A college is pleading with the government for an urgent merger after the FE Commissioner revealed it would be insolvent without bailout funding.
City College Southampton is surviving on emergency money from the Education and Skills Funding Agency which is due to run out by February 2023.
The college has seen multiple attempts at a merger fall through in recent years due to its perilous financial position.
Leaders are currently waiting out on the outcome of a city-wide review, which got underway in Autumn 2020, of Southampton’s FE provision to find out what other merger options are available.
A report published today by the FE Commissioner solely about City College Southampton warned that the college is “currently financially unsustainable and is unlikely to be able to stand alone, even if significant savings are made”.
However, it should be “eminently possible” to identify and crystallise savings to put the college into a “much stronger position, becoming more attractive to other organisations”.
The college’s principal Sarah Stannard (pictured) criticised the government for its lack of urgency in finding a long-term solution.
She said: “Staff and students have been made to wait too long for a clear way forward. The board of governors is planning for the college to remain standalone until at least the summer of 2023 because based on our experience to date we do not believe a solution will be implemented sooner.
“However, it would really help staff morale, student confidence and local stakeholders to know that this state of limbo is resolved and there is a clear solution with a real date that everyone is committed to working towards. I very much hope that there is a clear recommendation very soon.”
Southampton Itchen MP Royston Smith said: “Frankly, I think the government has not covered itself in glory and we are in danger of being unable to deliver the FE resource that is so vital to the city of Southampton. What we need is a solution, and quickly.”
The ESFA told FE Week it has no date set for the outcome of the city-wide review.
A spokesperson said: “This is an important piece of work. It is vital that we take time to work with providers to understand the current offer, and to develop a solution that works for the Southampton area, and all its stakeholders.”
Bailout funding reaches £8 million
City College Southampton first applied for exceptional financial support from the ESFA in 2017/18 after its financial health rating dropped from ‘satisfactory’ to ‘inadequate’.
Financial issues facing the college include high staff pay and building maintenance costs combined with falling apprenticeship income and declining student numbers across all programmes. It currently teaches less than 4,000 students.
The college received £1.97 million in 2018 as a bailout. During 2019/20, the college received a further £3.46 million emergency funding from the government. This is being treated as a grant but could be turned into a loan in the future.
And in 2020/21 the college received a further £2.48 million bailout.
The college’s first proposed merger was with Southampton Solent University, as recommended in the FE Commissioner’s 2016 area review. However, this was rejected by the DfE in February 2018, because of “concerns about the suggested governance model and value for money”, Stannard said previously.
Following a “rapid” structure and prospects appraisal, supported by the ESFA and the FE Commissioner and concluding in June 2018, City College selected Ofsted grade two Eastleigh College as a merger partner.
The ESFA pulled funding for this move days before it was due to be completed, just as Stannard was preparing to step down in favour of Eastleigh’s then principal, Jan Edrich.
Without the government’s support, Eastleigh withdrew from the merger.
A later proposal to merge with neighbouring Ofsted grade three Itchen Sixth Form was also rejected by the ESFA in September 2020, owing to what it called “too much uncertainty” around the merged college’s financial viability.
Today’s FE Commissioner report said the college’s senior team are working hard to try and address “some very difficult and challenging issues” that have been long embedded in the college.
It added, however, that “more must be done to minimise the financial losses, and the senior team need to bring forward a comprehensive cost reduction plan that will make significant changes to the cost base”.
The report notes that positive changes to the board and committee structure have been recently implemented.
Stannard said: “The college has been challenged to produce a detailed financial efficiency plan, which is in progress. Spending on backlog estate maintenance has been necessary and very high over the last few years to resolve health and safety issues, such as failing roofs on historic buildings. This expenditure will be significantly reduced going forward. We have also taken action to reduce pay costs this year and will continue to do so.
“Positively, applications for September 2022 are 7 per cent up on the previous year.”