Net benefit of Graduate Route reached £70m in first full year, research shows

The total net benefit to the UK exchequer of hosting Graduate Route visa holders came in at £70 million in the first full year of the scheme, new research has found, disproving claims that the UK loses out financially.

The findings are part of a new report, The Exchequer benefits and costs associated with the Graduate Route visa, which is the first detailed look at the fiscal benefits as well as the costs to the UK in the first full tax year after the Graduate Route visa was introduced.

The research – published jointly by the Higher Education Policy Institute, Kaplan International Pathways and the National Union of Students and undertaken by London Economics – comes days before the Migration Advisory Committee is due to present the findings of its review into the Graduate Route, commissioned by the government.

“The MAC’s review of the Graduate Route visa is very compressed in terms of time, at the government’s insistence. So there has been no call for evidence and there is a real risk that important decisions will be taken on the basis of little robust evidence,” said Nick Hillman, director of the HEPI.

“We believe it is vitally important that policy recommendations are rooted in the best knowledge that can be obtained. So we have worked hard and rapidly in concert with others to provide the key facts on how the Graduate Route visa has been operating.”

The research found that there were an estimated 66,410 Graduate Route visa holders in the UK in the 2022/23 tax year, split between 56,460 international graduates educated in UK higher education and 9,950 dependants.

For every 10 Graduate Route visa holders, there were under two dependants. The report highlighted that this ratio will decline significantly in the future due to the recent tightening of the rules on dependants which took effect in January 2024.

On April 30, the UK government released a statement announcing that the UK has already seen a decline of around 80% in the number of dependants of new international students.

“We believe it is vitally important that policy recommendations are rooted in the best knowledge that can be obtained”

According to the report, the benefits to the UK in higher tax revenues from hosting Graduate Route visa holders are estimated to have been £588 million in 2022/23 – or £10,410 per main Graduate Route visa holder.

These figures entirely exclude the wider and longer term benefits of visa holders, the report stated, noting that many may choose to remain in the UK beyond their current visa through the Skilled Worker route.

Meanwhile, a comprehensive assessment of the costs to the Exchequer of Graduate Route visa holders in terms of public service provision comes to an estimated £517 million for 2022/23, or £9,160 per main Graduate Route visa holder.

This means the total net benefit to the UK Exchequer of hosting Graduate Route visa holders in the first full year of the scheme is estimated to be £70 million, or £1,240 per international graduate, disproving claims that the UK loses out financially.

The research suggests the route has had a “positive but limited impact to date”, said Hillman, who believes that Graduate Route visa holders are “more than paying their way financially”.

“However, while the Graduate Route visa has made the UK a more attractive study destination, the number of direct beneficiaries of the Graduate Route visa has been limited so far, especially when set beside the total number of migrants to the UK,” he said.

“In an increasingly competitive global market for international students, the re-introduction of a dedicated post-study work route for international graduates has played a significant role in the attractiveness of the UK as a study destination,” said James Cannings, senior economic consultant at London Economics.

“Even when taking a very narrow view of its benefits, our findings indicate that the Graduate Route generates a net financial benefit to the UK Exchequer. Importantly, the Graduate Route facilitates a huge contribution to UK export earnings and economic prosperity across the entire UK,” continued Cannings.

Describing the availability of robust official data of visa holders on this specific route as “scant”, HEPI said that its numbers were calculated where necessary using reasonable proxies.

The report went on to suggest that the financial benefits of the Graduate Route visa are on course to “increase materially”, with the Home Office estimating 173,000 Graduate Route visas would be granted in 2023/24 and slightly more the following year, meaning over 350,000 Graduate Route visa holders could be in the UK by April 2025.

This would increase the direct economic benefits by over five times the level in the first full year of the Graduate Route’s operation, the report signalled. Meanwhile, costs are set to fall significantly as a result of the new rules on dependants.

“Preserving the Graduate Route visa is critical to ensuring the UK remains attractive to international students in a globally competitive market, particularly in light of the changes already made by the government,” said Linda Cowan, managing director of Kaplan International Pathways.

“Time should be given to allow the recent changes to take effect. This is not the moment to make changes to the Graduate Route visa without seriously reducing the attractiveness of the UK as a study destination.”

Ellie Gomersall, NUS Scotland president, is also calling on policy makers to avoid significant changes to the route, noting that the Graduate Route has only been in place since 2021, when its initial impacts were “marred” by Covid-19 travel restrictions.

“If the government wants to reduce migration, then the way forward is clear: take international student and graduate numbers out of net migration figures,” said Gomersall, a move sector stakeholders have long been calling for.

Meanwhile, separate research has analysed the benefits enjoyed by graduates using the route, as a new survey of 10,000 international alumni found them to have have higher job satisfaction and are more likely to make long-term employer connections than those not on the Graduate Route.

The report, which will be released by Universities UK and QS on May 23, will reveal that international students are primarily drawn to the UK for the high quality and strong reputation of universities, but more career support for graduates staying in the UK and returning home is needed. 

Of respondents on the Graduate Route, 72% were happy with their job role and responsibility, 72% were happy with the prestige of the organisation they’re working for and 69% were happy with their work-life balance. 

“There is a significant difference when you compare those statistics with those staying in the UK not on the Graduate Route, and that really reiterates what the Graduate Route is doing for international students and the long-term relationship they have with their employers,” QS insights manager Alex Berka, told delegates at the 2024 IHEF forum on May 2.  

“Rather than big transnational corporations… over half of the graduates said they found a job in small and medium-sized companies that are the backbone of the UK economy,” added Berka.  

The report showed that 57% of international students were more likely to do business with UK companies because of their degree and 70% feel a connection with the UK, highlighting the positive consequences for soft power and the long-term potential economic benefits for the UK.  

Meanwhile, respondents felt positively about the UK’s supportive learning environment, with more than 60% of students giving their university the top ranking for friendliness, diversity and inclusion. 

Additional reporting by Polly Nash.

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