In its Financial health of the higher education sector report, which is based on forecasts submitted by higher education institutions, HEFCE shows that despite extensive public funding cuts to be implemented next year, UK universities expect their overall revenue to climb by 2014/15.

It says the rise will be driven mainly be increasing fee tuition from home and EU students – which will climb from £5.5bn to £10.2bn – and non-EU students.

“As in previous years, the sector is expecting non-EU student numbers to increase over the forecast period,” states the report. “In cash terms, the sector is expecting overseas fee income to rise 37.6% from £2,513 million in 2010-11 to £3,459 million by 2014-15.”

“As in previous years, the sector is expecting non-EU student numbers to increase over the forecast period”

Despite the sector’s positive outlook, HEFCE says it is too early to predict how the new Tier 4 visa regime introduced by the UK Border Agency (UKBA) during 2011-12 will affect international recruitment in the medium term.

It also sees a significant risk that “reputational damage” caused by the policies – as well as UKBA’s decision in August to revoke London Metropolitan University’s Tier 4 licence to sponsor students from outside the EU – could lead to a slowdown.

“At present the sector is forecasting significant growth…but these forecasts were prepared before the UKBA decision to revoke London Metropolitan University’s licence was announced,” it states.

There have been widespread reports over international students shunning the UK, particularly from markets such as India. Twenty one per cent fewer student visas were issued this year across all sectors, according to UKBA.

That said, UCAS recorded an 8.5% increase in international undergraduate applications this summer suggesting interest remains high. The UK student housing market and British Council are also bullish about the health of the sector through to 2020.

HEFCE said overall income for universities is expected to rise from £23bn in 2011/12 to £26bn by 2014-15, offsetting a fall in public funding from £7.2bn last year to £3.4bn. However, while the sector should be on a “sound financial footing” by 2014/15, some institutions may be left short of cash for future investment. “There is a risk to the quality of higher education infrastructure, which will harm the long-term sustainability of the sector,” it said.