This article is in collaboration with Osama Khan, Director of Learning and Teaching, Southampton Solent University. You can watch the corresponding webinar at the bottom of this page.
‘Brexit’ refers to the UK’s decision to leave the European Union (as we’re sure you’re aware). The result defied expectations and roiled global markets, causing the British Pound to fall to its lowest level against the US dollar in 30 years. Home secretary Theresa May replaced David Cameron as leader of the Conservative Party and Prime Minister. The process of leaving the EU formally began on March 29th 2017 when May triggered Article 50 of the Lisbon Treaty. The UK has 2 years to negotiate a new relationship with the EU. Talks began on June 19th in Brussels and the full round concluded on July 20th. Questions have swirled around the process, in part because Britain’s constitution is unwritten, and in part because no country has left the EU using Article 50 before. Algeria had left the EU’s predecessor through its independence from France in 1962, and Greenland, a self-governing Danish territory, left through a special treaty in 1985. Britain, by contrast, is divided in the wake of an election that May called to give herself a mandate to pursue a ‘hard Brexit’, leave the EU single market, which guarantees freedom of movement, and leave the Customs Union. May has remained Prime Minister but the Conservatives have lost their majority, emboldening figures in the government who prefer a ‘soft Brexit’. Naturally, Brexit, whether it be ‘hard’ or ‘soft’, will have an impact on all aspects of the economies and life in the UK and EU. An area it will have one of the largest impacts on is education, learning, and development.
With the stability of the UK economy and freedom of movement across European borders now in question, there are both short-term and long-term effects on international students. The impact on the UK economy and the Pound is already noticeable - although the Pound has recovered slightly from its initial fall of around 10% following the referendum result, it’s possible that the Pound will remain weak against other currencies. This will impact both incoming and outgoing international students who will be paying tuition fees in a currency that isn’t their own. There are worries amongst students that they will find themselves paying higher fees for international students rather than the EU rates when they travel from/to the UK to study, and that there may be visa restrictions.
Before we continue we’d just like to clarify - when we refer to ‘UK students’ we mean domestic UK students, when we refer to ‘EU students’ we mean students coming from the EU (both pre and post Brexit), and when we refer to ‘international students’ we mean students coming from outside the EU.
Importance of international higher education
International education is a very important aspect of education in the UK as a whole. Over the centuries, people from all over the world travelled to the UK for a distinctive educational opportunity. Higher education goes back centuries in the UK, starting with universities such as Oxford, Cambridge, and St Andrews in Scotland. The UK has long been a hub where scholars from across the globe come together, and higher education in the UK is, therefore, very diverse, a centre for worldwide thoughts and philosophies to be debated and discussed at length.
Here are some facts and figures. 29% of academic staff in the UK are from overseas and, according to HEFCE, 44% of research staff in the UK are from abroad. 51% of research publications in the UK are produced by people from overseas and 61% of university/business co-authored publications are with international businesses. Over 20% of students in the UK come from outside the UK, and this percentage increases at postgraduate level. Overseas students contributed £25.8bn to the UK economy though on and off campus spending in the 2014-2015 academic year and supported 206,600 jobs in the UK. As you can see, the UK economy and education sector in particular seems to be benefiting from internationalisation.
International student mobility trends
There has been somewhat of a slowdown in the global rate of international student mobility, including those coming to the UK to study as well as those leaving the UK to study. Perhaps this is unsurprising given the political climate at the moment; some may say there is a slight ‘mistrust’ of culture and diversity, with events like Brexit in the UK and the political landscape in the US in the last year or so. As well as this there is the threat of international terrorism that is extremely prevalent at the moment.
So this issue may be a cause of the slowdown in international student mobility, but how has the UK been affected? The UK is actually suffering more than its competitors.
As a percentage of the number of international students, England has the highest proportion of new entrants when compared with countries like Germany, the US, and Australia. However, the actual number of international students in England (and the wider UK) is slowing down when compared to these other countries, and Europe overall is attracting greater and greater numbers of international students.
