Universities are facing a levy of 6 per cent on the income raised from overseas students' fees under the UK government’s plans to reduce net migration.
The proposal was put forward in a plan published on Monday, which stated that fees paid by students coming to Britain contribute £12 billion ($15.85 billion) towards the higher education sector.
Fees form part of an overall £20.65 billion contribution to the economy made by international students “but it is right that these benefits are shared”, the government said.
The government is exploring a levy it says will be reinvested in the higher education and skills system and though a figure was not revealed, it is understood to be 6 per cent.
Under the proposals, graduate visas will be reduced to 18 months and the requirements that sponsoring universities must meet to recruit international students will be strengthened.
The UK government said there have been problems involving "misuse and exploitation of student visas" and "too many graduates" who stay in the UK after their studies are not moving into graduate-level jobs.
The plans form part of a pledge by Prime Minister Keir Starmer to significantly reduce migration, which has risen sharply in recent years and led to the rise of the anti-migration Reform UK party.
But university leaders have been warning of significant financial concerns caused by a drop in the number of international students, who can be charged higher tuition fees, following restrictions introduced by the previous, Conservative government, as well as frozen tuition fees paid by domestic students.
Last week, an analysis by the Office for Students, the higher education regulator, forecast that 43 per cent of universities and colleges in England would be in deficit this year.
Nick Hillman, director of the Higher Education Policy Institute think tank, warned the proposed levy on international students “will be seen by many as a tax on a very successful UK export sector”.
Mr Hillman said other ideas were also “problematic”, particularly reducing the length of the graduate visa. He explained that “employers wanted to see an increase to three or four years, rather than a reduction, as new employees take months to become productive members of the workforce”.
Vivienne Stern, chief executive of Universities UK, said: “Following years of frozen fees, inadequate research funding and a rapid downturn in international students, the current operating environment is very challenging”.
"We would urge government to think carefully about the impact that a levy on international student fees will have on universities and the attractiveness of the UK as a study destination,” she said.
Business leaders are also warning that a levy and any restrictions on overseas students could have an adverse effect on the British economy.
Rain Newton-Smith, chief executive of the Confederation of British Industry, said: "Policy changes that risk making the UK a less attractive place to study, or increase costs confronting universities, will have knock-on impacts for the competitive strength of UK higher education as a growth export and young people's ability to access degree-level education at home.
"These trade-offs need to be considered if the government is serious about developing domestic talent and driving growth."
