UK universities could lose £621mn a year due to a proposed 6% levy on income from international student tuition fees, according to a new report.
The measure, directed at funding domestic skills programmes, is raising concerns about the financial health and global competitiveness of the UK higher education sector.
The findings, according to the Financial Times, are based on analysis conducted by Mark Fothergill for the Higher Education Policy Institute (HEPI), an independent think-tank focused on higher education policy.
Major Institutions Most Affected
Reports cite that research-intensive universities are expected to bear the greatest impact of the levy due to their higher number of international students and higher tuition charges. University College London (UCL) is projected to face the largest annual cost of £42mn.
The University of Manchester could lose £27mn per year, while King’s College London would face a £22mn reduction.
The report estimates that while these larger institutions may be better positioned to absorb some losses due to their diversified income streams, the financial hit still represents a significant portion of their budgets.
For instance, the proposed levy would account for about 2% of UCL’s total income for 2023–24. By comparison, smaller institutions such as Hult International Business School, which are more reliant on tuition fees, would see the levy take up to 5.5% of their total income.
Concerns Over Competitiveness and Sector Sustainability
Times reports that the higher education sector has raised concerns that the proposed levy could damage the UK’s ability to attract international students.
“The market for international students is competitive, and a levy would hamper universities’ ability to compete with institutions in other countries,” said Mark Fothergill, the researcher behind the report.
“International students are the backbone of our higher education system,” he added. “They contribute over £10bn in fees to English universities — around £4.50 of every £10 of fee income. No wonder the 6 per cent levy is seen as a tax on one of the country’s best-performing sectors.”
The HEPI report also warned that universities attempting to absorb the financial burden could be forced to make cutbacks to teaching or research. Nick Hillman, director of HEPI, said university leaders were concerned that the levy “will be yet another weight dragging them down in the struggle to remain globally competitive.”
Sector-Wide Financial Pressure and International Perception
The British Academy, the national body for humanities and social sciences, recently cautioned that the levy could worsen the perception that the UK is unwelcoming to international students. This could negatively affect the government’s efforts to grow the economy and enhance the UK’s soft power.
“The levy is a shadow looming large over universities as they prepare for the next academic year,” said Hillman.
“Threatening an expensive new tax on one of the country’s most successful sectors, with only a rough idea of how the money will be used, seems far from ideal.”
The HEPI report also pointed out that passing the costs onto students could further weaken the UK’s competitive position. Domestic tuition fees are already set to rise from £9,250 to £9,535 in the 2025–26 academic year. International students typically pay significantly higher fees, making further increases potentially damaging to enrolment.
Government Plans and Sector Outlook
Reports reveal that the government has said it will fully consult on how the levy would be implemented. A white paper published in May also proposed reducing the time international students can work in the UK after graduation from two years to 18 months.
Financial pressures are already growing across the sector. The Office for Students, the higher education regulator in England, reported earlier this year that nearly half of higher education institutions are expecting a financial deficit in 2024–25. The proportion of providers forecasting a deficit rose from 29.6% to 45.2%, largely due to weaker-than-expected international student recruitment.
The final decision on the levy and its implementation is still pending.
