The business world can’t afford for our universities to fail

If the number of lucrative international students falls by two-thirds, as is predicted, the Conservative government’s failure to stem that flow will stand as a senseless sabotaging of a rare UK export success story, says James Moore

Forty per cent of England’s universities are expected to run budget deficits this year

What’s the collective noun for English universities? A campus? A faculty? A high-table? I only ask, as we may be about to see an entire mortarboard of them go bankrupt.

This week, a new report by the sector’s regulator painted a grim picture, warning that higher education has become over-reliant on overseas students to fill an increasingly large hole created by a slowdown in the intake.

As a result, the Office for Students (OfS) has warned that 40 per cent of England’s universities are expected to run budget deficits this year – a figure that could rise to 80 per cent if, as forecast, the number of international students drops by two-thirds.

The report also recommended “significant changes” to the current funding model if one of the UK’s most successful export sectors is to have a bright future. Domestic undergraduates are currently capped by the government at £9,250, the average course cost for international students is estimated to be around £22,200 per year.

With unfortunate timing, a second report has thrown a spotlight on the supposed “misuse” of international student visas. In January, home secretary James Cleverly ended the “unreasonable practice” of foreign students bringing family members to the UK, as part of new visa curbs intended to cut migration numbers by tens of thousands. He later said that the student visa route may be “undermining the integrity and quality of the UK higher education” – and launched an inquiry.

That Home Office-commissioned report, published this week, found no widespread evidence that a post-study visa is being "widely abused" by international students – and that scrapping it would have a limited effect on reducing net migration.

According to the Migration Advisory Committee study, a “toxic” myth had emerged in recent years that wrongly suggested some institutions had discovered a lucrative loophole offering near-worthless degrees that appeal to an overseas intake that values not the academic qualification, but the two-year student visa permitting them to work legally in the UK for 20 hours a week during term time.

But after a third of higher-education institutions saw a decline in overseas, non-EU applications last year, the university sector now finds itself at a crossroads. Some have argued that the least viable should simply be allowed to go bust, despite the important role they play in many local communities and economies.

Which might almost sound reasonable given some of the pointless degrees on offer. Singled out was a media studies course at the University of Hull, which included a module on Disney – leading to it being crowned “the ultimate Mickey Mouse degree”.

However, here’s the key point: if the university sector is a bigger joke than the Goofy Christmas Movie, why have the bosses of global industry – including mining giants Rio Tinto and Anglo American, and the German tech conglomerate Siemens – written to Rishi Sunak to warn that his government’s antagonism towards the higher education sector is putting their investments here at risk?

Bosses at this trio of the bluest of blue-chip companies are “deeply concerned” by what the state of the UK’s university sector might mean for its ability to pump out the brightest and best graduates.

Their letter says government policy towards students from abroad could serve to squash the “positive impact that international students have on our skills base, future workforce, and international influence”.

They also raise the issue of the potential impact on the foreign direct investment the government likes to crow about, because it is indeed a handy thing to have, and the risk posed to collaborative research funding involving universities and private industry.

Nor is it just industry leaders who are concerned. The Russell Group of top UK universities is similarly vexed. It draws its members from big, research-focussed institutions – mnot the sort of places you typically find offering degrees in floral arrangement.

“It is no surprise to see the OfS [Office for Students] identifying increased pressure on university finances. Growing funding shortfalls for domestic teaching and research means cross-subsidy from other sources – primarily international student fees – has become increasingly important to the sector’s financial health,” the group said.

“Application data suggests that recent changes in government rhetoric and policy, including the ban on post-graduate students bringing dependents, are having a negative impact on international student numbers. Any further restrictions would significantly destabilise the sector and ultimately result in less spending in local communities, fewer opportunities for domestic students and less UK research.”

And what of that “toxic myth” that international students are using visa schemes as a some sort of back-door route to bypass normal immigration regulations? It simply isn’t true.

Yes, one university – London Metropolitan – was temporarily stripped of its foreign students licence in 2012, after the Home Office raised concerns about attendance levels at lectures, and that a “significant proportion” of enrolled students did not have sufficient English to pursue their courses.

My concern is more the survival of a viable business sector. I believe the global conglomorates are right to raise concerns, and not just because of the potential blow to a UK economy that needs all the help it can get. Shutting the door on overseas students will hurt British ones, too, by making higher education more expensive.

The OfS says financially stressed universities are making efforts to reduce costs, by pooling services, for example. But there are limits to how much can be achieved by cost-cutting. Needless to say, putting up student fees will not prove a popular policy.

If the government and its allies were really concerned about poor-value, Mickey Mouse degrees, they ought to focus their attention on the sector’s regulators and accreditation agencies. But this is not about facts or quality control in the higher education sector. It is about narrative and an attempt to act tough on immigration ahead of the general election.

In the process, Britain risks trashing a sector that it ought to be hailing as a source of strength and taking all the necessary steps to retain what is a highly advantageous, if not market-leading position.

Siemens, Anglo-American and Rio Tinto can each see this. That our witless politicians apparently cannot appears down to their having top-class honours degrees in either cynicism or stupidity. That some have double-firsts in both is really nothing to throw your mortarboard in the air and celebrate.