Fifty higher education providers in England are at risk of exiting the market within the next two to three years, MPs on the House of Commons education committee have been told as part of an inquiry into university funding and the threat of bankruptcy.
The evidence follows a gloomy forecast last week from England’s higher education regulator, the Office for Students (OfS), which warned that three out of four universities are likely to make losses next year as financial turmoil continues across the sector.
MPs were told on Tuesday that 24 of the 50 institutions identified as vulnerable are at immediate risk and could be forced to stop offering degree-granting courses within the next 12 months.
OfS chief executive Susan Lapworth sought to allay fears, reassuring MPs that this did not mean the regulator was expecting a “disorderly exit” from any institution.
“The risk assessment is that we’re being fairly conservative, making sure we’re on the front foot, and we’re engaging with every institution and a wide range of stakeholders and having all the right conversations. We’re not saying we’re expecting any of them to exit in a disorderly manner any time soon,” she said.
The committee heard that smaller institutions are at greater risk. Of the 50 identified, 30 were described as “small” while the rest had more than 3,000 students each. “So we think about them broadly in that context,” Lapworth said.
As well as universities, many smaller higher education institutions, which are often specialist providers, are registered with the OfS. “Generally the pattern is that the smaller ones are the ones we’re more concerned about,” Lapworth said.
The committee heard that a number of providers have already exited the market, including Schumacher College in Devon, which closed its degree-award courses with immediate effect last year, as well as the Academy of Live and Recorded Arts (ALRA), which closes in 2022.
Of the 24 institutions reported to be at risk of exiting the market within 12 months, 17 were described as small and the remaining seven had more than 3,000 students. For context, England’s largest universities have thousands of students.
Committee chair Helen Hayes said MPs were told during a confidential roundtable discussion with universities that an unnamed provider could collapse before the end of the year. “Given that we are now at the end of November, this was a warning of the potentially imminent collapse of an institution of higher education.”
The Universities Minister, Jacqui Smith, who was also giving evidence, was asked whether he understood the urgency of the situation facing some universities. Smith replied: “I don’t think I would say before the end of the year that there is an imminent collapse, no.”
However, he acknowledged that the government needs to bring financial stability to the sector, which is why it has agreed to allow domestic tuition fees to rise in line with inflation.
Smith defended the proposed introduction of a levy on international student tuition fees, details of which will be outlined in Wednesday’s Budget, saying it would provide a maintenance grant for disadvantaged students.
A Department for Education spokesperson said: “This government inherits a university sector facing severe financial challenges, with tuition fees frozen for seven years.
He added: “We have taken action to get the sector on a secure financial footing, including raising the cap on annual tuition fees and refocusing the OfS to support universities to meet future challenges.”
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