Methodology

UK revenue from education related exports and transnational education activity

Published: 16 December 2021

Introduction

Readers should note that the export estimates in this publication are based on an experimental methodology designed to accurately estimate, using the latest available evidence and data, the different aspects of the UK’s trade in education related goods and services. This includes capturing both direct expenditure and the associated expenditure that occurs where an international student visits the UK to consume those goods and services. As the methodology has been developed specifically for this purpose, the estimates are not necessarily directly comparable with goods and services breakdowns contained in ONS’ Pink Book (here) estimates, which measure the balance of payments for the UK

This technical document provides further information on the methodology used to calculate the revenue from education related exports and transnational education activities for 2019. Mostly, this is the same methodology used for the publication of revenue for education related exports and transnational education activities in 2018. Any changes from our previous methodology will be outlined in the text below. For brevity, the underlying figures used to obtain the overall figure have not been included. It is possible to calculate these figures using the steps outlined in the methodology.

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Definition of exports and transnational education

Exports

Exports are transactions between UK residents and non-residents. In most of the transactions represented in this report, the non-residents travel to the UK to procure their education-related services from a UK-based organisation. Whether tuitions fees are paid in advance of arrival or once in the UK does not impact upon the nature of the transaction.

In addition to fees, any type of transaction that is carried out by the non-resident while in the UK also counts as international trade. Therefore, any money spent on living costs is counted as a UK export.

It should be noted that in our export statistics the full value of the transaction is counted as an export; no adjustment is made to subtract any costs involved in delivering the service, or in producing and shipping the goods overseas.

Transnational education (TNE) activity

Some UK-based organisations will have subsidiaries or long-term bases outside the UK from where they sell their services. In such situations, much of the initial value of transactions will flow out of the business into the local economy – local staff, rent, consumables, etc. – only the profit will be available to be repatriated to the UK.

Additionally, where there are operational profits these may be reinvested in the foreign operations rather than being repatriated. Unlike exports where the full value of the transaction is counted, here we only count the proportion of the revenue that is repatriated to the UK.

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Data Sources

Summary

The data used to estimate education related exports and transnational education (TNE) activity are built up from many different data sources, most of which were not constructed for the purpose of estimating the export value of education services and products. This data varies in quality and in security of supply. The following sources of data have been used:

Official data sources

This includes data supplied by the Higher Education Statistics Agency (HESA) relating to, for example, international student numbers studying at Higher Education Institutions. It also includes visa application data from the Home Office. We have an understanding that the quality of this data is high and there is good reason to expect a continuation of supply.

Research evidence

Some of the figures rely on research evidence from a single study and on extrapolation of these figures to fill in gaps over time. The reports used are indicated where this is the case.

Market research from trade associations and representative bodies

These data are of varying quality and much of it is relatively new. As these organisations are often the sole source of such information it is not possible to obtain a complete understanding of the level of accuracy. Furthermore, some of the data is provided to the department through the good will of individual organisations and so there is a greater level of risk that data collection may be changed or discontinued in the future.

Publicly available data from private companies

This is the type of information published in annual reports and financial statements. In these instances, the data is not necessarily captured or presented for the purposes we are using them for so there are questions around the appropriateness of its use.

Changes in constant prices

These calculations are based on some data that is not regularly collected. In these instances, a GDP deflator has been applied to reflect the value in 2019 prices. The GDP deflators used are those published by the HMT.

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Higher Education Institutions

Fee Income

Fee income data are compiled from the Higher Education Statistics Agency (HESA) finance data record. HESA record the aggregate value of fees at Higher Education Institutions (HEIs) for EU and non-EU domiciled students. These values have been used without further calculation. Since the previous publication, HESA has included new providers in its financial data collection. This publication uses the latest financial data, which restates tuition fee income figures across multiple years to include new providers. Therefore, tuition fee figures in this publication sometimes differ from previous years.

Scholarships

Since scholarships are publicly funded the value of awards to non-EU students has been subtracted from overall fee income. The following scholarships have been included in these calculations:

Cost to government of fee loans

EU students can access student loans for fees. The proportion of these loans that are not paid back is subtracted from the fee income as this value is funded by Government. DfE does not estimate the proportion of the value of fee loans to EU students. The RAB charge for all full-time higher education student loans is currently estimated to be around 53% for 2019-20. This figure is multiplied by undergraduate EU fee income in 2019/20 to give a high-level estimate of the RAB charge to government.

