The levy—a flat charge per international student, with the first 220 per provider exempt—will affect institutions disproportionately. Providers with large cohorts of lower-fee international students are expected to bear the heaviest financial impact, potentially losing 10–14% of their international income. Research-intensive universities recruiting higher-fee students may see only marginal effects. Analysts warn this could shift resources away from institutions and regions least able to absorb the shock, exacerbating existing disparities.

Recent insights from Nichlas Dillion (NOUS Group) at Property Week’s Student Accommodation Conference underscored the importance of understanding not just the financial, but the behavioral dynamics of international student mobility. International students choose destinations primarily based on the perceived quality of education, career prospects during and after study, and immigration pathways. The UK remains a strong draw due to its high-quality education, global reputation, and graduate work opportunities, yet policy changes such as visa restrictions, tuition inflation, and now the new levy could alter this calculus.

Government modelling suggests the levy may generate £445 million but leave the sector £270 million worse off, with a potential reduction of 14,000 international students in 2028–29. Independent analyses warn of a £1.8 billion first-year economic loss, concentrated in London, Scotland, and the South East. The conference highlighted that students from countries like India and Nigeria are increasingly choosing destinations that provide post-study work pathways, illustrating that immigration policy is a key driver of university choice. Conversely, reductions in affordability or financial incentives may divert students to other global competitors such as Canada, the Netherlands, or Malaysia, who are actively expanding international recruitment.

The government frames the levy as a funding mechanism to reintroduce targeted, means-tested maintenance grants for low-income students in priority subjects. From 2028/29, households earning £25,000 or less will receive £1,000 annually for the first two years, with tapering support up to £30,000. While this aligns with widening access goals, analysis indicates that more than half the levy’s burden could be passed to students through higher fees or reduced institutional services. The National Union of Students warns this may lead to either cuts in provision or increased fees, risking reduced demand and diversity.

The broader Budget package compounds financial pressures. Tuition fee caps rise in 2026–27 and 2027–28, maintenance loans increase modestly while parental income thresholds remain frozen, and the Plan 2 loan repayment threshold will be frozen from 2027–30. Operational costs will also rise due to changes in salary sacrifice pension contributions and SEND funding responsibilities. Together, these measures intensify universities’ exposure to funding volatility.

This conference session reinforced that the UK’s international competitiveness is influenced by more than financial incentives. Students weigh factors such as affordability, post-study work opportunities, and long-term immigration prospects alongside education quality. While the UK continues to attract top talent, policy uncertainty and new levies risk undermining this position, particularly at undergraduate levels and for institutions heavily reliant on non-EU students.

Short-term, universities must engage in rapid financial planning and scenario modelling to anticipate shifts in enrolment, regional impacts, and staffing requirements. Strategies that diversify recruitment, protect research income, and engage local stakeholders will be essential to managing the transition. Policymakers must carefully balance distributional gains from the levy against potential losses in economic activity, research capacity, and the diversity that underpins the UK’s international higher education standing.