Universities Regulator Advertises Contract to Help Manage Potential Closures

File photo of university graduates on Oct. 12, 2011. Chris Radburn/PA

The universities regulator has announced a £4 million tender to hire consultants for assessing financial risk at higher education institutions, amid sector-wide challenges.

According to the bid opened by the Office for Students (OfS) last week, contractors will help the watchdog ensure that students’ interests are protected during any changes or transitions, “including potential market exits.”

The duration of the contract is expected to last three years.

The Office for Students (OfS) told The Epoch Times on Monday that it opened the tender to obtain additional expertise and resources to help them with their financial monitoring responsibilities, which the government recently had made a focus of the watchdog’s operations.

“The selected contractors will work with us to understand the financial position of individual higher education providers and the plans they have in place as they respond to and address the wider financial challenges, as discussed in our recent annual financial report,” the OfS spokesperson said.

“The financial sustainability of the sector continues to be a high organisational priority for the OfS,” the spokesperson added.

HE Funding Models Must Change

Monitoring the financial sustainability of universities by the OfS formed part of the government’s response to increasing financial challenges within the sector.

A report published by the OfS in May warned that by 2026–2027, nearly two-thirds of higher education institutions will be in deficit.

Susan Lapworth, the OfS’s chief executive, gave a stark warning at the time that an increasing number of institutions “will need to make significant changes to their funding model in the near future to avoid facing a material risk of closure.”

According to the Universities and Colleges Union, 67 universities in the UK are going through restructuring, redundancies and course closures, with the union recently called on the government to issue emergency rescue packages to institutions struggling with their finances.

So far, the position from the new Labour government on the prospect of potential bailouts appears to mirror that of its Conservative predecessor, with Education Secretary Bridget Phillipson saying universities are autonomous and are expected to manage their own budgets, “and I would expect them to do that without seeking any calls on the taxpayer.”

A review on the OfS—“Fit for Future”—published last month to coincide with the reorganisation of the watchdog’s priorities had heard higher education sector leaders expressed concerns over institutional finances. Report authors acknowledged these concerns, but told higher education institutions that “trade-offs will need to be made” for the sector to remain viable.

“Not every provider will be able to grow their way out of this period of financial contraction. Many will need to review current operating models, and some will need to plan to deliver their offer with more limited resources, as income declines in the future,” the report had said.

Fears of ‘Disorderly’ Closures

The OfS’s restructure comes after a report from the University of Warwick and consultancy firm Public First advised the government establish a £2.5 billion fund to support universities at risk of closure, arguing a proactive approach to risk management was needed in the face of so many higher education institutions experiencing financial difficulty.

Where a restructure is not possible and closure is the only outcome, report authors suggested a special administration regime could be introduced to manage institutions so they can have a “more orderly form of exit.”

The report said that if institutions were allowed to close “in a disorderly way,” there was a “risk of contagion” which could affect the whole HE sector. Authors warned lenders could become more cautious about lending to other institutions, as well as current students and applicants losing confidence in the sector.

However, authors did not propose a raising of tuition fees or preserving the status quo, rather that changes “need to be managed in a strategic way” amid recognition that the education sector will not always grow.

Reexamining Higher Education

Similarly, others have argued that post-18 education as a whole needs to be reorganised to better respond to skills demands in the labour market.

Last month, education think tank EDSK released a report calling for all tertiary education streams to be overseen by one body, giving equal footing to university degrees and other forms of adult education, both vocational and academic.

EDSK Director Tom Richmond had told The Epoch Times that the current higher education system is “heavily skewed towards three-year residential full-time undergraduate degrees, which is a hugely expensive and inflexible way of upskilling and reskilling both young people and adults.”

“It would be far cheaper for government and far better for learners if more flexible pathways were available to achieving the same goal of a more skilled workforce. This would mean rethinking how, when and where government invests in every part of tertiary education,” he added.

The Epoch Times contacted the Department for Education for comment.