FE Commissioner tells MPs he thinks dozens of colleges could run out of cash next year

There are 30 to 40 colleges “at risk of running out of cash” following the coronavirus crisis, the FE Commissioner has said.

Richard Atkins, who has been undertaking analysis of college financial health with the Education and Skills Funding Agency throughout the pandemic, revealed the number whilst giving evidence to the education select committee this morning.

However, he said this could change and it would be “foolish” of him to provide a precise figure until he sees full financial returns, which are due on July 31.

It comes two weeks after Association of Colleges chief executive David Hughes warned that total income across colleges in England could fall by £2 billion – from £7 billion to £5 billion – next year as the “enormous impact” of Covid-19 bites.

The FE Commissioner said: “I have been working closely with colleagues in the ESFA to analyse the financial health of colleges and in particular to look at their cash flow forecasts. I have a pretty good idea of what colleges are at risk of running out of cash.

“Those colleges wouldn’t necessarily need intervention. They may require more funding and they need to come forward and ask for that. We may respond to that in a number of ways.

“The first place colleges go for financial support is to their banks. If they are not able to borrow from their bank the bank of last resort would be the government, there is a fund to support colleges.”

He added that the “figure in my head” and he is “working on the assumption” that “at risk there are 30 to 40 colleges going into the next financial year”, but this may change when he sees their financial return on July 31 “where they are going to present their budget and financial outlook for next year”.

Atkins was keen to stress “how difficult for principals it is this year and finance directors”, particularly their job of putting together a costed curriculum plan which is the “engine room of any college”.

“A costed curriculum plan is where colleges need to plan for the number of students, the average class sizes, the number of staff, the costs and contributions to overheads.

“It sounds quite straightforward but in colleges with thousands of learners it is always challenging but this year with the potential of a 50 per cent drop in apprenticeship starts, unpredictable 16 to 18 numbers, with HE numbers being subject to the new 5 per cent cap, plus the commercial income that a lot of colleges have lost already, it is a complex picture for each college.”

The commissioner concluded: “At the moment 30 to 40 colleges would be of concern but until I have seen their detailed financial return it would be foolish of me to give a precise number.”