Fear for funds if foreign intake falls

A downturn in the volatile international student recruitment market is more likely to plunge institutions into the red than a bad result in the research assessment exercise, a report warns.

Institutions earn more in fees from non-European Union overseas students than they receive in RAE-related cash, the report says.

This leaves universities exposed because overseas recruitment can be more unpredictable than RAE results, according to the paper by the Higher Education Policy Institute.

It warns: "Of all the income streams of English institutions, international student fees are surrounded by the greatest uncertainty. Given that universities continue to run very close to break-even levels, a heavy dependence on international student fees is potentially a risk factor."

The paper shows that English institutions on average earned more in 2003-04 from overseas student fees than they received in research income from the Higher Education Funding Council for England. Fees totalling £1.12 billion amounted to 8.1 per cent of institutions' income. RAE-related earnings accounted for 7.5 per cent.

A dramatic rise in the number of overseas students coming to the UK between 1999-2000 and 2003-04 prompted some "very ambitious" expectations of continued growth, with English institutions forecasting that enrolments would increase by another 7.7 per cent in 2004-05.

But the latest figures from the Universities and Colleges Admissions Service indicate that the number of international students coming to the UK may be beginning to fall.

A "worst-case scenario" analysis by Hepi shows that most institutions where international student fees represent more than 12 per cent of income would have their surpluses wiped out if there were a 25 per cent fall in revenue from the overseas market.

Topping the table of institutions with high income from overseas students are the London School of Economics (where overseas fees account for a third of income), the School of Oriental and African Studies (31.9 per cent), and London Business School (19.3 per cent).

But the report adds that institutions that are not part of this "atypical"

London group are the most vulnerable. These include Essex, Luton, City and Westminster universities and the Royal Academy of Music. Fees in 2003-04 ranged from £5,352 a year at Luton University to more than £26,000 a year at LBS.

A Universities UK spokesperson said: "UK universities have considerable experience of managing changing markets and responding to fluctuations in student demand. The period 2003-04 was indeed turbulent for the market in international students, but the debate has moved on considerably since then."