Mixed reception

Student visas are to be the subject of an eight-week consultation, Theresa May, the home secretary, announced last month. The government's preferred option, it seems, is to crack down on the numbers coming from outside the European Union to UK colleges to take sub-degree level courses. It is unlikely to restrict entry for those studying for a degree.

But after the Comprehensive Spending Review, will young people from abroad still want to come here? And if they do, will our universities want them?

There is no telling how the proposed changes to our higher education system will affect the fate of foreign students, nor what possible impact that will have on UK institutions.

The government itself seems bullish and has on several occasions indicated that it wants to increase the number of foreign students.

David Willetts, the universities and science minister, told Times Higher Education in September that one aim of the Browne Review was to encourage institutions to adapt more effectively to the international market. In particular, he argued that the increased autonomy granted to universities by the reforms was "fundamental to their success and their attractiveness to both overseas students and academics".

According to the Higher Education Statistics Agency, in 2008-09 there were 251,310 students from outside the EU studying in the UK, and another 117,660 from EU member states.

In the same period, says the Organisation for Economic Cooperation and Development, UK institutions educated about 10 per cent of students who attended university outside their home country, with those from outside the EU bringing in £2.2 billion in course fees.

Foreign students are therefore big business for Britain. Alex Massey, research Fellow at the right-leaning think tank Policy Exchange, sees this trend strengthening.

"The UK is still the second-most attractive destination for international students in the world", behind only the US, he says, and "international demand will remain strong for those institutions that can offer attractive courses and demonstrate strong student outcomes".

Some senior figures in higher education have suggested in recent weeks that attracting more students from outside the EU could help plug the funding gap left after the non-research higher education budget for English universities is slashed from £7.1 billion to £4.2 billion by 2014-15. This will be crucial, especially in light of government indications that it may withhold some of the extra income from higher tuition fees.

According to data gathered by Mike Reddin, formerly an academic at the London School of Economics, who provides annual coverage of overseas student fees, non-EU undergraduates pay on average £10,463 a year for arts courses and £11,435 a year in the sciences. Meanwhile, universities receive £6,290 for each home and EU student in class-based subjects (£9,290 in lab-based courses) through fees and Higher Education Funding Council for England subsidies. But fees for overseas students can be far higher in some institutions. Foreign undergraduates studying lab-based subjects at Imperial College London, for example, face annual tuition fees of up to £26,250.

With fees for English students to be capped at £9,000 a year, foreign students will continue to represent an attractive income stream.

But while universities in a competitive market remain understandably vague about future pricing strategies, there seems to be a consensus that fee levels for foreign students are as high as they can go.

The LSE, for example, says that although a final decision will not be made until its exact level of government funding becomes clear, it has "no plans to increase the general level of fees for non-EU students".

Wendy Piatt, director general of the Russell Group of large research-intensive universities, believes that "it is too soon to predict how wider changes to higher education funding may affect overseas students". She acknowledges that "there is a fierce global market", but expects that Russell Group members "will continue...recruiting and providing the very best international students with a high-quality education".

Other observers, however, wonder if UK universities will remain as enamoured of foreign students as they are now. As domestic students bring in more revenue and the gap with international fees shrinks, the UK's academy may be less prepared to invest time and money in overseas recruitment. But even this does not automatically mean that foreign student numbers would drop.

Irene Ng, professor of marketing science at the University of Exeter and Fellow of the Advanced Institute of Management Research, predicts that increased competition among English universities could drive down prices for foreign students, which she agrees "are already set at the maximum rate the international market will bear".

If local and overseas fees were roughly equal, England could end up with an influx of foreign students - attracted by cheaper fees but bringing no substantial financial advantage to universities. Good news, then, for those who want to study here, but bad news for the bursars.

Prime Minister David Cameron evidently agrees with at least the first part of this assessment, since he touted reduced tuition fees for international students as one of the key benefits of the coalition's reforms during a recent trip to China.

