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 their inquiry into university funding and the threat of insolvency.
The evidence follows last week’s gloomy forecast from England’s higher education regulator, the Office for Students (OfS), which warned that three in four universities were likely to be in the red next year as financial turmoil continues in the sector.
MPs were told on Tuesday that of the 50 institutions identified as vulnerable, 24 were at more immediate risk and could be forced to stop offering degree-awarding courses within the next 12 months.
Susan Lapworth, the chief executive of the OfS, sought to allay fears, reassuring MPs that it did not mean the regulator was expecting any of the institutions to exit “in a disorderly way”.
“The risk assessment is us being pretty conservative, to make sure we are on the front foot, and we are engaging and having all the right conversations with each institution and a wider range of stakeholders. We are not saying that we’re expecting any of those to exit in a disorderly way imminently,” she said.
The committee heard that smaller institutions were at greater risk. Of the 50 identified, 30 were described as “smaller” while the rest each had in excess of 3,000 students. “So we think about them as large in this context,” Lapworth said.
As well as universities, a range of smaller higher education institutions that are often specialist providers are registered with the OfS. “The pattern generally is that the smaller ones are those that we are more worried about,” Lapworth added.
The committee heard that a number of providers had already exited the market, including Schumacher College in Devon, which closed its degree-awarding courses with immediate effect last year, plus the Academy of Live and Recorded Arts (ALRA), which closed in 2022.
Of the 24 institutions revealed to be at risk of exiting the market within 12 months, 17 were described as small and the remaining seven each had more than 3,000 students. By way of context, England’s biggest universities have tens of thousands of students.
The committee chair, Helen Hayes, said MPs had been told during a confidential roundtable discussion with universities that an unnamed provider could collapse before the end of the year. “Given that we are in late November now, that was a warning of a potential imminent collapse of a higher education institution.”
The universities minister, Jacqui Smith, who was also giving evidence, was asked if that was her understanding of the urgency of the situation facing some universities. Smith replied: “I don’t think I would necessarily say before the end of the year that there is an imminent collapse, no.”
She accepted however that the government needed to bring financial sustainability to the sector, which is why it had agreed to allow an increase in domestic tuition fees 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 fund maintenance grants for disadvantaged students.
A Department for Education spokesperson said: “This government inherited a university sector facing serious financial challenges, with tuition fees frozen for seven years.
They added: “We have taken action to put the sector on a secure financial footing, including committing to raise the maximum cap on tuition fees annually and refocusing the OfS to support universities to face the challenges of the future.”
