Chancellor Rachel Reeves is facing mounting pressure from prominent business groups to abandon a proposed new levy on university fees for international students, a move they warn could severely damage economic growth and the UK's global standing.
Business Backlash Against the 'University Tax'
In a significant intervention, an alliance of 15 business organisations has issued an open letter, shared with The Independent, demanding the government scrap what they label a 'university tax'. The groups, which include UK Music, Business LDN, and Tech UK, have voiced serious concerns that the planned 6 per cent rise on international student fees will have profound and 'unintended consequences' for the country.
The letter highlights the immense economic contribution of international students, stating they add tens of billions to the UK economy every year. This financial injection is described as vital for 'supporting local businesses and fuelling regional regeneration' across the nation.
Wider Consequences for Domestic Students and Regions
The business leaders also pointed to a less obvious but critical side-effect of the proposed levy. 'A reduction in international student numbers could also indirectly affect domestic student opportunities,' the letter argues, explaining that income from international fees helps subsidise the cost of home students.
Research from policy consultancy PublicFirst, released in September, quantifies the potential regional damage. It estimates that nine out of 12 regions in the UK would face a loss of more than £100 million in the levy's first year due to an expected drop in international student numbers. The impact would be most severe in London (£480 million), followed by Scotland (£197 million) and the South East (£163 million).
Henri Murrison, chief executive of the Northern Powerhouse Partnership, a signatory of the letter, emphasised that international students are 'central' to the economies of cities like Sheffield, Manchester, Leeds, and Newcastle. 'They support local businesses, create jobs, and help sustain our universities,' he said, warning that 'the proposed levy risks pulling the rug out from under one of the few areas where the northern growth corridor currently outperforms its competitors globally.'
Calls for a Rethink Ahead of the Budget
The signatories are not calling for a complete halt to reform but are urging a more considered approach. They have asked the government to pause the implementation of the levy, undertake a full risk assessment, and consult thoroughly with the higher education and business sectors to develop a sustainable funding model.
John Dickie, chief executive of Business LDN, which represents firms like Deloitte and Uber, stated that scrapping the levy would 'support growth and the UK’s international competitiveness.' He added, 'Overseas students make a significant contribution to the economy so we should be rolling out the welcome mat for the most talented people from across the globe rather than pushing them away.'
This business criticism comes after the government's immigration white paper, published in May, outlined plans to explore the levy and also reduce graduate visas to 18 months. Sector leaders had already warned these measures could deter international students and worsen the financial challenges facing universities.
A government spokesperson defended the policy, stating: 'The International Student Levy will fund the reintroduction of targeted maintenance grants to break down the barriers to opportunity for disadvantaged students.' They confirmed that further details would be set out in the forthcoming Autumn Budget.