In order to combat this slowdown, the UK will have to work hard to ensure favourable movement and visa regulations to attract both students and education staff alike post-Brexit.
One reason for the slump in the overall number of international students while the number of new applicants remains high is the duration of higher education courses in the UK. For example, a typical undergraduate course in the US is four years, followed by a two-year Master’s course, and PhD lasting five to seven years. In the UK, however, a typical undergraduate course is three years, followed by a one-year Master’s course, and a hard-working PhD student can achieve their doctorate in three or four years - it’s considerably shorter.
There is also a big focus on transnational education (TNE) in the UK, where, for example, a Chinese student can study their first two years under and British education system in China and study their final year in the UK. This is attracting many new entrants to the UK over our competitors. Interestingly, the largest area of growth in international students in the UK comes from TNE partnerships which all come from outside of Europe. So Brexit may not have such a large effect on international education after all.
Freedom of movement
Freedom of movement across member states is a core principle of the EU and allows citizens to easily travel, work, study, and live in any member state. There is a chance that Brexit could have a detrimental effect on the ease of which EU citizens can work and study in the UK. The contrast applies for UK citizens hoping to work and study in the EU. From 2007 to 2014, the number of UK students who spent up to a year studying in the EU rose by 115% and has since continued to rise. London is currently the most international student city with over a quarter of its students coming from overseas.
Fernando M Galán Palomares, former president of the European Students’ Union, says that he expects student mobility between the UK and the rest of Europe to decrease dramatically due to: higher tuition fees, hostile visa regulations, less access to healthcare, and less access to work opportunities.
What have universities said?
It is unlikely, that visa restrictions will make the movement of EU students too difficult. Upon leaving the EU, the UK has the option of remaining a part of the European Economic Area (EEA), similar to countries like Norway and Iceland who are not EU members. If the UK does remain part of the EEA, then there will be very little impact on the freedom of movement of people from EU nations, and the rules will effectively remain as they were pre-Brexit. The same, of course, goes for UK students looking to study in the EU.
Alternatively, the UK can apply to join the Schengen Area, which promotes free movement within 26 countries in Europe regardless of EU membership status. If the UK joins the Schengen Area, then international students will need to apply for a residency visa for studying in the UK for longer than 90 days. If the UK chooses not to be members of the EEA or the Schengen Area, UK students will need to apply for a Schengen visa to be able to study in Europe.
That being said, considering the commitment of UK universities to welcoming international students, it’s unlikely that the UK will opt out of both the EEA and Schengen Area.
The Bologna Treaty
When the EU was formed, different sectors of the economy began to form their own treaties to help unify each sector across the member countries. The Bologna Treaty is the treaty related to the higher education sector and essentially provides a system where students can transfer their credits between countries, allowing them to study for a period in another member state and receive a largely consistent education. Of course, it is in the best interest of international students for this treaty to be maintained in the UK post-Brexit.
Costs of studying abroad
Arguably the biggest concern for present and future international students is that the cost of studying will rise. There is a chance that an increase in tuition fees post-Brexit will prevent many international students from being able to afford to study in the UK.
Current pricing plan:
UK students ≈ £9,000 per annum
EU students ≈ £9,000 per annum
International students ≈ £15,000 - £25,000 per annum
Brexit means that the UK will no longer be under EU regulations limiting tuition fees, meaning there will be nothing to prevent universities charging EU students the same fees as international students.
That being said, since the referendum result, UK universities have come out in force to reassure international students that their fees will remain unchanged for the foreseeable future. Some of these universities include University College London, the University of Reading, and Queen Mary University.
However, the aforementioned Palomares has said that UK universities will suffer a financial blow due to the loss of funding from EU programmes; as a result, they may have to increase tuition fees to compensate.
Graduate employment opportunities
One possible scenario is that the UK will operate a points system similar to countries like Australia when deciding who can live and work within the border.
