Here are this week’s highlights in the UK economy.
GDP contracted 0.2% in the third quarter. UK’s economic output declined for the first time since the start of 2021. The ONS announced that the drop was driven by the manufacturing and retail sectors, as well as the extra bank holiday in September.
Wage growth and hiring activity dropped in October. KPMG and the Recruitment and Employment Confederation reported that the number of people in permanent jobs placed by recruiters has dropped for the first time in 20 months. Pay pressure for new permanent hires also rose but is at its slowest pace in 18 months.
Housing demand dips to its fastest pace. The Royal Institution of Chartered Surveyors’ New Buyer Inquiries index dropped to -55% in October from -36% in September. This is the fifth largest decline since 1999. Negative buyer demand was recorded across all parts of the UK.
Mortgage repossessions rise higher. A total of 744 mortgage repossessions by county court bailiffs were recorded in the third quarter, up by 91% year over year. Mortgage repossessions orders, on the other hand, increased to 2,491, up by 103% from the previous year, according to the Ministry of Justice (MoJ).
Grocery inflation hit a record high. Prices of groceries rose 14.7% higher compared to a year ago, according to Kantar Worldpanel. The group estimates that shoppers would need to pay an extra £682 annually if they remained buying the same type of products.
Housebuilder Persimmon reports drop in sales and prices of new-build homes. Soaring interest rates and economic uncertainty have driven cancellation rates to 28% in the past six weeks and the net weekly sales rate at each outlet dropping to 0.48% in the same period.
University expansion can’t meet student housing demand. Financial Times reported that the undersupply of housing for university students has forced many students to live far from campuses, especially in Durham, Bristol, Manchester, Glasgow and York. The country’s universities had a 15% rise in admissions as the system transitioned to teacher-assessment basis instead of the traditional qualifying exams.
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Data from the Universities and Colleges Admissions Service (UCAS) reveal that at the end the 2021 cycle, more than 492,000 university applicants were admitted to higher education, or 81.1% of the total number who applied. In a separate report, the group also found out that 9 out of 10 students regard that the country is a “positive place to study”, which is reflected in the strong appetite from overseas applicants.
The demand from international students for a place in UK universities, both in the undergraduate and postgraduate levels, continues to grow. According to Erudera, the total foreign student population in the country rose to more than 605,000 enrollees in the 2020 to 2021 period, rising 8.71% year over year. University College London hosts the most number of students from overseas with 23,360 enrollees.
But everything is going to change in the coming months — that is, if Suella Braverman’s proposal is to push through. The home secretary recommended in October that she’s considering putting measures to limit the number of dependents that international students can tag along to reduce the number of people piggybacking on each student’s visa. This was met with strong opposition from university officials and groups who cited research that the country will lose a lot of revenues if there’s a limit imposed on international student admissions.
This proposal presents a dilemma to the public as the country is currently assessing its migration policies. Most international students can afford to pay the cost-of-living requirements in the country despite the very high inflation. The ONS estimated that in 2018 to 2019, the average annual rent was £5,403 for accommodation owned by universities and £6,462 for the private sector. And with the soaring inflation today, this has clearly gone up. The University of Oxford estimates that living expenses range between £1,290 and £1,840 per month in 2023 to 2024, with accommodation costing £715 to £860 monthly.
With their spending power, the growth of international students is a boon for the national economy. The Higher Education Policy Institute (HEPI) estimates that they contribute £25.9 billion, as students spend for food, accommodation, and tuition fees.
However, there’s a dearth in accommodation facilities. Purpose-built student accommodations (PBSA) are not enough, and private rentals or houses of multiple occupation (HMOs) near universities cannot contain the pressure brought by the continued influx of students seeking a place to stay.
Universities have taken in a high number of international applicants even during the peak of the pandemic, but because affordability is not an issue for them, especially for Chinese students that dominate the total population, they can compete in the very tight rental market. This leaves a large number of local students being priced out in areas where they are supposed to stay doing full-time studies.
Furthermore, with the post-study work visa, international students can continue leasing their current rooms since they are permitted to stay in the country for two years after graduation (or three years for PhD degree holders), which further pushes vacancies lower.
Emily Walsh, Principal Lecturer in Law at the University of Portsmouth, wrote an analysis on the UK’s student accommodation providers and the confusing regulation involved. In a nutshell, Walsh calls for accountability on the part of local planning authorities and universities in ensuring that regulations promote the welfare of students.
Braverman’s proposal may reduce some pressure in the student rental market at some point when potential students switch to other countries that allow family members to come with them. It's effective at reducing the number of family members who, according to the home secretary, are not working or employed in low-skilled jobs that do not contribute to the economy, but this comes at the expense of losing billions of earnings for the country.
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