Visa Changes and Funding Gaps Imperil UK University Towns

In September 2025, the UK's university sector continues to grapple with deep-seated financial and structural issues. A year after Sir Keir Starmer's warning that universities were in a "worse state" than previously realized, the government has yet to unveil a meaningful plan to address the crisis.

Now, new policy changes risk further harming the sector. Adjustments to visa rules and the introduction of a levy on international student fees threaten to undermine universities, with potentially severe consequences for the towns and cities where they play a vital economic and cultural role.

A recent report from the Centre for Cities highlights the outsized impact of universities in places like Plymouth, Hull, Exeter, and Dundee, where these institutions are the largest exporters of services. In these university towns, the financial health of higher education institutions is closely tied to the broader local economy. As international student numbers decline due to Brexit, competition, and tighter immigration policies, the ripple effects could be devastating.

The university funding model has been problematic for years, with the sector becoming increasingly reliant on lucrative international student fees, which now account for a quarter of all revenue - up from just 5% three decades ago. While this model has its critics, the government's latest policy shifts threaten to further undermine the system without addressing its underlying issues.

As the UK's domestic student population peaks and employer national insurance costs rise, universities face a perfect storm of financial pressures. Unless the government can devise a coherent strategy to support the sector, the consequences for university towns could be severe, with the collapse of any major institution having far-reaching effects beyond its campus boundaries.