A body blow for UK higher education, international employability offers the way forward

December 8, 2025

A body blow for UK higher education, international employability offers the way forward

The UK higher education sector is bracing itself for not one but two body blows. In the forthcoming budget, the government is set to introduce both a levy on international student fees and a reduction in the Graduate Route from two years to 18 months. For a sector already under severe financial strain, this is not just another policy tweak but a seismic shift. Universities are facing a double hit: the removal of hundreds of millions in international tuition income and a weakening of the very post-study work offer that has underpinned record levels of overseas recruitment. Worse still, revenue from the levy will not be ring-fenced for universities themselves. The lion’s share is expected to be diverted into further education, the Chancellor making clear the funds will be used to underwrite less privileged students accessing level 4–6 qualifications at both further education colleges and universities.

The perception problem

Compounding the challenge is public perception. Polling by HEPI and Public First shows that the British public consistently misread the reality of universities. They believe institutions are wealthier than they are, assume graduates regret their choices far more than is the case, and underestimate the economic contribution of international students. One recent survey found that the public guessed 40% of graduates would not go to university again, when the true figure is just 8%. They also guessed that nearly half of graduates feel debt negatively impacts their lives, when the reality is closer to 16%.

As Professor Bobby Duffy at King’s College London observed, such misperceptions “send signals about how we really feel about an issue … based on what we hear from the media, politicians and general conversations”.

This matters because policymakers respond to perceptions. If the public think universities are flush with resources, the introduction of a 6% international levy is seen as fair. If they believe graduates are saddled with regret, the Graduate Route can be curtailed without much political cost. What is missing from the debate is the evidence that universities deliver employability, that students succeed, earn, and contribute both in the UK and more importantly back in their home countries—building British soft power overseas and driving inward direct investment back into the UK.

Ministers’ rationale and sector alarm

Ministers insist these measures are about balance. Skills Minister Jacqui Smith has argued the levy is not directed at students but at institutions, designed to ensure local communities benefit. Former Labour adviser Andy Westwood notes that a future Labour government will be “much more interventionist … prioritising particular places” and “missions” such as defence or industrial strategy. This is not only a threat to universities’ autonomy—something they value fiercely—but it also means they are being asked by government to do more, with less, in service of government-defined priorities.

Sector insiders are unconvinced. As one strategist at Public First put it, “The best outcome universities can hope for is not being completely hit over the head.” Finance directors privately admit they are modelling scenarios that include staff cuts, course closures and retrenchment. The Office for Students forecasted that 40% of English universities will end the year in deficit. With the recent merger between the University of Greenwich and University of Kent already going ahead, we can expect more UK university mergers on the horizon. With the levy in place, the Graduate Route curtailed, and little prospect of receiving the levy proceeds back, the headroom to manoeuvre shrinks further.

The Graduate Route squeeze

The Graduate Route has been marketed as the jewel in the UK’s crown, the simple post-study work visa that sets the country apart from competitors. But its proposed reduction to 18 months and the rising salary threshold for Skilled Worker visas mean many international graduates will hit a dead end. The average starting salary for UK graduates is £28,500, well below the £33,400 “new entrant” threshold. The dream of studying, working, and transitioning to permanent residence will be out of reach for most.

This is why employability matters. If students can see evidence that UK degrees lead to meaningful jobs, whether at home, in the Gulf, in India or China, they will still come. But if universities cannot evidence robust, representative non-EU graduate outcomes, the UK will appear to offer a shrinking return on investment.

A global opening — if the UK can seize it

Ironically, just as the UK is pulling back, the United States has created an opening. Trump’s proposal of a $100,000 fee for employers sponsoring H-1B visas will significantly increase the cost of hiring international graduates. This will hit the US tech sector particularly hard. The silver lining for the UK is that, with record levels of tech investment announced during President Trump’s state visit, another opportunity is emerging.

For South Asian students, particularly Indians, who represent the largest cohort in both the UK and US, the appeal of Britain should be clear. Canada is tightening pathways to permanent residency, Australia is capping student numbers, and the US is pricing itself out of reach. But opportunity will only become reality if UK universities can prove they deliver on employability. Without data on graduate outcomes, salaries, and industry pathways, prospective students will look elsewhere to: Germany; Ireland; Dubai; Malaysia; Singapore; and domestic universities in key source markets like China and India, where capacity is growing.

Breaking out of the box

HEPI has described universities as being trapped in a “box” of constraints: funding shortfalls, regulatory burden, staff costs, competition, demographic decline and new alternatives like apprenticeships. Breaking out of that box requires more than incremental lobbying for higher fees. It demands a strategic pivot to employability.

That means:

Benchmarking non-EU graduate outcomes: Institutions must collect and publish international graduate destinations and salary data, available from Asia Careers Group SDN BHD, instead of just relying on inconsistent HESA surveys. Longitudinal tracking and employer verification are essential.
Curriculum reform: Programmes must be co-designed with employers, embedding industry projects and applied learning that signal readiness to recruiters.
Transparency: Universities should publish international employability dashboards on their websites, giving students clear evidence of the return on investment of a British degree.
Global positioning: Employability must be marketed as a global advantage, a UK degree that delivers careers not only in London, but in Mumbai, Kuala Lumpur, Lagos and Dubai.

The politics of employability

The political economy aligns with this strategy. Ministers want evidence that migration routes are being used responsibly. The public want reassurance that international students contribute rather than displace. Students themselves want careers. Employability data answers all three.

Universities UK has stressed that international students enrich communities and generate billions. Public First has calculated that every UK resident is £355 better off annually because of international enrolments. But these macro numbers will not be enough in the face of populist scepticism and the rise of Reform UK. What will resonate is proof that international students graduate into real jobs back home and that their success reflects well on Britain.

One vice-chancellor at a research-intensive institution said: “We are boxed in. We can’t raise fees, we can’t cut staff without damage, and we can’t guarantee a visa route. Our only option is to show that our graduates succeed because employability is the one argument that ministers, the public, and students will all accept.”

A senior figure at HEPI added privately: “We are watching a slow collapse scenario. The only way to avoid it is to reposition around outcomes. Everything else, funding, regulation, public trust follows from that.”

Conclusion: employability or erosion

The combination of the levy and the Graduate Route reduction is a body blow for UK higher education. It strips out income, weakens the sector’s most attractive offer to international students, and diverts resources to further education. But it also clarifies the way forward. If universities want to maintain international recruitment at current levels and grow in the future, they must put employability at the centre of their mission.

The US has created an opening with punitive H-1B reforms. Canada and Australia are pulling back. The UK has a narrow window of advantage. But unless universities can prove that a British degree delivers careers at home and abroad, that window will slam shut.

In the end, it is employability that will decide whether UK universities escape the box or remain trapped until erosion gives way to collapse.