The English regulator has written to 23 institutions concerning their “high levels” of recruitment of Chinese students, to ensure they have “contingency plans” in case there is a “sudden drop” in numbers.
The Office for Students (OfS) annual report on financial sustainability finds that university finances generally remain in good shape, but cites the growing risk of an over-reliance on international students.
Overseas student fees play an important role in university finances, the report says, but it cautions that any event that reduces the flow of such students to English providers could have a “significant impact”.
The OfS said it has “written to 23 higher education providers with high levels of recruitment of students from China, to ensure they have contingency plans in case recruitment patterns change and there is a sudden drop in income from overseas students”.
Rising geopolitical tensions have prompted greater scrutiny of UK universities’ Chinese recruitment.
Susan Lapworth, OfS chief executive, said: “We continue to have concerns that some universities have become too reliant on fee income from international students, with students from one country sometimes a significant part of the financial model.
“Universities must know what they would do if international recruitment fails to meet expectations.”
Times Higher Education asked the OfS how it judged which universities had “high levels of recruitment of students from China”.
A spokesman for the regulator told THE that it had examined Higher Education Statistics Agency (Hesa) data on universities’ recruitment of students from China, then estimated the proportion of tuition fee income from Chinese students in relation to each institution’s total income.
The OfS also took an institution’s individual circumstances and financial resilience into consideration, the spokesman said.
THE analysis of Hesa data shows that 23 providers in England admitted more than a third of their non-UK students from China in 2021-22.
The University of Southampton had the highest proportion (61 per cent of all international students coming from China), followed by the Royal College of Art (60 per cent), and the University of Sheffield (58 per cent).
These figures form only part of what the OfS considered and do not indicate which institutions received OfS letters. The regulator would not disclose which institutions it has sent letters to.
Universities’ Chinese student numbers, as a proportion of all international recruitment
Source: Hesa
The OfS highlighted that many large research-intensive providers recruit significant numbers of overseas students from China, often on one-year postgraduate taught master’s courses.
However, it said these institutions often have healthy cash reserves, considerable asset bases, capacity to borrow if needed and a strong competitive position, meaning they would be in a good position to weather the risk of a drop in recruitment.
Among the 207 providers in England with non-UK students enrolled last year, 22 per cent of these students were from China.
Among Russell Group universities, the rate was much higher, at 41 per cent.
The OfS said total non-European Union tuition fee income reached £7.8 billion last year, and is expected to rise to almost a quarter of the proportion of institutions' total income by 2025-26.
Dr Martine Garland, associate lecturer in marketing at Aberystwyth Business School who has studied financial diversification in UK universities, said over-reliance on any one source of income increases exposure to financial risk.
“If your all-important international fee income comes from a range of countries, it is obvious you are less exposed to the vagaries of international politics and culture than if all your lychees are in one basket,” said Dr Garland.
“If you are 60 per cent reliant on students from China and tomorrow the Chinese government has a change of policy – that is a big income hole to fill. By all means, recruit from China, but the strategy should be to have balance in your international income portfolio.”
The annual report is based on data returned to the OfS from the annual financial return for 2021-22, which includes five-year forecasts for providers.
The report also highlighted the impact of inflation and the challenge of meeting investment needs for facilities and environmental policies as other potential risks to the sector.
“For a small number of institutions the financial picture is of particular concern and we will continue to focus our attention on those cases,” Ms Lapworth said.
“But all institutions will continue to face financial challenges, with a number of risks present at the same time for many.”
