Credit Crunched Colleges

by Sarah Dodds

A new story about the credit crunch hits the news daily at the moment and it seems that no one is immune from the downturn, even the education sector. To date, a College has not gone bust, but there is concern that as the financial situation worsens, more Colleges will become stretched and forced into mergers in order to survive.

As businesses begin to struggle, they are releasing fewer staff for Train to Gain and have less need for new recruits, reducing student numbers and College income. In the recession of the 1990s adult learning numbers increased as people re-skilled in the face of unemployment. However, the cost of accessing further education for adult learners is now more expensive and it may be that the unemployed will not be able to afford to engage in training.  Added to this expected drop in numbers is the huge amount of debt that Colleges have built up due the massive rebuilding scheme that has been ongoing for the past few years. Collectively Colleges now owe in the region of £1 billion.

This combination of dropping income and increasing debt is seen as a risk to the financial health of Colleges. The National Audit Office highlights that the number of Colleges considered to be financially weak has increases to 89, from 61 in 2005-2006, with the smaller Colleges commonly considered to be the ones at the most risk.

However, many still consider the risk to be more theoretical than real with the Department for Innovation Universities and Skills dismissing fears and commenting that ‘the Learning and Skills Council has a good, well established procedure for helping Colleges through with a financial recovery plan’.

Although the very existence of a College is unlikely to be at risk, mergers and other emergency plans may become more commonplace. Therefore, at these difficult times, it is more important than ever for Colleges to pursue money that they are owed, whether it is from students or other sources, in order to maximise and maintain their income.

Sarah Dodds is a solicitor in Burnetts’ Dispute Resolution team. If you require any assistance dealing with debts, or if you have any other disputes arising out of funding issues, please contact Burnetts on 01228 552222.

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Burnetts provides nationally recognised, specialist legal advice to schools, colleges, universities and other education providers. To find out more visit www.burnetts.co.uk.