Colleges lost more than #163;10 million of income in a year as a consequence of tight restrictions on student visas that prevented them from recruiting overseas students, government research has found.
According to a survey by the Department for Business, Innovation and Skills (BIS), the number of non-EU students at FE colleges fell from 13,333 in 2010-11 to 10,601 the following year. That meant college income from foreign students dropped from #163;52.6 million to #163;41.6 million.
The change came after the Home Office introduced new restrictions on international students' right to work, barring them from more than 10 hours' paid work a week, compared with 20 hours for university students, and preventing them from staying in the UK for more than three years.
Students at colleges also have to pass an external English language test, while universities can administer their own.
Grimsby Institute told the researchers that recruitment had been hit so hard that it had "mothballed" one of its halls of residence, saying "we just haven't got the students". Numbers fell from 105 in 2010 to just seven last year. Had numbers remained at the higher level, it would have been worth more than #163;1 million to the Lincolnshire college.
At Ealing, Hammersmith and West London College, which won a Queen's Award for Enterprise for its work with international students, numbers fell from 1,300 in 2010 to 870 last year, although numbers this year are expected to rebound to 1,500. International recruitment accounts for 12 per cent of the college's income.
"The government just doesn't seem to get that it's a massive decrease in the local economy," said Rachel Gurney, international contract manager at the college.
The Home Office has said its focus is on continuing to attract "the brightest and the best" while reducing overall immigration figures. "It is vital that we continue to attract the brightest and the best international students but we have to be more selective about who can come here and how long they can stay," said Damian Green, then immigration minister, in 2012.
Ministers have rejected calls by MPs to take international student numbers out of immigration figures, on the basis that students usually leave the country once their course is complete.
The requirement for students to have proficiency in the English language has meant many colleges dropping classes in English for speakers of other languages. Chichester College in West Sussex told the researchers that they had to make five members of staff redundant as a result.
The BIS research found that colleges were responding to the restrictions by setting up campuses abroad, as with the Association of Colleges' (AoC) India initiative, increasing the number of short courses that students can pursue on short stay visas and building partnerships with international employers who can generate a steady stream of learners.
"You can't argue with the figures that show the number of students coming to colleges has gone down since 2010, and you have to assume that the immigration legislation has affected that," said John Mountford, international director of the AoC.
Potential students now face an additional barrier, with the imposition of face-to-face "credibility interviews" to determine whether they are genuinely coming to the UK to study. "I don't think it's going to get any easier in the short or medium term," said Mr Mountford, although he added that student recruitment was beginning to increase again.
Colleges said any further restrictions would be hugely damaging. "It would be disastrous. Disastrous," said one principal.