New research highlights economic benefits of UK’s Graduate route

Next week, the Migration Advisory Committee (MAC) is due to publish a report on the UK’s Graduate visa route, after being commissioned by the Home Secretary in March to carry out a ‘rapid review’ of the post-study immigration route.

The review forms part of the government’s five-point plan to reduce net migration and aims to verify whether the Graduate route is operating in the best interests and priorities of the UK, and ensure steps are being taken to prevent abuse.

However, the tight turnaround time for the review means the MAC has only been afforded 10 weeks to carry out the research and produce its findings to the Home Secretary by the 14 May deadline. For this reason, there has been no call for evidence and experts in the higher education sector say that there is a ‘real risk that important decisions will be taken on the basis of little robust evidence’.

To help provide some key facts and improve the evidence available to policymakers, organisations representing the higher education sector have joined forces to conduct in-depth research into the impacts of the Graduate route on the UK economy.

The new report published this week by the Higher Education Policy Institute (HEPI), Kaplan International Pathways and the National Union of Students (NUS) and undertaken by London Economics 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 visa was introduced (2022/23).

Home Office concerns over ‘abuse’ of Graduate route

First introduced in 2021 as part of the UK’s post-Brexit points-based immigration system, the Graduate route allows international students to stay in the UK and work, or look for work, at any skill level after completing their studies. It is an unsponsored route which allows students to stay for 2 years (or 3 years for PhD students).

To be eligible, a student must hold valid leave under the Student route and have successfully completed an undergraduate, postgraduate or doctoral degree with a Higher Education Provider with a track record of compliance.

Since the Graduate route was established, a total of 175,872 visas have been granted. However, the Home Office is concerned that the demand for study visas is being driven more by ‘a desire for immigration rather than education’, and that people are using people are using ‘lower tariff’ courses as a long-term route to work in the UK.

Early data suggests that only 23% of students switching from the Graduate route to the Skilled Worker route in 2023 went into graduate level jobs.

In 2023, 32% of international graduates switching into work routes earned a salary above the general threshold at the time (£26,200), with just 16% earning over £30,000 – meaning that the vast majority of those completing the Graduate route go into work earning less than the median wage of other graduates.

Graduate visa is worth £70m to UK economy

Despite the government’s concerns, the HEPI report reveals a clear benefit of the Graduate visa in that it contributes significantly to the public purse, with an estimated net benefit of £70 million in its first year.

The report’s key findings include:

• 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 and this ratio will decline significantly in the future due to the recent tightening of the rules on dependants for international students.
• The total net benefit to the UK Exchequer of hosting Graduate Route visa holders in the first full year of the scheme (2022/23) is estimated to be £70 million (or £1,240 per international graduate), disproving claims that the UK loses out financially.
• The financial benefits of the Graduate Route visa are on course to increase materially, as the Home Office estimated 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. Meanwhile, the costs are set to fall significantly as a result of the new rules on dependants.

Nick Hillman, Director of HEPI, said: “If the Graduate Route visa remains in its current guise, as I fervently hope, then the financial and productivity benefits will multiply in the years ahead. If on the other hand, the Graduate Route visa is severely restricted or even abolished, as has been rumoured, then fewer international students will come to the UK in the first place, damaging our universities, our economy and our soft power. Tougher rules would mean employers in the public and private sectors find it harder to recruit the skilled employees they need. We would all be financially and culturally poorer.”

The findings from the HEPI report are being shared with the MAC, whose own report on the Graduate route is due to be published next week.

Smith Stone Walters will share details of the MAC report and any potential consequences in due course. To be the first to hear about the latest changes in UK immigration, please sign up to our news service. Or to speak to an immigration advisor, please contact us today.