The UK's standing as an attractive place for foreign students to study is being put at risk by the Government's attempts to cut net migration and confusing work rules, a report claims.
The number of international students coming into the country has dropped in the last three years, and if this continues it could cause damage to the economy as well as put financial pressure on universities, according to a study by the IPPR think-tank.
It argues that a significant reason for the drop is the Home Office's attempt at slashing net migration to the tens of thousands - a move fuelled by public fears over the issue.
In order to meet this target, ministers need to drive down the number of legitimate overseas students, who are counted in the figures, it says.
"International students remaining in the UK for longer than 12 months are officially counted as migrants in government statistics, and as a result, international students have become a prime target for efforts to reduce overall migrant numbers," the IPPR says.
"Concerns about migrants abusing the student visa route in order to work or stay in the UK without permission are also creating additional pressure for reductions in international student numbers."
The report, which comes on the day the latest migration statistics are due to be published, says that while the UK should be hanging out welcome banners for foreign students, there is instead confusion within government over their policies.
The Home Office is pursuing policies that will clamp down on foreign student numbers and at the same time the Business Department has said that the numbers of students coming to the UK from abroad could rise by 15-20% in the next five years, the IPPR claims.
The think-tank says that foreign students contribute around £13 billion to the UK economy and generate around 70,000 jobs, but adds that its analysis suggests that the numbers coming to the UK have fallen by 29% since 2010.
It adds that the overall reduction in international student numbers since 2010 has been concentrated among particular nationalities.
Much of the decline in student visas issued to individuals outside the EU between 2011 and 2012 is down to falls of 62%, 38% and 30% in the numbers of students from Pakistan, India and Bangladesh during that period, the report says.
It also says that the UK's work offer for students after their studies is poorer than that of many competing nations. Recent changes mean that those who want to stay in the UK to work must apply for a different visa and gain a graduate level job.
The IPPR suggests that the government could make the UK a more appealing place by making this system less complicated, and following the lead of countries like Australia and allow international students to work more hours while they are studying.
IPPR research fellow Alice Sachrajda said: "The UK should be hanging out a banner saying: 'Foreign students welcome here'.
"Instead, the UK is doing the opposite. We are pursuing policies which could cause lasting damage to a sector of our economy worth £13 billion and in which the UK is a world leader.
"The reduction in foreign student numbers is being driven by the net migration target, which is designed to meet the public's concern about high immigration. But foreign students are not the focus of that concern, because as the report shows they come for a relatively short time, go home after their studies and contribute much more than they take out while they are here."
She added that the Government is right to be vigilant over abuse of student visas, but added that a strict approach should not stop the Government from committing to increasing international student numbers.
During a visit to India earlier this month, Prime Minister David Cameron sought to assure students and business leaders his bid to slash new arrivals to the UK should not stop them coming.
He said he remained committed to "tough" action to reduce net migration to the tens of thousands by 2015 - which has led to a perception in India that Britain is less welcoming than economic rivals - but insisted there was "no limit" to the number of genuine foreign students the UK would accept.
A Home Office spokeswoman said: "International students make an important contribution to our economy and the UK's education system is one of the best in the world.
"To maintain this reputation it is vital we tackle the widespread abuse of the student visa system we saw in the past, while making sure Britain remains open for business. This year we have conducted more than 450 compliance visits to educational institutions and since we have tightened our rules more than 600 colleges have lost the ability to bring in international students.
"However, there is no limit on the number of genuine international students who can come here and latest figures show that sponsored student visa applications for our world class universities have increased."