Short-term cash, long-term cost: The hidden impact of the international student levy

By Karen Cairney, Founder & CEO, Cairney & Company

With the UK Budget announced this week, we share our reflections on a policy shift with significant implications for higher education and national competitiveness. 

The Budget may feel dominated by immediate pressures on households but buried within it is a policy with profound long-term implications for the UK’s prosperity: the proposed international student levy. At first glance, a charge that appears to affect only overseas students and universities may seem remote from everyday life. Yet the consequences will be felt locally and nationally, by communities, employers, and the future workforce on which the country depends. 

Higher education remains one of the UK’s greatest national assets. Our universities educate and skill the workers of tomorrow, drive scientific breakthroughs from medical diagnostics to renewable energy, and generate the ideas that shape social and economic progress. They are also deeply rooted in their regions: major employers, providers of clinical and community services, partners to industry, and anchors of local growth. 

The introduction of a flat £925 levy per international student from 2028 – with the first 220 students exempt – threatens to undermine this ecosystem. Because the levy is not proportionate to fee levels, institutions that recruit large numbers of lower-fee international students will bear a far heavier burden than wealthier, higher-fee universities. Many of these institutions rely on international income to support essential teaching and research for domestic students. The policy therefore removes funding from those least able to absorb the shock. 

Students themselves will not escape the consequences. As Wonkhe reports, the levy is expected to raise around £445m in 2028-29, but government modelling suggests the sector would simultaneously lose £270m – indicating that more than half the cost will be passed directly to international applicants through higher fees. The same estimates project a loss of 14,000 international students in that single year, signalling a real risk that the UK will price itself out of a competitive global market. Reduced demand does not just weaken university finances; it diminishes campus diversity, global engagement, and the international networks that benefit both students and the wider economy. 

And the ripple effects extend far beyond institutional budgets. Fewer international students mean reduced spending in local economies, fewer jobs, and a shrinking pipeline of research talent – the very people who help deliver the next generation of technological and scientific advances. Communities that depend on universities as economic anchors will feel the strain most acutely. 

In a period of national hardship, universities may seem an easy target. But the pursuit of short-term fiscal gains risks inflicting long-term damage on one of the UK’s most productive and globally respected sectors. Weakening higher education weakens the country’s skills base, its innovation capacity, and ultimately its economic resilience. 

This is not just a higher education issue. It is a national competitiveness issue – and one we cannot afford to ignore.