Ng, however, urges caution, claiming that problems are already emerging around the employability and English-language abilities of international students. At the moment, she says, UK higher education has retained its reputation for excellence. However, if increased financial pressures prompt some unscrupulous providers to compromise either degree standards or course quality to attract higher-paying foreign students (even if the difference in fees is not as great as it is now), the academy's reputation may suffer, she believes.

As Martin Davidson, chief executive of the British Council, warned at an education conference in March, universities should not treat overseas students "like an industry where quantity matters more than quality. If we do, it will not be long before we find the value of what we have tried to exploit falling away."

To prevent such a scenario, Ng believes it may become necessary to increase the powers of the Quality Assurance Agency and compel the publication of employability statistics for overseas graduates. Increased transparency would enable potential students to avoid problem institutions, she says.

Ng also counsels a shift in the UK strategy for overseas recruitment, urging local universities to be more modest in their ambitions. Not only has competition from the US and Australia limited the level of fees, large endowments mean that the US Ivy League also has an inherent advantage when it comes to facilities, extracurricular activities and celebrity academics.

Trying to compete with them in these areas, rather than focusing on the strengths of the UK system, such as in-depth three-year degrees, would be a mistake, she argues. Just as much of the developed world has had to accept that it is relatively stronger in services and high-technology industries than manufacturing, so UK higher education institutions should bow to the inevitable and concentrate on what they do best.

But could the Browne Review result in a drop in the number of overseas students, rather than an influx? Sally Hunt, general secretary of the University and College Union, says that far from encouraging universities to adopt a more global outlook, the cuts will make it harder for them to recruit abroad. In particular, she warns that the reduced teaching budget at the heart of the coalition's plans "will have a huge impact on the UK brand and the proud reputation we have on the global stage".

Indeed, similar concerns were raised by Chinese students during Cameron's visit.

Hunt warns that the coalition's optimism about attracting more foreign students contradicts its stated desire to reduce immigration. She contends that the more restrictive visa policies announced by the coalition, which will include cuts in visas for students studying below the degree level, will make things harder for universities since "our efforts to be seen as an attractive option by students in many parts of the world are not helped by populist politicians banging on about immigration. The last thing we want to do is send a message that those students are not welcome here."

And of course, even increasing international students as a proportion of the undergraduates and postgraduates at UK institutions would do little to enhance the national skills base if strict visa controls meant that many were barred from settling in the UK after completing their education.

One radical outcome may be that the UK becomes a net exporter of students, rather than an importer. At the moment, the number of UK students studying abroad is tiny: for example, only 8,861 studied in the US in 2009-10, according to the Institute of International Education, compared with 31,342 Americans studying in the UK.

But there are signs that Britons' interest in a US education is increasing sharply, with 4,000 prospective students and parents attending the Fulbright Commission's college fair earlier this year, and several Ivy League institutions sending representatives to recruit in top UK schools. Even though the absolute numbers are still tiny, this trickle could become a flood if the price difference between a top UK and US education reduces significantly, or if the pressure on places here shuts out too many good students.

Closer to home, continental universities may begin to look more attractive, with fees significantly lower than in the UK (see box below). And although business secretary Vince Cable's suggestion in September that unemployed young Britons should be sent to India to seek work was greeted with derision, Britons with roots on the subcontinent may find it cheaper to be educated there than at home.

This, of course, could have mixed consequences: on the one hand, many of the UK's youngsters would broaden their horizons overseas, but on the other, some of our top students would leave the country, perhaps never to return. It is also unclear whether a significant rise in the number of young Britons studying overseas would change the overall balance of domestic-foreign students in the UK. This partially depends on visa restrictions.

But whether or not universities want - or manage - to increase the number of overseas students, they must bear in mind the fact that foreign fees will only ever offer a partial solution to their funding problems.

According to Hefce data for 2008-09, the English higher education system received more than two and a half times more revenue from the recurring teaching grant than from overseas students - £5.75 billion compared with £2.2 billion.

Even if universities do increase their proportion of overseas students significantly, it will take more than foreign students to plug the gap.