Learndirect Ltd appears to be on the brink of collapse, after a fresh round of redundancies belied the fact that its efforts to generate new business have proved “impossible”.

FE Week understands that the UK’s largest FE provider told the vast majority of its staff on April 23 that they are likely to lose their jobs next month as it prepares to “run down all areas”.

“The business has looked at every way possible that it can to generate new business after July 2018 but given the ESFA’s position this has proved to be impossible,” management wrote in a letter sent to staff across the business on Monday, seen by FE Week.

“We need to plan the run-down of all areas so that we can finish all outstanding activity by this point. These changes will have a direct impact on your role in that it will cease to exist once these proposed changes take effect.”

ESFA funding for adult skills and apprenticeships will not be available to Learndirect after July 2018, in punishment for the grade four it received from Ofsted last year.

We need to plan the run-down of all areas

An initial round of redundancies directly linked to this loss began in February for a small number of its 1,500 staff, but recent developments in other potential revenue streams appear now to have proven fatal.

The provider recently said goodbye to contracts with the Home Office and the Standards and Testing Agency, respectively to deliver the Life in the UK test for citizenship applicants and the professional skills tests for teachers respectively, which brought in a combined income of £10.8 million this year.

And it is understood that Learndirect has also been unsuccessful in sourcing new income from the European Social Fund – cash that the UK receives as a member state of the EU to increase job opportunities and help people to improve their skill levels.

The company claimed in its most recent accounts that it had “other sources” of “growing” cash, such as ESF contracts, which would be used to keep the company afloat after its adult skills and apprenticeships funding ended.

It had ESF funding amounting to just shy of £50 million to use up until July, but the ESFA has told Learndirect outright that it would not be awarded any more after that date.

The ESFA sent letters out last month to all other providers who were successful in their bids to extend their ESF, which have received an extension until March 2019 and additional funds.

The only other bodies that Learndirect could ask for access to ESF cash from would be the Department for Work and Pensions and the Big Lottery Fund – which administer the funding and provide match funding alongside the DfE.

Both organisations told FE Week they have no intention of handing the provider an extension.

Learndirect was privatised and sold to Lloyds Development Capital (LDC), the private equity arm of Lloyds Bank, in 2011. Its parent group is called Pimco Holdings Ltd.

As revealed in Learndirect’s accounts from November, Pimco has debts worth £48.5 million, plus a loan of £2.9 million from LDC, both of which need to be paid back from November 2018.

Your role will cease to exist once these proposed changes take effect

There is a further loan from LDC of £48.8 million which will be repayable in May 2020.

Pimco’s ability to repay, refinance or extend these loans will depend on the performance of its subsidiaries – including Leanrdirect – over the next 12 months.

“The medium-term strategy of the group is to continue to grow the value in its ongoing businesses (principally Learndirect Apprenticeships Ltd, Learndirect Professional and the ESF contracts for adult skills provision) in order to be able to repay its liabilities in due course,” the accounts said.

This plan has been dealt a financial hammer blow by Learndirect’s failed attempts to secure new ESF cash.

A spokesperson for LDC would not discuss Learndirect’s survival when FE Week asked for comment.

Learndirect also refused to comment.

A 14-day redundancy consultation period immediately commenced following the letter sent to staff on April 23.

The Learndirect saga started with a legal battle with Ofsted when the nation’s biggest FE provider unsuccessfully challenged its grade four report in the High Court.

The subsequent fallout led to the government singling the provider out for special treatment by allowing it to see through the end of their current contracts – instead of ending them within the usual three-month termination period.

It was then subject to investigations from the National Audit Office and Public Accounts Committee.

PICTURE: Learndirect Ltd’s chief executive Andy Palmer appearing at a PAC hearing in January

College principals have been lambasted as “greedy and hopelessly out of touch” by the University and College Union, after new analysis showed a third enjoyed a pay rise of more than 10 per cent in 2016/17.

Data on last year’s college accounts was released this morning by the Department for Education.

It revealed that 17 principals earned salaries of over £200,000, and the union’s analysis of the 220 colleges included in the data found that 81 (37 per cent) gave their principal a bumper pay rise of more than 10 per cent.

These massive raises are all the more controversial, given that college staff across the country have been driven to strike action after they were offered a measly a one-per-cent increase of their own.

