Regional economic growth to suffer from student visa reforms

Latest figures of 0.2 percent GDP growth show the UK's climb out of recession to be uncertain and sluggish. It seems that the Home Office could not have predicted worse timing for the release of a new Home Affairs Committee damning report on the consequences of the changes to student visas.

July 28, 2011 BY Awale Olad

It's official: these changes are set to cost the economy £3.4 billion; a disconcerting revelation for the embattled George Osborne who also has to monitor the Euro-crisis and the fiscal turmoil in Greece.

The over-arching message from Select Comittee report is that the government needs to seriously consider the growing challenges of the UK’s economy and the impact of restricting foreign students on income generated by research and innovation in higher education -  issues which it thinks have not yet been properly considered.

International students' contribution to the economy

The UK’s economy is bolstered by the funding stream of overseas students, an industry ‘worth up to £40 billion’ and provides a direct contribution of ‘up to £12.5 billion’ annually to revenue. There is no denying that the government faces some considerable challenges in reforming the current immigration system and trying to balance an economy in freefall. But major restrictions on foreign student visas announced earlier this year have created real panic across the education sector about loss of income. This week's report by the Select Committee suggests that economic contributions by foreign students will be cut drastically, producing widespread reductions in net income across the Treasury’s coffers.

These concerns are not new, but has the government taken them seriously yet? Back in March at a meeting of the All-Party Parliamentary Group on Migration (APPG) a group of MPs and experts warned that reforms of such magnitude will have a negative impact on Higher Education institutions and on wider economic growth. Following the meeting the chair of the APPG Jack Dromey MP, asked the Home Secretary whether the economic impacts of restricting international students would be considered – and received the response that the government had no intention of doing so.

It seems the dismissal of these concerns has now come back to haunt the government. In particular, the regional economic impacts of restrictions on international students look to be significant and could endanger government efforts to rebalance regional economies.

The effect of student visa reforms on regional economies

Unlike other core British industries such as manufacturing, IT and financial services, which tend to concentrate economic growth within particular regions, income from international students contributes to all the regions and devolved countries of the UK. Many FE and HE institutions provide wider employment opportunities, generate income for local industries and the private housing sector, and offer a wider boost to local economic dynamism within their region. Education providers in the UK argue that they are able to consolidate their role as hubs of innovation and economic regeneration by drawing upon international talent and revenue.

As such, regional economies are likely to be hit the hardest by restrictions on international students which are viewed as short-sighted and counter-productive. The Scottish Home Affairs Committee sees these changes as potentially deterring "genuine, high-calibre" students from applying to study in Scotland.

The failure to ask the government’s own immigration guru, the Migration Advisory Committee, to assess what damage will be dealt to the economy as a result of curbing overseas students, displays a disregard of what immigration experts have to say on the issue.

If it had done so, these issues and potential solutions could have been provided earlier in a cost-effective way, giving the government political ownership on the matter and better planning for impacts on national and regional economic growth. Sadly, however, this looks to have been a missed opportunity.