Trading Places

This morning, Onward publishes a new research paper, Trading places, which finds that UK universities have become “worryingly dependent” on student fees from overseas, especially from China, and ministers should take steps to increase their financial resilience.

Read the research here

The report reveals that since the mid-1990s, the number of overseas students has risen sevenfold while the number of places awarded to UK students has risen by just 50%. Over the same period, the number of full-time Chinese students studying in Britain increased 75 times over, from 1,510 to 115,435. In the last four years alone, the number of Chinese students domiciled in Britain increased by 36%.

As a result, UK universities now rely upon overseas students for £5.8 billion, of which £2.1 billion is estimated to be from Chinese-domiciled students. Last year, two-thirds of funding from Chinese students, around £1.4 billion, went to Russell Group universities, meaning the most prestigious and research-intensive universities are most exposed to the fall-off in demand from the coronavirus pandemic and geopolitical tension with the Chinese Government.

The report argues that the growth of overseas students has crowded out UK students from the most prestigious institutions and courses. The growth of international students at Oxford and Cambridge has been matched with a decline in the number of state school pupils winning places at these institutions. Between 2014/15 and 2018/19 the number of UK students fell at Oxford, Cambridge, Imperial, UCL, LSE, Bath and Manchester, and flatlined at KCL and Durham.

The concentration of Chinese students raises several concerns. First, it creates fragility from relying too much on a single country, especially given the Chinese Government has previously threatened to reduce the flow of students to Australia in response to concerns about state espionage. Second, because university research is funded through opaque cross-subsidies from overseas student income, this fragility threatens UK science at a time when it is needed most. Finally, there are well-founded concerns that the Chinese Communist Party (CCP) or organisations that it controls have sought – in some cases successfully – to undermine academic freedom and the integrity of scientific research on UK campuses.

To reduce these risks, the report recommends that ministers:

1. Introduce higher levels of funding for high value-added courses to encourage universities to take more domestic students in those subjects. This might see courses such as physical sciences, medicine, or engineering attracting higher levels of teaching grant, as proposed by the Augur Review. 
2. Make universities’ ability to increase overseas student places or charge top fees contingent on growing domestic numbers alongside. This would primarily affect the most prestigious universities and highest value courses, boosting opportunities for domestic students. 
3. Consider capping the proportion of income which a university can generate from a single country. Given the growth of foreign funding for research, such a cap could cover either only fee income, or also include corporate income. 
4. Force all universities to declare all non-UK research funding and contracts over £250,000 a year. This would mirror Section 117 of the US Higher Education Act which forces universities to declare all foreign funding.
5. Plug the £1 billion gap in research funding next year to protect UK science. Without direct funding, ministers will be unlikely to hit their target of 2.4% of GDP by 2027 and many institutions will cut back on vital research next year. 

Will Tanner, Director of Onward and author of the report, said:

“While overseas students generate valuable income and international focus on UK campuses, universities have become worryingly dependent on them for their finances, undermining their independence, credibility and long-term sustainability.” 

“Britain has never had a serious debate about the growth of overseas students. Yet the viability of the UK’s most prestigious universities – to say nothing of billions of pounds of science funding – is now decided not in Parliament but in countries thousands of miles away.”

“Even more worrying is that a third of overseas funding comes from China, a country whose government has shown itself unafraid of threatening to cut student flows in response to criticism and whose commercial partnerships with UK universities are increasingly under scrutiny.”

For media inquiries please email will.tanner@ukonward.com