Susan Bassnett: The overseas student bubble has burst

The last decade has seen an unprecedented increase in the number of students going into higher education. The sector has expanded beyond any expectation. New universities with degree-awarding powers are springing up all over the place, and private universities are waiting in the wings. We shall soon end up like some of those countries where nobody quite knows how many universities there are because new ones appear faster than politicians can lie.

But, behind the scenes, there is growing anxiety in universities because nobody can make any sense of the changes that are afoot. Clearly, as students have started to think of themselves as customers demanding a service from universities, so their expectations have begun to rise.

It is only common sense to realise that meeting their expectations may well have serious financial implications. There is no need to repeat how seriously underfunded British universities are; that is a fact that everybody, from vice-chancellors to junior lecturers, can tell you.

Nor should there be any need to point out that the much-discussed top-up fees are not going to help with that underfunding at all - the sums are too small, and in any case much of the money will be ploughed back into student bursaries.

What universities have been doing for some time now is trying to meet the shortfall by recruiting more and more overseas students, who pay large fees and help to balance the books. Now, mysteriously, that market is in decline.

There is growing concern nationally that universities will no longer be able to rely on overseas student numbers increasing. Even leading institutions are seeing a drop at undergraduate level and, though less dramatically, at postgraduate level, too.

A new Universities UK survey shows that four out of five universities saw enrolments of overseas students decline in 2005. Undergraduate applications even from China fell by 25 per cent.

There are all sorts of theories about why this is happening. One obvious factor is that there is much more competition: Australia and New Zealand have followed Canada and the United States in developing international strategies, to tap into the huge Asian markets. Plus, in many previously underdeveloped countries there has been substantial investment in higher education. So these days the crème de la crème of Chinese students prefer to study in their own top institutions in preference to paying high fees and stepping out of potentially advantageous professional contact circles to spend a few years abroad.

In Africa, there has been a steady movement of students southwards into universities in South Africa that have expanded and developed in the post-apartheid age. Another significant factor is the rise in the number of good European universities that now offer degree programmes in English. Students opting to study in the Netherlands or Germany, for example, two countries that have recently announced huge investment packages into overseas recruitment, now have the advantage of being able to improve their English, acquire another European language and pay lower fees.

The high cost of living in the United Kingdom must be a factor, too. And, since last July, immigration controls have been tighter, visa fees have increased, and visa extensions are more difficult to obtain. In addition, there are concerns about security. The negative publicity of the London bombings and the sense of the UK as possibly an unsafe place for young people to come to is bound to have had an adverse impact.

In short, the bubble has burst. It was always a mistake to assume that overseas students would go on flooding into British universities in large numbers indefinitely, given the care that students now take in checking out what is going to be available to them when they arrive at their chosen destination. All students are much more savvy than they were a few years ago, and the expansion of UK higher education has hardly been matched by a rise in quality and standards.

What is needed is a serious rethinking of what is on offer in universities, more effort to ensure that the UK is a welcoming place for visitors from abroad and, crucially, much less greed and exploitation.

The writer is a pro-vice chancellor at the University of Warwick

education@independent.co.uk