The impact of international students in Scotland: Scottish Government response

Chapter Two – Direct Economic Impact of International Students

As shown earlier, the number of international students at Scotland's colleges is relatively small, at 1,849 in 2016-17, representing 1% of the total number of students at college. By contrast there are over 28 times as many international students at Scottish HEIs. For this reason, and because of a relative lack of data on the economic and broader impact of international students at college, this chapter focusses on the economic impact of international students at HEIs.

Scotland is highly successful in attracting international students to study at Scottish HEIs. However, it is important to consider differences in tuition fee levels when comparing across the nations of the UK.

Since 2008 the Scottish Government has paid the tuition fees of full-time, first-time Scots-domiciled students and a limited number of postgraduate students. EU law requires that citizens resident in other EU Member States are eligible for the same fees support as home students. However, this does not apply within Member States. Therefore, while eligible EU students at Scottish HEIs generally have their fees paid by the Scottish Government, since 2012-13 undergraduate students from England, Wales and Northern Ireland have paid tuition fees to study in Scotland. Similarly, undergraduate students from Scotland pay fees to study in other parts of the UK.

The level of fees for UK students is set by the HEIs on a course by course basis up to a limit of £9,000 a year. HEIs are obliged to declare fees in Scotland for UK students in advance. According to Scottish Government analysis, in 2014-15 the average fee paid by UK students at Scottish HEIs was £7,681 ^[8] .

There is no limit on the number of non- EU international students that Scottish HEIs can recruit. The level of fees charged by HEIs for non- EU international students is for each individual institution to determine. In 2015-16 these ranged from £8,880 to £47,200 per year, depending on the institution and specific course. ^[9]

At postgraduate level, students are charged fees regardless of their domicile. However there are separate fee scales for students whose status is "home" ( UK or EU) and those whose status is "overseas".

In Scotland, of the total tuition fee income raised by Scottish HEIs in 2015-16, home and EU domiciled students ^[10] accounted for 48% of income (£446m) while non- EU domiciled students accounted for 52% (£488m). Whilst it is not appropriate to compare total international tuition fee income in Scottish HEIs with the other nations of the UK due to the differences in fees charged to EU students at undergraduate level, it is possible to compare fee income from non- EU domiciled students.

Average fee income from non- EU domiciled students in UK HEIs, 2015-16 ^[11]

	Number of non- EU domiciled students	Fee income from non- EU domiciled students (£)	Mean fee income per non- EU domiciled student (£)
England	261,275	3,790,096,000	14,506
Wales	16,730	150,520,000	8,997
Scotland	29,980	488,360,000	16,290
Northern Ireland	2,585	25,270,000	9,776
UK	310,570	4,454,246,000	14,342

When considering total fee income received from non- EU domiciled students and the number of non- EU domiciled students enrolled in 2015-16, Scottish HEIs receive an average fee income per student of £16,290, higher than the UK average of £14,342. ^[12]

Increasing significance of international students

Enrolments at Scottish HEIs split by domicile, 2005-06 to 2016-17

	2005-06		2016-17		Change 2005-06 to 2016-17
Domicile	Enrolments	% of total	Enrolments	% of total	Enrolments	%
UK	193,050	87%	189,630	78%	-3,415	-2%
International	29,035	13%	52,290	22%	23,255	80%
Total	222,085	100%	241,935	100%	19,850	9%

Between 2005-06 and 2016-17, the total number of students enrolled in Scottish HEIs increased significantly, up 9%. Over this period, whilst the number of UK domiciled students has remained relatively constant, the number of international (both other EU and non- EU) students at Scottish HEIs has increased by 80%.

This increase in international students (particularly non- EU international students) is reflected in the changing financial position of Scottish HEIs. Between 2005-06 and 2015-16 overall income in the university sector grew by 38% in real terms. The largest percentage increase in income in that time was in non- EU tuition fees, which increased from £140 million to £438 million in cash terms, a real-terms increase of 154%. By comparison, income from research grants and contracts increased from £381 million to £748 million in cash terms, and increase of 60% in real terms. ^[13]

Support for fees and living costs

In addition to tuition fees, the Scottish Government is responsible for policy and funding for living cost loans and bursaries for eligible EU students at Scottish HEIs. The Students Awards Agency Scotland ( SAAS) is responsible for delivering financial support to students. Unlike Scottish domiciled students, EU students are generally not entitled to living cost loans.