Living expenditure

Weekly living costs for EU and non-EU domiciled students are estimated using the Student Income and Expenditure Survey (SIES). For 2019/20, the average weekly living costs are derived from the ad-hoc release published in support of the Post-18 Review of Education.

The calculation for average weekly living costs is derived from the mean cost of a full-time student living away from home in an academic year (39 weeks).

The annual living cost is calculated by multiplying the average weekly cost by the length of stay in the UK, this is assumed to be:

39 weeks for undergraduate EU students (it is assumed they are more likely to travel to their country of origin during the holidays)
42 weeks for undergraduate non-EU students (it is assumed they are less likely to travel to their country of origin during the holidays)
52 weeks for postgraduate students (reflects the longer course duration)

The number of students split by full-time/part-time, EU/non-EU, undergraduate/ postgraduate in each year is taken from the HESA student record. These numbers are then multiplied by the course length (weeks) and by the weekly living costs to allow a calculation of the aggregate level of living costs for EU and non-EU students. Finally, in order to estimate the figure for the academic year 2019/20, a GDP deflator has been applied to the figure.

Erasmus+

Statistics on the number of Erasmus+ students coming into the UK are published by Eurostat. Higher Education students who study in the UK under the Erasmus+ scheme do not pay fees to the UK institution but to the partner institution in their country of origin. The only contribution included in calculations for Erasmus+ students is therefore living expenditure. It is assumed that all Erasmus+ students are full time, undergraduate students studying for 39 weeks.

Research and other contracts

The value of research grants and contracts split between UK and international sources are captured through data HEIs return to HESA. This incorporates export income from academic departments' research grants and contracts, academic services and administrative/central services.

International Intellectual Property income

Information on the total value of HE Intellectual Property (IP) revenue comes from the Higher Education - Business and Community Interaction survey (HE-BCI). This provides data on the total (domestic and international) income from IP.

To estimate the proportion of HE income from IP that is exported, the estimate from London Economics research is used. London Economics took data on the total revenue and export revenue for the R&D sector in 2008. They found that 38 per cent of the R&D sector revenue was generated through exports. It is assumed that this same proportion can be applied to the education sector.

Other overseas income

This is calculated using London Economics’ research, which conducted a survey of Tier 4 sponsors. HEIs responding to questions on income sources were also asked about any income that they earn from an overseas source that is not covered elsewhere. It is therefore not clear what is covered in this category. Results were grossed up from 14 responses to the population of 165 HEIs, suggesting a high level of uncertainty in these estimates. London Economics estimated £61.6 million of HE income from other sources in 2008/09.

The growth rate over the 2004/05 to 2008/09 period was calculated by London Economics to be 12.3 per cent. This was carried forward to future values.

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Further Education

The number of international students in Further Education (FE) has been estimated using Home Office visa application data. This data is only submitted by non-EU applicants, and therefore does not include the number of EU students studying at FE providers. This means our figures will not fully capture this component of the value of education exports.

For this publication, application data was needed for the calendar year 2019, however, due to data issues it has not been possible to breakdown the numbers of applications for Further Education in Quarter 4 2019. Instead, we use the number of applications in Quarter 4 2018 as a proxy.

The volume figures are revised downwards to reflect the number of applications that are granted. This is estimated based on the proportion of Tier 4 applications granted, which will include students in other education sectors, not just FE.

In 2020, an estimated 97 per cent of Tier 4 – general student (main applicant) - visa applications were granted. Using this method, approximately 13,200 non-EU students were estimated to be studying at FE colleges in 2019.

Fee expenditure

The average value of tuition fees for international FE students is estimated using a survey conducted by the Association of Colleges.

Living expenditure

It is assumed that the weekly living expenditure for FE international students is the same as for HE students. The course duration is assumed to be 36 weeks. To calculate both fees and living expenditure for the 2019 calendar year, migration data for the first three quarters of 2019 were used, as well as fourth quarter data for 2018. Due to the lack of data availability for quarter four in 2019, it has been assumed that fourth quarter data for 2018 and 2019 would be similar in value.

