A large training provider for the HGV industry has called in the administrators – blaming inadequate funding levels that are failing to cover the true cost of delivery.
System Group Ltd informed “dismayed” staff today of the business’s closure. It puts more than 100 people out of work and over 2,000 learners, who are mostly only skills bootcamps, having to find other places to complete their training.
System Group delivers transport and logistics apprenticeships to around 500 apprentices nationally and holds adult education budget contracts in the Greater Manchester Combined Authority and West Midlands Combined Authority worth £2 million and £300,000 respectively.
It had become one of the government’s main providers of HGV licence and driving skills bootcamps – a major skills shortage area that ministers are trying to tackle.
FE Week understands large employers such as Sainsbury’s, Next, and Royal Mail will be affected.
System Group, which is owned by investment firm Rcapital, made a loss of £1.1 million in the year ending April 2021, according to its latest accounts.
A spokesperson for Rcapital blamed insufficient government funding rates on the decision to close.
“The directors came to the difficult decision that System Group showed no real prospect of trading profitably, owing to the fact that the costs of training were significantly higher than the grants received from public bodies to train our students,” the spokesperson said.
“Especially given the current economic environment and high levels of inflation, System Group’s business model was therefore not sustainable.”
The comments will resonate with many other providers across the country who have complained that the funding offered for many courses and apprenticeships does not meet the true cost of delivery – an issue that has become particularly acute in recent months.
Association of Employment and Learning Providers chief executive Jane Hickie said: “Many training providers are extremely concerned about what the future holds, and, despite unprecedented inflation, some funding rates have not been reviewed for many years. Unless urgent action is taken, we will sadly see more providers driven out of the market, and therefore unable to deliver critical skills programmes.”
Eddie Williams and Tim Higgins of accounting firm PwC have been appointed as joint administrators of System Group.
PwC said: “Although the business has historically broken even, or has been marginally cash generative, it has been impacted by challenging conditions around a number of key education programmes in the sector and experienced severe liquidity challenges.”
System Group, headquartered in Liverpool, is rated ‘good’ by Ofsted and has delivered transport and logistics training for more than 25 years.
Employees who lost their job today told FE Week of their “dismay” and “anger” and hit out at management for a “lack of compassion” in how they communicated the closure.
“It is just before Christmas and people don’t know whether they’re going to be paid. Staff are rightly upset,” said one staff member who wished to remain unnamed.
System Group currently has 132 full time employees. Of those, 105 have been made redundant immediately, with 27 retained in the short term to support the administrators.
PwC’s Eddie Williams said: “We know that this will be an incredibly difficult time for staff and the learners. Our team will be doing everything possible to support the employees affected. In parallel, we will be rapidly engaging with retained employees and hope to provide them with an update around their position over the coming days.
“Fundamental to this will be the ongoing support of key government customers alongside local councils as a basis for allowing the company to continue to provide ongoing services and support to learners.”
A Department for Education spokesperson said: “We are working with the appointed administrators to minimise the impact on employers and learners.
“Our priority remains finding high quality alternative training providers for apprentices and anyone enrolled on Skills Bootcamps so they can complete their training.”