In Scotland, tuition fees are generally paid only for full-time students undertaking their first undergraduate degree or some specified postgraduate courses. The majority of students undertaking postgraduate courses pay their own fees.

In 2016-17, SAAS provided tuition fee support to 14,785 EU students at an average of £1,900 per student. 91% of these students were undergraduate students.

Using 2014-15 baseline data, the cost of maintaining free tuition for EU students in all four years of their undergraduate degree course at a Scottish university is around £97 million per year. This includes funding from the Student Awards Agency Scotland for tuition fees as well as teaching grants from the Scottish Funding Council.

Employment in educational institutions

As described earlier, international students make up a significant proportion of the student body at Scottish HEIs. The income generated from non- EU international students is significant and has been increasing.

The distribution of international students between Scottish HEIs varies considerably. For example, while on average international students make up 22% of all students at Scottish HEIs, they account for 47% of all students at the University of St Andrews compared to 3% at the University of the Highlands and Islands. ^[14] There is also considerable variation between courses. Subject areas such as engineering and technology, computer science and business and administration tend to attract a much higher proportion of international students than subjects such as law, humanities and creative arts and design. ^[15]

Universities Scotland have estimated that Scottish HEIs employ 38,450 directly and another 142,000 jobs are supported indirectly, accounting for almost 6% of all jobs in the Scottish economy. ^[16] Given the large share of the student body that they represent, it is reasonable to assume that international students support a significant proportion of those employed in higher education institutions across Scotland as a whole, and that this is more acute in those institutions and in those subject areas with a higher proportion of international students than those with less. There is a direct impact through the need to employ teaching staff, particularly for those subjects with a high proportion of international students, as well as administrative and management roles relating to the recruitment and support of international students and the provision of services such as student accommodation. There is also an indirect impact as any surplus generated by fees from international students and other on-campus expenditure may also support employment in broader teaching, research, management, administrative and other roles in HEIs.

Impact on the wider economy

In addition to fee income, international students contribute to Scotland through other expenditure incurred during their studies, including accommodation and other day-to-day expenses. A number of recent studies have estimated the total value of expenditure by international students to the economy.

In a 2011 study, London Economics used data from the former Department for Innovation, Universities and Skills' ( DIUS) Student Income and Expenditure Survey ( SIES) ^[17] to estimate total non-fees spending by full-time international students in the UK, including living expenses, housing, transport, course-related materials and other costs. For Scotland this was estimated to be approximately £441m in 2008-09 (equivalent to £509 million in 2017-18 prices) ^[18] , which represented 10% of the total UK figure. ^[19] This is higher than Scotland's share of the UK population at around 8.5%,.

Using a different methodology, a report by Oxford Economics in 2017 on the economic impact of UK universities estimated that £5.4 billion of international students' subsistence expenditure funded from abroad was spent off campus across the whole of the UK in 2014–15, generating an estimated £11.3 billion of gross output. This included £42,000 in gross output generated for every EU student and £66,000 for every non- EU international student ^[20] (equal to £44,000 and £69,000 respectively in 2017-18 prices ^[21] ). These figures do not include tuition fees or some other forms of on-campus spending including university accommodation.

Most recently, a study by London Economics for the Higher Education Policy Institute and Kaplan International Pathways published in January 2018 used a different approach to calculate that in 2015-16 the net economic benefit to the UK of each EU student was £68,000, and £95,000 for each non- EU student, including tuition fees, living costs and other expenditure. The authors noted that these figures may over-estimate the costs of international students in terms of teaching grants, student support and the provision of public services to their dependents, while under-estimating the benefits. The report estimated that the total net economic contribution of international students to the UK in 2015-16 was £20.3 billion. This includes £1.94 billion in Scotland, supporting the 2011 study's suggestion that around 10% of the economic benefit of international students to the UK is in Scotland. ^[22]

Despite the variations in methodology, the consistent message of these analyses is that the net benefit of each international student to the Scottish economy is in the tens of thousands of pounds; that both EU and non- EU students have a positive economic impact despite the different fees and student support arrangements (although the economic contribution of non- EU students is greater); and that the economic benefit of international students to Scotland is higher per capita than it is for the UK as a whole.