Other income

This estimate is based on a London Economics’ survey of Tier 4 sponsors. FE colleges were asked to state what other income they receive that is not covered elsewhere. The responses of 21 providers (out of 429) have been scaled up to represent the whole sector.

It is difficult to identify what has been included in other income, as institutions have not specified.

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Independent Schools

These estimates are based on the Independent Schools Council (ISC) Annual Census This provides estimates of the number of EU and non-EU students studying at member schools.

Since not all EU and non-EU student study at ISC member schools, Department for Education data on independent schools has been used together with ISC data to identify the number of non-UK students studying at British Independent Schools.

Based on ISC data, 92 per cent of students are identified as boarders. Using this figure, it is possible to estimate the course fees and living expenditure of international students studying at independent schools.

No estimate for the value of living expenditure for day pupils has been produced as there is no appropriate data source for this information.

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English Language Training

All estimates for the value of English Language Training (ELT) in the UK are obtained from the Study Travel Magazine, which publishes a Global Market Report each year. This report estimates the revenue generated (from tuition fees and living expenditure) by ELT in the UK. In 2019, Study Travel Magazine survey estimated UK revenue from the English Language market was $2,683,040,353, which is £2,119,602,000 (using the survey’s quoted of exchange rate £0.790 to the dollar). It is assumed that all ELT delivered in the UK will be for international students, so all revenue can be counted as an export.

The ELT market is made up of public and private providers. State sector members have not be included due to risk of double counting. In 2012, 86 per cent of ELT providers were private providers, the remainder were public providers. As such, the Global Market Report revenue figure for the UK has been reduced by 14 per cent to reflect the risk of double counting public providers in FE estimates.

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Education Products and Services

Education related publishing

Education related publishing covers school, ELT and academic and professional books that are published and exported overseas, either physically or digitally.

The Publishing Association (PA) collects data on the sales of members and non-members. This data is scaled up to produce an estimate for the whole sector.

Education related equipment

Education-related equipment includes either physical products or software supplied to customers in the education sector. This data is collected through a survey by the British Educational Suppliers Association (BESA).

Education related broadcasting

These estimates are based on publicly available figures from annual reports from the BBC, Channel 4, and the Open University; where this data is not available, the figures are assumed constant from the previous year as with the BBC education related broadcasting figure for 2019. These broadcasters account for the majority of education-related broadcasting.

Using annual accounts and OFCOM reports, it is possible to estimate education related broadcasting revenue. A London Economics report assumes that 10 per cent of this broadcasting revenue is from exports. This figure has been applied to calculate the revenue repatriated to the UK from education related broadcasting.

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Transnational Education Activity

Higher Education

The number of HE TNE students enrolled at UK institutions overseas can be identified from HESA aggregate Offshore Records (AOR).

The Department for Business, Innovation and Skills (BIS) conducted research in 2012/13 looking at the average student revenue from HE TNE students. The estimates for HE TNE have been produced by multiplying the average revenue figures by TNE enrolments for 2019. 2019 figures are calculated by weighting 18/19 and 19/20 academic years.

Further education

The estimates for TNE income for FE colleges is based on a London Economics Survey of Tier 4 sponsors. This estimate was based on a small number of responses (23) and scaled up to represent the sector. A GDP deflator has been applied to estimate the value in 2019.

Schools

We are currently reviewing this figure and the methodology behind it, as such our estimate has a significant level of uncertainty associated with it. We have uplifted last year’s total revenue received by schools who deliver some part of the curriculum to students outside an English-speaking country by inflation and converted to sterling, using rates published by HMRC, to be consistent with previous iterations of this publication. As before, an arbitrary 10 per cent of the revenue from these activities is estimated to be repatriated to the UK. This proportion is not based on any empirical evidence.

English Language Training

This figure is based on accounts published by the British Council and Pearson, who report on the income generated from activity that develops a wider knowledge of the English Language. It is assumed that 10 per cent of the income generated from ELT overseas activity from the British Council and Pearson is repatriated to the UK.

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