The union also pointed out that several colleges – including the likes of Hull College Group and Bradford College, both of which are planning huge job cuts – were not included in the data raising “serious concerns” about accountability.

Vision West Nottinghamshire College, whose principal was paid £275,000 in 2015/16, was also omitted from today’s release.

The accounts data can include pay for more than one post-holder because of ongoing mergers across the country – but the UCU said this is “no excuse” for inflating leadership pay.

“College principals who pocket huge pay rises while pleading poverty on staff pay look greedy and hopelessly out of touch,” said UCU general secretary Sally Hunt.

“Many of the worst offenders are at recently merged colleges, but we are clear that mergers are no excuse for inflating senior pay.

“The fact that several colleges are not included in the data also raises serious questions about accountability to students and taxpayers. We urgently need much greater transparency in how senior pay is decided to ensure that leaders at all colleges can be held to account.”

The UCU told FE Week in December that colleges must justify staff who are paid over £150,000 a year, after our analysis of 2015/16 accounts showed 71 leaders earned salaries of that size or more.

Today’s publication of accounts show that 73 principals alone earned £150,000 or more in 2016/17.

The figures also confirm FE Week’s exclusive story last month, which revealed Matt Hamnett, the former principal of North Hertfordshire College, was the highest-paid principal last year.

He was paid £294,000 on top of a £47,000 pension contribution and benefits in kind worth £1,000 last year – or just over one per cent of its entire turnover of £30 million.

The universities minister has backed FE representation on the board of the new regulatory body for higher education.

Sam Gyimah’s remarks to the Commons education select committee this morning followed a heated debate in parliament last night, in which senior MPs from both sides of the political divide made renewed demands for the sector to be represented on the Office for Students.

“It’s an idea that I’m supportive of, yes,” Mr Gyimah (pictured above) said in response to committee chair Robert Halfon.

Mr Gyimah said the government “had the message loud and clear”, and that OfS chair Michael Barber was “supportive” too.

And Philippa Lloyd, the director general for HE and FE at the Department for Education, answered Mr Halfon’s question with a resounding “yes, yes”.

The OfS was launched on April 1 as the new regulator for HE providers, but complaints have been mounting throughout 2018 about the lack of FE representation on its board – despite the large number of people studying HE at FE institutions.

During last night’s debate on the OfS, which was called by the Labour party, Mr Halfon said he was “concerned” about this omission.

“Further education and apprenticeships play a vital role in access to HE for the most disadvantaged and are crucial to building the skills base and productivity of our country, but they are so often excluded from bodies of this kind,” he said.

He urged the government to “make it a priority to recruit a serious representative” from the FE sector.

Tottenham MP David Lammy, who backed FE Week’s #SaveOurAdultEducation campaign last year, said it would be a “mistake” for FE not to be represented in “such an important body, which is regulator, funder and has important levers in relation to the provider”.

“I do hope that the minister will look again at the important role of FE,” he said.

Speaking on behalf of the government, Mr Gyimah noted the “points that have been made about the composition of the board” – but made no commitments.

“The secretary of state’s first set of strategic guidance to the OfS set a very clear expectation that apprenticeships must be taken into account whenever the OfS exercises its functions, and that apprentices must be represented within its widening access and participation activity,” he added. 

During an earlier education committee hearing on March 27, Mr Barber said he would “welcome good applications from the FE sector” to replace Toby Young, who resigned in disgrace from the board in January.

In a follow-up letter to Mr Halfon, dated April 5, Mr Barber wrote that the OfS would “welcome high-quality applications from candidates from the further education sector during all recruitment exercises to the board”.

The first of these is set for this month when the DfE “launches a new campaign for the student experience board member this month”.

However, recruitment has yet to begin, and will be launched in due course, the DfE admitted today.

Mr Barber also said he had appointed “another member of the student panel with experience of both further education and apprenticeships”.

That person would sit on the panel alongside NUS president Shakira Martin who “plays an important role as a graduate of, and advocate for, the FE sector”.

“We expect to be held to account by all of our student panel members and value the full range of their experiences and expertise,” Mr Barber wrote.

Emily Chapman, NUS vice president for FE, said the union had “been saying for a long time that the government must show its understanding of the central role colleges play”, and Mr Gyimah’s comments showed “the government is beginning to recognise students like the ones studying for a HE course in an FE environment.”