Overall student numbers may have fallen again (-1.7%) for the 2013-14 academic year according to HESA, but the falls were smaller than the previous year (-6.3%). Although there were falls in part-time student numbers, there were encouraging signs in the other figures. Full-time students, the key metric of student accommodation demand, increased again, while students from non-EU countries continued to rise. The big question for the higher education sector is whether this is the beginning of the recovery or just stabilisation at current levels.

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^{Source: HESA}

As usual, the HESA data comes with a warning in that it is backwards looking. The data is based on the previous academic year and so does not tell us what has happened this current year and what could happen next year. For that we need to delve into the UCAS data on applications and acceptances. The news is positive. Overall applications and acceptances for the current academic year are up 3.4% and 3.3% respectively. This equates to 16,800 more acceptances than the previous year and brings the total to over half a million for the first time.

The good news provided by the UCAS data continues. Acceptances by UK domiciled students increased by 3.2%, EU students by 7.6% and from other countries by 5.7%. Initial numbers for applications this year and so for students starting next year points to a further 2% increase. This should easily take application numbers above their previous 2011 peak. Although growth rates are below those seen during the late 2000s, they point to a return to the trend prior to 2007.

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^{Source: UCAS, HESA}

The biggest unknown is what impact the lifting of the cap on student numbers will have. Government figures point to 60,000 extra spaces per year and so, assuming an average three year degree, that could increase total student numbers by 180,000. However, this figure is a government estimate based on the number of qualified students who are unplaced.

The Browne Review gave a revised and lower estimate for the increase of 20,000 to 30,000 students per annum. This would appear a more realistic figure but the actual increase will depend on the approach from individual institutions as well as any oversight from Government to ensure quality is maintained.

In a continuation of our analysis from last year, the introduction of higher fees appears to have continued to drive a flight to quality. The decline in student numbers between the 2011-12 and 2012-13 academic years was severe but lower ranking institutions were disproportionally impacted. They generally had large falls in both domestic and international student numbers. Although the fall in domestic student numbers was felt across all ranking groups, the impact on higher ranked institutions was lower and slightly counterbalanced by rises in international student numbers.

The total fall in student numbers for the following academic year (2013-14) was less severe but the distorted effect across institutions has followed a similar trend. Our analysis in Figure 7 shows continued falls in numbers towards the lower end of the rankings with both declining domestic and international students.

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^{Source: HESA, Complete University Guide}

Meanwhile, higher ranking universities have generally seen an increase in domestic students for the 2013-14 academic year and a continued rise in foreign students. An exception is the second highest ranking group with a decline in domestic students due to a fall in the number of part-time students at The University of Warwick.

We would expect this scenario to continue with the lifting of the cap on student numbers. The attractiveness of universities in terms of the quality of the education they provide, their value for money, employment prospects and even the student lifestyle offered by the town or city will continue to play an important role in where prospective students choose to go. Universities towards the lower end of the rankings will struggle to differentiate themselves on these factors and will therefore struggle to attract students both domestically and from overseas.

International Students

With a Conservative majority Government newly elected, calls for limits to international migration have become louder with a commitment to cap numbers. Around 34% of international migrants coming to the UK do so for formal study and it is essential that we recognise the important role they play in university funding and the wider economy.

The impact of tighter migration controls on the number of international students is evident over the period of the previous government. The number of people coming to the UK for study fell from a peak of 238,000 in 2010 to 192,000 in the year to Q3 2014. However, analysis of sponsored visa applications from the Home Office shows that this fall has been contained in sectors other than Higher Education. These have actually increased slightly during the same period.

Although the number of international students appears to be relatively unaffected by tighter immigration control, it is essential that we ensure that the UK remains an attractive place to study and we do not send out contrary messages. Surely it would also be beneficial if we made it easier for the best and brightest to continuing working in the UK once they have finished their studies?

^{Source: ONS, Home Office, HESA}