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The Economic Costs and Benefits of International Students
Phil Vickers and Bahram Bekhradnia

Higher Education Policy Institute July 2007

Introduction
1. During the second half of the last century, and continuing this, there has been a steady upward trend in the numbers of international students – from the EU and beyond - studying in UK HEIs. This report examines the economic benefit the UK receives from the presence of these international students and in the case of EU students compares these benefits with the substantial subsidy they receive from the UK 1 taxpayer . 2. The full benefits these students bring to the UK economy (and society in general) are impossible to quantify, and some (for example cultural) have no readily measurable economic value. There is already a body of literature examining the theoretical effects that international students have on the host country, and this report does not seek to add to this, nor to provide a full economic analysis. Rather, it seeks to identify the main costs and benefits, and to estimate their orders of magnitude, in order to arrive at some policy conclusions. The best recognised of the economic effects is the impact of international students’ spending on tuition fees and living costs. Also, since several thousand remain in the UK each year to work, having graduated from a UK HEI, the report also quantifies the impact that this has on the UK economy. 3. This section of the report briefly outlines the number of international students in the UK, other relevant background factors, and how these have changed in recent years, and then gives a brief overview of some of the issues relating to the examination of the economic impact of international students. The second section quantifies the direct effects 2 of expenditure on tuition fees and other living costs . The third section examines the possible effects of international students remaining in the UK to work following graduation. The final section assesses the policy implications of the conclusions of the report. 4. In the early 1990s Greenaway and Tuck investigated the magnitude of the injection into the economy resulting from the presence of international students by examining the amount of money entering the UK to pay for tuition fees and other expenditure. 5. In 1992 – the year on which Greenaway and Tuck’s analysis was based – there were 95,900 full time international students in UK HEIs. That number increased steadily to 240,390 in 2004-05 (318,400 including part-time students). Of these, 100,005 were from EU countries, whilst the remaining 218,395 were from countries outside the EU. Table 1 below

1

Some non-EU students also receive UK government grants to study in the UK, but this to a small minority. 2 This section serves as an update to a similar study: David Greenaway and Jacqueline Tuck, Economic Impact of International Students in UK Higher Education.

shows the breakdown of these two groups into undergraduate and postgraduate, and into full time and part time students. Table 1: Summary of international (including EU) students present in UK universities in 2004-05 EU: Full Time: Undergraduate: Postgraduate: Part Time: Undergraduate: Postgraduate: Total: 9210 18205 100005 16320 34375 218395 Source: HESA 44980 27610 82095 85605 non-EU:

6. The UK’s international market share of international students stood at around 11 per cent in 2004, having reduced from 16 per cent or so in 1998. In terms of market share the UK remains second to the USA (which has also lost market share, but which still dominates the market with a share of over 20 per cent). Despite this reduction in market share, the number of international students globally has been increasing to such an extent that the number of such students in this country has grown rapidly, as is shown in Figure 2 below. Figure 2: Growth in international student numbers

International students in UK universities, 1995-2005 350000 300000 250000 200000 150000...
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