In the short term, the point system will seem like a barrier to the potential UK workforce - those trying to enter the UK to work. However, in Canada and Australia, countries that have been operating under a points-based system for decades, they have managed to add a very skilled workforce to a variety of sectors. So from a diversity standpoint in the short-term, a points-based system may not be ideal, but in the long run, the UK may benefit from attracting a very skilled workforce from overseas.
Let’s put this into context with some numbers. In 2014, international students enrolled at London universities directly contributed £3 billion to the UK economy and supported over 37,000 jobs.
It could be argued that fewer EU students coming to Britain could mean a diminished economy, but it should be noted that non-EU students, especially Chinese students, continue to enrol at UK universities in record numbers. Remember: access, funding, and visas for non-EU students will remain unchanged and should be unaffected by Brexit.
Teaching Excellence Framework
The Teaching Excellence Framework (TEF) is a framework introduced to assess the quality of teaching in academic institutions. The process of implementing the reforms brought about by the TEF will last four years, and we are currently in the second year. From September 2017, universities are permitted to increase their fees to match inflation. Universities will be given a rating - gold, silver, or bronze - based on their teaching quality, the learning environment they create, and value added post-graduation (i.e. future job prospects). In the fourth year and beyond, universities will be able to charge much higher fees depending on their rating. This, of course, could have a detrimental effect on all students, not just international students.
However, this new emphasis on teaching quality incentivises universities to provide the best learning and education experiences they can - meaning that UK universities will remain very competitive options against ‘rival’ countries like Germany post-Brexit. So, UK institutions may still be an attractive option for students looking to study overseas.
St George’s case study
Based in South London, St George’s is the last remaining all-medical university in the UK. This particular university is relevant to our topic (and not just because one of our brokers is an alumnus) because a large number of the students are international or from the EU. This is hardly surprising as medicine generally is a sector where a large percentage of students and workers come from outside the UK (21.7% of nurses and 35.4% of doctors).
As a result, a downturn in international students due to Brexit could have a disastrous effect on the already understaffed and underfunded NHS.
The importance of TNE to the UK
Transnational Education (TNE) is the ‘provision of education for students based in a country other than the one in which the awarding institution is located’. For example, the University of Nottingham has a campus in China, and any course studied in Nottingham can be studied in the campus in China. Globally, there has been a large increase TNE recently, which has helped cushion the blow of decreasing international students coming to the UK.
Interestingly, despite the aforementioned large numbers of Chinese students coming to the UK, TNE in China is more popular. What this means is that many students are choosing to stay in China to study, but receive the prestigious qualifications from Western/English-speaking universities. The same is occurring in other Asian countries like Malaysia, Hong Kong, and Singapore.
Another interesting trend to note is that the number of students overseas studying TNE under British institutions is higher than the number of international students in the UK, and that gap has been widening significantly over the past ten years. It’s likely that the gap will widen immediately post-Brexit due to falling numbers of international students.
[2014-2015 academic year
Source: Author’s analysis based on data from:
UK data sourced from HESA Student record and Aggregate offshore record
Data for Germany sourced through DAAD
Data for Australia sourced from the Australian Government Department for Education]
As shown by the table, the UK has a huge portion of the TNE market and a large number of international students generally, so it’s important that the Brexit deal continues to promote international students; otherwise, it could have a detrimental effect international students themselves and on the UK higher education sector as a whole.
Changing global higher education landscape
We are seeing globally that as economies improve, their demand for higher education increases. This is largely due to the fact that higher education helps to create a more skilled workforce, which further contributes to economic growth and productivity. This is, again, shown in the case of China - their increased demand for higher education is a result of their recent economic strength and ability to innovate themselves ‘from within’, rather than relying on other countries.
A smart move by the UK post-Brexit would be to strengthen ties in Asia and emerging economies as those are the areas from where a lot of demand for UK/Western higher education comes.
