BRITAIN'S share of the lucrative market in overseas students has declined sharply as Australia and other competitors attract more Asians on to degree programmes, according to the Organisation for Economic Co-operation and Development (OECD).
Although the number of foreign students coming to study in the UK is still growing, its market share is falling faster than any other developed country, threatening its position as the second most popular undergraduate destination after the US.
In 2003, Britain educated about 13.5 per cent of the university students studying outside their own country, down from 16.2 per cent in 1998, said the OECD's annual Education at a Glance report. Universities had been losing out in recruiting from the fast-growing numbers of students going overseas.
Australia has been the biggest beneficiary, making progress particularly in attracting students from China, the largest and most rapidly growing source of new business.
"The advantage that the UK has traditionally had is getting smaller," said Andreas Schleicher, head of analysis at the OECD.
He warned that other countries, particularly in the Nordic area, were introducing courses taught in English, threatening to erode further the dominance of universities in English-speaking countries.
Recent regulatory changes, British universities say, have made their problems even worse since the OECD figures were compiled. Vice-chancellors have warned the government's recent tightening of the visa regime for overseas students has damaged their ability to recruit, particularly in China.
Figures published recently by the Universities and Colleges Admissions Service are expected to confirm a drop in recruitment from China that could damage university finances. British institutions have become increasingly reliant on the income from overseas student fees which, unlike charges to British or European Union (EU) students, are unregulated.
Mindful of the £1.25bn-a year revenues earned from foreign students' fees, ministers are struggling to balance the need to promote and support British university courses abroad with concerns about security and illegal immigration. Under a Home Office pilot scheme, colleges are being asked to report back when enrolled students disappear or accepted candidates fail to turn up.
University chiefs met in London recently to discuss the challenges facing the sector, including the strength of global competition. "In higher education there is fundamental change going on in many countries and a lot of investments being made," Mr Schleicher said. He predicted that greater internationalisation of education would have a growing impact on countries' balance of payments. There was also a burgeoning market for cross-border programmes delivered electronically.
The decline in students is still only relative and most universities said they had seen no discernible downturn in applications. But Les Ebdon, vice-chancellor of Luton University, which works hard to recruit international students, was uncertain whether the overall numbers would continue to grow. "There might well be an absolute decline this year. I think there is a great concern amongst vice-chancellors that the situation on visas and the unfriendly attitude towards international students is playing against us." British universities could not afford to alienate potential students just as the international market became more competitive.
"The strength of the pound is hurting us, the Americans are coming back into the market after staying away for a few years after 9/11, and now the prime minister, who had a highly successful strategy to increase the number of foreign students, has let the Home Office sabotage everything."
But the OECD found plenty to praise. Mr Schleicher said overall the UK higher education system had a very high successful completion rate for degrees of 83 per cent of people who started courses, compared with a 70 per cent OECD average. Shorter courses also resulted in a higher level of funding per student and high-quality provision.
In 2000, the UK was producing a higher proportion of graduates than other countries but the increase in the number of graduates had now levelled off, other countries pulling ahead.
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