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New research published jointly by the Higher Education Policy Institute (HEPI), Kaplan International Pathways and the National Union of Students (NUS) and undertaken by London Economics reveals the net benefits to the UK Exchequer of the Graduate Route visa scheme.
The Graduate Route visa allows international students to stay in the UK after their studies (for two or three years depending on the level of qualification). The new report, The Exchequer benefits and costs associated with the Graduate Route visa, is the first detailed look at the fiscal benefits as well as the costs to the UK in the first full tax year after the Graduate Route visa was introduced (2022/23).
In March 2024, the Home Office asked the Migration Advisory Committee (MAC) to conduct a rapid review of the Graduate Route. The MAC’s findings are due to be published on Tuesday, 14 May 2024. There has been speculation that Ministers may respond by imposing new restrictions on international students wishing to stay and work in the UK.
The new research being published today has been commissioned in order to improve the evidence base available to policymakers.
Key findings
- There were an estimated 66,410 Graduate Route visa holders in the UK in the 2022/23 tax year, split between 56,460 international graduates educated in UK higher education and 9,950 dependants.
- For every 10 Graduate Route visa holders, there were under two dependants and this ratio will decline significantly in the future due to the recent tightening of the rules on dependants – this took effect in January 2024 and has already seen a decline of around 80 per cent in the number of dependants of new international students.
- The benefits to the UK in higher tax revenues from hosting these Graduate Route visa holders are estimated to have been £588 million in 2022/23 (or £10,410 per main Graduate Route visa holder). These figures entirely exclude the wider and longer term benefits – for example, Graduate Route visa holders may choose to remain in the UK beyond their current visa through the Skilled Worker route.
- A comprehensive assessment of the costs to the Exchequer of Graduate Route visa holders in terms of public service provision comes to an estimated £517 million for 2022/23 (or £9,160 per main Graduate Route visa holder).
- This means the total net benefit to the UK Exchequer of hosting Graduate Route visa holders in the first full year of the scheme (2022/23) is estimated to be £70 million (or £1,240 per international graduate), disproving claims that the UK loses out financially.
- As robust official data on Graduate Route visa holders is – to date – scant, our numbers are calculated where necessary using reasonable proxies and detailed information on our data sources is available in the report.
- The financial benefits of the Graduate Route visa are on course to increase materially, as the Home Office estimated 173,000 Graduate Route visas would be granted in 2023/24 and slightly more the following year, meaning over 350,000 Graduate Route visa holders could be in the UK by April 2025. This would increase the direct economic benefits by over five times the level in the first full year of the Graduate Route’s operation. Meanwhile, the costs are set to fall significantly as a result of the new rules on dependants.
The benefits of the Graduate Route need to be considered as part of the bigger picture of international student recruitment. This is because the Graduate Route visa is a key part of the reason why so many international students opt to study in the UK in the first place. Separate work by HEPI and London Economics shows just one cohort of international students provide net economic benefits to the UK that are worth £37.4 billion before they graduate.
The number of international students attracted to the UK has also been a core part of our soft power, with HEPI’s latest annual Soft-Power Index showing that one quarter of the world’s countries are led by someone formerly educated in the UK’s tertiary education sector.
Earlier small-scale qualitative research on the Graduate Route visa commissioned by the Home Office found ‘respondents were overwhelmingly using the route to work – all respondents were either in employment, in self-employment or looking for employment’ and that ‘most are working in professional or associate professional level jobs’.
Nick Hillman, Director of the Higher Education Policy Institute (HEPI), said:
The Migration Advisory Committee’s review of the Graduate Route visa is very compressed in terms of time, at the Government’s insistence. So there has been no call for evidence and there is a real risk that important decisions will be taken on the basis of little robust evidence. We believe it is vitally important that policy recommendations are rooted in the best knowledge that can be obtained. So we have worked hard and rapidly in concert with others to provide the key facts on how the Graduate Route visa has been operating.
The new research suggests the Graduate Route visa has had a positive but limited impact to date. Those former international students who have made use of the Graduate Route visa are contributing their skills to UK employers and more than paying their way financially. They pay more in taxes than they use in public services. However, while the Graduate Route visa has made the UK a more attractive study destination, the number of direct beneficiaries of the Graduate Route visa has been limited so far, especially when set beside the total number of migrants to the UK.
If the Graduate Route visa remains in its current guise, as I fervently hope, then the financial and productivity benefits will multiply in the years ahead. If on the other hand, the Graduate Route visa is severely restricted or even abolished, as has been rumoured, then fewer international students will come to the UK in the first place, damaging our universities, our economy and our soft power. Tougher rules would mean employers in the public and private sectors find it harder to recruit the skilled employees they need. We would all be financially and culturally poorer.
Linda Cowan, Managing Director of Kaplan International Pathways, said:
Not only is the Graduate Route visa a key attraction to international students deciding where to study globally, but this report shows that it also produces a net tax benefit for the Exchequer. This contribution is poised to increase further with the significant drop in the number of dependants of new international students anticipated with the tightening of the rules on dependants that took effect in January 2024.
For the UK to continue to benefit from the huge overall contribution that international students make not only economically but by enriching our academic sector and society as a whole, we must not take our success for granted. Already this year, with the changes the Government have made to the dependant visas and increases in application fees and health surcharges, there is reduced interest in the UK as a study destination and reduction in the number of dependents of international students who can come to the UK.
Preserving the Graduate Route visa is critical to ensuring the UK remains attractive to international students in a globally competitive market, particularly in light of the changes already made by the Government. Time should be given to allow the recent changes to take effect. This is not the moment to make changes to the Graduate Route visa without seriously reducing the attractiveness of the UK as a study destination.
Ellie Gomersall, NUS Scotland President, said:
Every student benefits from an international experience: that our universities are global campuses means we all become exposed to new ideas, to global collaboration, learn from each other and expand our horizons. This report shows the undoubted economic benefit to the UK of encouraging international students to study and work here. Policymakers must remember that the unstable and hostile environment they are creating for our international friends and colleagues does real damage – not just to the UK’s education system, but to the people who have to experience this uncertainty and hostility every single day.
The Graduate Route visa has only been in place since 2021, when its initial impacts were marred by COVID travel restrictions. I urge the Government and policy makers to offer our international friends and colleagues some stability and avoid significant changes as a result of the Migration Advisory Committee’s rapid review.
If the Government wants to reduce migration, then the way forward is clear: take international student and graduate numbers out of net migration figures.
James Cannings, Senior Economic Consultant at London Economics, said:
In an increasingly competitive global market for international students, the re-introduction of a dedicated post-study work route for international graduates has played a significant role in the attractiveness of the UK as a study destination.
Even when taking a very narrow view of its benefits, our findings indicate that the Graduate Route generates a net financial benefit to the UK Exchequer. Importantly, the Graduate Route facilitates a huge contribution to UK export earnings and economic prosperity across the entire UK. Specifically, our analysis does not include a range of wider economic benefits associated with these visas – for example, in terms of boosting international student numbers and the associated significant impact on the UK economy during their studies, the substantial financial cross-subsidies that they generate for universities to sustain their core domestic teaching and research activities or the additional tax revenues from Graduate Route visa holders who subsequently switch to long-term work visas.
Given the attractiveness of the UK higher education sector, these net Exchequer benefits are set to increase substantially in the coming years given the ongoing and expected future growth in graduates taking up this vital post-study work route.