The higher education sector in the UK has been one of the largest beneficiaries of being in the EU. For every £100 given to the EU for research purposes, the UK received, on average, £125 back to do research within the UK. After Brexit the UK will, of course, lose access to this funding. The silver lining of this, however, is that many countries outside of the EU are willing for forge partnerships with UK universities, so there is still a good chance that research can continue at a high level in the UK. These countries are also the countries with the largest and fastest growing markets for international students, as shown in the chart below.
[Source: Deloitte Access Economics and EduWorld (2016), Growth and Opportunity in Australian International Education]
Financial ups and downs
EU and EEA citizens can claim free or reduced-cost healthcare in any member state by applying for a European Health Insurance Card (EHIC). Assuming the UK remains part of the EEA, the EHIC is still valid within the UK and for UK students in Europe. If the UK leaves the EEA, however, UK citizens studying in Europe and EU/EEA citizens studying in the UK will need to pay for health insurance.
On the flip side, students coming to the UK from overseas may benefit from a better currency exchange rate than they currently receive, as the Pound fell in the wake of the referendum result (as we have discussed above).
This leads us to talk about exchange rates. After all, we are a foreign exchange company.
Exchange rates - the possibilities
As we’re sure you’re aware, exchange rates work in pairs. We will now break down the possible outcomes for the GBPEUR exchange rate in the aftermath of Brexit. Let’s take a couple of scenarios to illustrate our points:
Strong Pound - Weak Euro
In order for the Pound to be strong, there will have to be smooth Brexit talks between the UK and the EU, with good trades deal put in place. On the economic side of things, higher inflation will increase the probability of an interest rate hike. This will attract investors to buying GBP, thus increasing its value. On the other side of the pair, in order for the Euro to be weak, European Central Bank (ECB) president Mario Draghi may delay normalisation policy - i.e. maintaining the current quantitative easing programme. Further, unexpected political movements within the EU, such as anti-EU parties increasing in popularity and maybe even winning elections.
What does this mean for students? For EU and international students coming to the UK to study, they will have fewer Pounds for their Euros (or whatever their native currency is), meaning that tuition fees will be relatively higher since they will be paying UK universities in Sterling. This also, of course, means that the general cost of living will be higher too - rent, food, and travel will all cost more, relatively speaking, since they will need to spend more of their home currency to buy the Pounds to pay for these things.
The opposite will be said for UK students studying abroad, as their Pounds will buy more of the foreign currencies, making tuition fees and living costs relatively cheaper for them.
Weak Pound - Strong Euro
In order for the Pound to be weak, Brexit talks will have to break down or take longer than intended to agree on a deal - if a deal is made at all. Alternatively, poor GDP will have to occur (which can be caused by a variety of factors). In either case, the Pound will seem very unattractive for investors. On the other side of the pair, for a strong Euro, Brexit talks with the UK will have to be prosperous for both parties, ECB president Mario Draghi will begin normalisation and reverse quantitative easing. If their inflation target (currently at 2%) is met, then this is likely to cause an interest hike, making the Euro an attractive currency for investors.
What this means for students is basically the reverse of what is said above. EU and international students coming to the EU to study experience relatively cheaper tuition fees and living costs, since their Euros and other currencies will be worth more Pounds. Similarly, UK students studying abroad will face relatively higher costs due to their Pounds buying less of the foreign currencies.
There are, of course, many businesses involved in higher education, and a strong Euro and weak Pound may not be such a bad thing from their perspective. As with the immediate aftermath following the referendum, a weak Pound attracted foreign businesses due to its low price.
Strong Pound - Strong Euro (or Weak Pound - Weak Euro)
In this case, the two currencies just offset one another - the exchange rates will be fairly similar to how they are now. Neither party will notice much of a difference in costs to how things are at the moment, generally speaking.
To conclude, what will happen post-Brexit is largely speculation, and no one really knows what will happen. It’s fairly safe to say that for the next two years or so (until September 2019), things should remain largely unchanged for international students and higher education generally. What we do know is that Brexit is likely to have a long-lasting impact on international students, but academic institutions and governments are striving to ensure that there is minimal impact on higher education.
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Posted in Personal Resources on Oct 5 2017