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Should reports of falling student numbers worry investors?

Should reports of falling student numbers worry investors?

The number of students entering UK universities seems to somehow be a matter of debate each year; different research bodies have different figures, even though the pool of new undergraduates is presumably of a fixed size.

The problem comes in when figures saying there is a decrease are given more weight than more stable figures. With the attention student accommodation investment is getting only growing, many investors understandably might be worried at a lack of tenants – but is this worry justified?

The answer is mixed, as it often is.

On the one hand, it appears to be at least possible that the overall number of students has been falling in the past few years. However, it is important to look at this fall in context: whilst the recent Student Housing Review from GVA does show a fall, it is a reduction of as little as 2%. This also must be placed against the backdrop of rises of between 5% and 10% recorded over the last decade, particularly from the EU.

Rather than a relatively small fall in applications being something that should worry investors, perhaps it should instead be seen as a natural levelling in the market. This is a good thing as it promotes longer term stability.

Looking to the future, another worry for investors is whether the UK will remain as attractive to foreign students once the Brexit process is complete. The separation from the EU combined with a government which appears to be hostile to foreign students, has some worried that the number of those who are traditionally considered the best tenants will fall. It is a fair worry, but another case where a deeper look reveals a more complex picture.

It appears that foreign student numbers are more dependent on currency markets rather than any perceptions of hostility or a reaction to national politics. For instance, it is true that the number of foreign students from India has slumped recently, but surely that is more to do with the fact that the Indian Rupee has dropped 17% against the Pound in the last year, making it almost 20% more expensive to live in the UK? Likewise, the Nigerian Naira has fallen so much over the last five years that it is now more than 100% more expensive to study here than it was half a decade ago.

So if we can take this as a reasonably accurate measure, we can begin to look at the other side of the coin. Whereas it is more expensive for Indians and Nigerians, it is much cheaper for Chinese students. Between 2005 and 2015 the Renminbi grew spectacularly against the Pound and it is now almost 50% cheaper for Chinese people to study in the UK than it previously was. It does not seem likely to be a coincidence that student applications from China more than doubled over that period.

It is good that investors are engaged with the data when making a decision on future investments – after all, this is a business decision. However, it is worth remembering that headlines about falling student numbers do not tell the whole story, and it is always worth looking a bit deeper.

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