subsidise students from their respective juridictions) and often do not cover the total cost of teaching and administration of courses. Universities have responded by increasing recruitment of international students to plug the funding gap.

In a marketised model, international students are attractive as their fees are uncapped, meaning that institutions can charge much higher amounts for the same number of students.

Universities are also judged in rankings that include things like how international their student body is, and the ratio of staff to students. Recruiting more international students helps keep the ratio of staff to students lower because higher international student fees mean that fewer students are needed to fund a course.

In 2016-17, international student fee income made up 15.2% of an average institution’s total income. This has risen to 24.6% in 2022-23. This greater reliance on international student fee income as a percentage of overall revenues has been driven by several factors.

Data from the Higher Education Statistics Agency also shows how important individual regions are as part of the overall international student cohort. In 2023-24, the top two countries are India and China. India provided 107,480 students to the UK higher education sector, 25.1% of all international students. China contributed 98,400 students, 23.0% of international students.

Financial risk

The implications of such rises in the proportion of revenues being raised from international student fee income are vast. Most apparent is the increased risk that this exposes UK universities to in terms of volatility in international student numbers.

This is much more unpredictable than changes in government finance, which tend to be announced in advance. Simply put, fluctuations in international student numbers have a big effect on income. And this is a key factor in the current financial crisis in UK higher education.

Marketisation has been linked to cuts that universities are imposing on departments, closing courses and making significant redundancies. This is because greater volatility means that institutions are likely to seek to cut costs such as staff in response to lower revenues, as staff costs represent a large portion of the overall cost base for universities.

The Universities and Colleges Union estimates total job losses within the sector to be in the region of 15,000. Such widespread and rapid cuts are likely to have severe knock on effects for the UK economy as a whole and the universities sector. Industrial action is already affecting the delivery of courses, research activity, and key knowledge exchange and practical impact activities.

Current government policy implies a perseverance with the marketised model, although a proposed 6% levy on international student fees seeks to encourage institutions to pursue more diverse sources of revenue. However, this is unlikely to have any material effect on where institutions draw their students.

The Higher Education Policy Institute has suggested that such a levy could cost an already financially precarious sector in the region of £621 million. Universities may well react by increasing the volume of international students they take on board, as increasing domestic fees may deter home applicants.