Foreign students spend more than £500 million in the West Midlands every year - as much as the income generated by Birmingham's booming legal sector.

The financial contribution made by over-seas' students in the West Midlands is also equal to a fifth of the total wealth made from the city's financial services industry.

Their massive economic benefit is revealed in a new study by the British Council highlighting the economic worth of Britain's education system to the UK.

According to the British Council, overseas students spent £8.5 billion last year, representing a 39 per cent increase since 2004.

In the West Midlands, they shelled out £101.5 million on tuition fees alone.

When living expenses are factored in, the figure soars to about £500 million - a fifth of the £2.5 billion annual revenue hauled in by Birmingham's financial services sector.

British universities are increasingly keen on attracting students from outside Europe who pay more than twice as much as those in the EU.

Warwick University has about 3,500 non-European students out of a total population of 20,000. Students from overseas spend about £8,000 a year on fees, but considerably more on living expenses.

Peter Dunn, spokesman for the university, said: "It's not just the money. It is the reputation of the West Midlands. Universities can only succeed by becoming global. You can't be global if your students are from one continent."

The amount spent by foreign students in the West Midlands is also equal to a third of the economic contribution made by the region's automotive industry and a fifth of the wealth made from leisure and tourism in Birmingham.

Martin Davidson, chief executive of the British Council, the UK's largest cultural relations agency, said: "It's fantastic to have the true financial value of education to our economy confirmed.

"Fundamentally this report shows the shift of axis of our education system from one that operates predominantly domestically to one that operates on a truly international basis.

"However, our position is vulnerable. Unless we start taking education much more seriously as a global business, we will lose out to other countries who understand the value of education to their economy much better than we do."

The British Council's research shows education was worth £28 billion in total in 2003-04 including overseas' students and training exports.

The figure has leapt from £23 billion in 2001-02, largely fuelled by growing numbers of international students at British universities.

It compares to the financial sector's £19 billion, the vehicle trade's £20 billion and £14 billion from healthcare service exports.