We need to unleash the untapped entrepreneurial potential of foreign students

Over the last few weeks, there has been much debate about the increase in the number of international students coming to the UK.

This culminated last week in the recommendation by the Migration Advisory Committee that the graduate route – which allows students to stay for up to two years after they finish their studies – should be retained despite concerns that it was being used as a backdoor entry route into the UK.

That decision may yet not be positive news for the higher education sector and, as this column has discussed, the recent decline in international student applications may cause serious financial difficulties for several universities in the next few months. Unfortunately, much of the rhetoric over the last few months has focused on the negative aspects of overseas recruitment rather than looking positively at the benefits this can bring to the UK. Some of this was addressed last week when a number of leading businesses emphasised the positive impact that international students have on the UK’s skills base, future workforce, and influence overseas.

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Yet few have discussed what is currently a lost opportunity to make the most of what talented young people can do through entrepreneurship. Back in 2006, AnnaLee Saxenian of the University of California, Berkeley published a groundbreaking work entitled The New Argonauts: Regional Advantage in a Global Economy. It studied the impact of highly skilled immigrants in Silicon Valley and showed, for the first time, that Chinese and Indian scientists and engineers were running nearly a third of the region’s high-tech businesses that collectively accounted for nearly $17bn (£13bn) in sales and more than 58,000 jobs.

Since then, there have been countless studies that have confirmed the importance of immigrants in driving technology-based entrepreneurship, with more than half of the top US tech companies founded by first- or second-generation immigrants.

Indeed, the father of Apple founder Steve Jobs was a Syrian immigrant, Amazon’s Jeff Bezos is a second-generation Cuban immigrant, and Google founder Sergey Brin was born in Russia. This shouldn’t be surprising as a paper from the National Bureau of Economic Research showed immigrants in the USA perform better on nearly all the innovation measures they examined.

An increasing number of immigrant entrepreneurs, including Tesla founder Elon Musk, studied at US universities before launching their successful businesses. A study of the link between immigration and entrepreneurship by the National Foundation for American Policy showed that a quarter of all American unicorns (privately held companies valued at $1bn or more) had a founder who originally came to the US as an international student.

While the success and growth of businesses started by students are not at the same level in the UK as in the USA, the latest Higher Education Business and Community Interaction Survey shows that there are over 18,000 active businesses that were created by graduates from UK universities in 2022-23, employing over 57,500 people and generating nearly £5bn of income.

However, very few of these are from international students as current visa regulations prevent them from doing so. While home students at UK universities can set up new ventures while studying, overseas students are prevented by the terms of their visa until they complete their studies i.e., they cannot set up a business, work for a company as a director, or seek employment in a company where they hold 10% or more of the shares.

While some would argue that overseas students are here to learn and not set up businesses, they can still work up to 20 hours per week during term time (and full-time during vacations) for someone else. In other words, overseas students who work in a pub or a local café can do so with few restrictions, yet if they have bigger ambitions such as starting their own business, they can be thrown off their courses.

If this restriction were removed – perhaps with a requirement that they register their new businesses with their sponsoring institution – it would lead to higher levels of entrepreneurial activity and only benefit the UK economy in the long run. In fact, taking student numbers for 2022 as a baseline, if only one additional overseas student out of a hundred started a business while studying, this would increase the number of graduate enterprises emerging from UK higher education every year by 140%, generating an additional 6,800 new student-led firms every year.

In terms of immigration policy, politicians from all parties have argued that it must become a magnet for the best talent from around the world, and as university leaders have argued, higher education is looking to attract some of the brightest overseas students to study here.

But just imagine if we could remove the barriers to these amazing young people to use their studies, especially in science and technology, as the foundation for a new business. They would then stay here to create jobs and wealth as has happened in the USA and make a real difference to the UK economy.

Given this, I would hope that vice-chancellors, business leaders, and entrepreneurs will support the removal of this inequitable barrier to boosting technology entrepreneurship in the UK and do all they can to encourage overseas students to build the innovative firms that will make a difference to the economy in the future.