Bailout saves WCG from going insolvent next month

A West Midlands college group has received a last-minute government bailout to avoid being declared “insolvent” next month.

Today, the Department for Education (DfE) published Further Education Commissioner (FEC) Shelagh Legrave’s ‘intervention assessment summary report’ into a financial crisis at Warwickshire College Group (WCG).

The report, signed off by Legrave in October, reveals that the college wanted government bailout loans totalling £4.7 million.

This included a £1.7 million emergency loan for “working capital” and clawbacks demanded by the Education and Skills Funding Agency (ESFA).

WCG also asked the government to refinance a £3 million loan owed to Lloyds bank, with a three year “repayment holiday” until 2027.

In a letter published alongside the report, skills minister Jacqui Smith said the DfE has approved a “financial support package” for the college.

‘Increasingly concerned’

The FEC report tells a story of a college group that struggled with strategic direction as it approached the financial brink.

Its focus on repaying debts by relying on income surpluses and selling assets left it “financially vulnerable” with cash due to “run out” in January 2025.

WCG approached the FEC in May after the chair and governors became “increasingly concerned” about what the college group would need to do to remain “financially solvent”.

In July, the college group had £1.2 million in unrestricted cash – enough to last eight days.

Staff costs were “significantly above budget” in that academic year, with £2 million in agency costs that were “insufficiently challenged” by senior management.

The ESFA also demanded a clawback of an estimated £1.4 million from apprenticeship and 16 to 19 funding claims from 2023-24, with audits “likely to go back further years”.

In a recent interview with FE Week, Legrave said the college’s financial strategy was “interesting” and “wouldn’t be one that I would have followed”.

Board lacked ‘clarity’

Board members responsible for challenging college leadership said information given to them “lacked sufficient clarity”, resulting in “limited strategic discussion”.

A staff survey in June suggested that 40 per cent of staff had “no trust” in college leadership.

Budgeting was “done late” and agreed by senior managers with “limited consultation and engagement with middle management”.

However, the commissioner praised the college’s new principal’s “positive, joined up approach to leadership and governance”.

The college group is currently run by CEO and principal Sara-Jane Watkins, who took on the job in September. The college was run by Peter Husband for an interim period after Angela Joyce left to lead Capital City College Group in January 2024.

It has also recruited a new chief financial officer, turnaround director Robert Griffiths and four new board members have been recruited to “strengthen” governance.

Recommendations from the FEC include developing a ‘single improvement plan’ covering three to five years, refreshing its holistic strategic plan, reviewing its curriculum and agreeing performance indicators to monitor progress ahead of an ‘intervention assessment stocktake in March next year.

WCG hopes to receive £1.4 million from the sale of its Malvern Hills campus after fighting a high court battle with the local council.

It also plans to sell part of its Evesham campus which is “assumed to be surplus to requirements”.

Challenges ‘not insurmountable’

Sara-Jane Watkins, WCG’s CEO and Principal said “The intervention report has highlighted some important areas where we need to improve, but we are already seeing positive steps towards change. 

“We view this intervention as an opportunity to reset our strategic plan and re-establish our ambitions for a stronger, more sustainable future.

“The challenges identified in the report are not insurmountable – they are stepping stones to refining our vision, strengthening our approach, and aligning our resources to meet the needs of our students, staff, and local communities.”

She added that securing the loan from the government demonstrates that the college is on the “right track”.

A spokesperson for the college did not respond when asked the total value of the loan.

The college group is responsible for about 13,000 students, including more than 2,000 apprentices, and has 1,300 staff across six colleges in Warwickshire and Worcestershire.

It’s made up of Evesham New College, Warwick Trident College, Rugby College, Royal Leamington Spa College, Moreton Morrell College and Pershore College.

Local MP for Warwick and Leamington Matt Western said: “I was deeply concerned to learn of the financial difficulties that the group are facing but I thoroughly welcome the involvement of the FE Commissioner and the financial support package to protect learners.  

“It is of the utmost importance that those learning at the group are not impacted by this financial situation.”