Sector snapshot: international student demand

CIL recently surveyed ~150 education agents to understand the outlook for international students in UK higher education. Overall sentiment remains positive, although UK government policy towards international students requires ongoing monitoring. This article explores six core trends in international student demand.

1. The number of non-EU students enrolled on undergraduate degree programmes at UK universities has experienced robust growth in recent years.
2. The outlook for international student enrolments in the UK continues to be positive, although a softening of demand is expected.
3. There have been a number of key drivers of international student demand for UK higher education, including the post-study work visa .
4. UK universities have experienced strong growth in international undergraduate students from newer source markets.
5. There is some uncertainty over China’s continued position as the most important source market.
6. Potential changes in UK government policy towards international students remain a key risk.

1. The number of non-EU students enrolled on undergraduate degree programmes at UK universities has experienced robust growth in recent years.
The number of non-EU international students enrolled on undergraduate degree programmes at universities in the UK has experienced robust growth of 8% per annum over the past few years, increasing from 174,000 in 2018/19 to 221,000 in 2021/22.

This has, in part, been driven by the reintroduction of the post-study work visa in 2019 as well as other competing Anglophone destination countries experiencing more restrictive COVID lockdown measures, such as Australia and New Zealand.

2. The outlook for international student enrolments in the UK continues to be positive, although a softening of demand is expected.
A survey of ~150 education agents and consultants conducted by CIL in January 2023 suggests that the outlook for international student enrolments in the UK remains positive, with most agents surveyed expecting the number of students they place into UK higher education to increase over the next three years.

Agents expecting increased enrolments cite the release of pent-up demand post-COVID-lockdown and the reopening of international transportation routes as important factors while highlighting the ongoing appeal of the UK as a key destination market for international students.

Although the outlook for the UK remains positive, a potential softening of demand is expected due to competing Anglophone markets rebounding, most notably Australia and New Zealand.

3. There have been several key drivers of international student demand for UK higher education, including the reintroduction of the post-study work visa
In 2019, Boris Johnson’s government announced the return of the post-study work visa (previously abolished in 2012), allowing graduates to work for a period of two years after completing their courses. This re-introduction further enhanced the attractiveness of the UK as a destination for higher education.

The prestige of UK universities continues to drive ongoing international student demand. The quality of higher education in the UK is perceived favourably, with our agent survey highlighting that the quality of university was the top selection criteria when placing international students abroad. The UK ranks second only to the US in terms of the number of universities in the top 200, with 58 US higher education institutions in the top 200 compared to the UK’s 28 institutions (based on 2023 Times Higher Education world rankings).

There is also growing demand from key source markets where the local supply of high-quality universities is limited. While these markets, such as China, are investing in improving the quality of higher education (the number of Chinese universities in the top 200 has risen from four in 2017 to 11 in 2023 according to the Times Higher Education rankings), evidence suggests that there still remains a supply/demand imbalance.

Finally, international student demand for UK higher education has benefited from currency fluctuations that have led to the UK being perceived as representing good value relative to other Anglophone markets.

4. UK universities have experienced strong growth in international undergraduate students from newer source markets
While China continues to be the key source market, UK universities have experienced strong growth in international students enrolling on undergraduate degree programmes coming from newer source countries, namely India, Pakistan, Nigeria and Kuwait. The availability of the post-study work visa has been a key ‘pull’ factor for students from these markets.

5. There is some uncertainty over China’s continuing position as the most important source market
Due to concerns about potential geopolitical risk there is some uncertainty over China’s continuing position as the key source market. Some UK universities indicate that they are taking active steps to reduce their reliance on China by targeting student recruitment in alternative source markets (partly explaining the growth in newer source markets seen above).

Recent data published by UCAS show that applications from Chinese students have fallen for the first time in over a decade, from 28,930 in 2022 to 27,710 in 2023 (4% decline). However, 2023 applications still remain higher than pre-pandemic levels (21,250 applications in 2020).

The long-run view highlights the scale of the ramp-up in Chinese student demand in recent years, leaving the sector more exposed to any such geopolitical risk.

6. Potential changes in UK government policy towards international students remain a key risk
The attractiveness of the UK as a destination for international students is susceptible to regulatory shifts. There have reportedly been some discussions in government circles around changes to post-study work rights in the UK, with a reduction from two years to as little as six months being considered. In contrast, Australia is extending its post-study work rights to four years for certain degrees.

However, with many UK universities heavily reliant on non-EU international student volumes for income (accounting for >30% of tuition fee income and 17% of UK universities’ overall income), any adverse changes in government policy here would result in many universities facing significant financial difficulties.

Potential opportunities for providers and investors

Our findings highlight the continued demand from international students for degree programmes at UK universities. This dynamic has created opportunities for private providers, many of which are backed by private equity, to partner with universities. For example:

• Partnering with universities to recruit and prepare international students for entry to undergraduate or postgraduate degree programmes, by way of a foundation or pathway programme.
• Offering online postgraduate degrees and other courses to access a wider learner pool, both in the UK and overseas. Here, many universities have opted to partner with an online programme management (OPM) provider to deliver these programmes online.
• Establishing branch campuses in new locations in the UK and overseas, to tap into new pools of learners. Again, some universities have opted to partner with higher education delivery partners.

The UK will continue to be an attractive destination for international students pursuing higher education. This ongoing mega trend will continue to create opportunities for universities and their partners alike, albeit UK government policy towards international students requires ongoing monitoring.

To find out more details on our latest research and sector credentials, please contact our Education and Training practice.