A Berkshire college has been placed in intervention after facing “serious cashflow pressures” from the high costs associated with a private finance initiative (PFI) contract.
Newbury College has also blamed “complexities” in the planning system for not being able to sell its Mayfield Point site, causing delays to much-needed cash receipts.
The Department for Education issued the intervention notice today after a “consequential slippage” in repayments of funding advances. Severe cashflow issues are one of several possible financial triggers for intervention.
FE Week understands the college has not received emergency funding.
Newbury College was unable to put a figure on its money troubles, but said it was working with the FE Commissioner to “quantify” the financial risk.
Controversial contracts
Newbury College is one of only a few FE colleges to operate under a PFI. The contracts, greatly expanded under New Labour in the 1990s, saw private firms build and operated public sector infrastructure and facilities, with above-inflation repayments scheduled over many years.
PFIs, typically used to fund schools, prisons and hospitals, were scrapped in 2018 after costs to the taxpayer reportedly hit £200 billion.
The college’s latest financial accounts outlined the “very high costs” of its PFI, which is due to end in 2027.
Accounts show deficits from PFI payments amounting to about £460,000 each year since 2018-19, including massive deficits from interest payments. It had a bill of £154,000 in 2018-19 for the interest alone.
The college will no longer face financial deficits when the contract expires in July 2027, and has deployed a raft of initiatives to improve cashflow, such as maintaining student numbers, and “actively” managing cost-of-living increases and projected salary rises in its forecasts.
A college spokesperson said the board and leadership team have been in discussions with the FE Commissioner’s office for several months regarding structured support for its PFI payments. They added that cashflow will be aided by a 25 per cent rise in student numbers over the last two years, they added.
It also received the first payment for the sale of an eight-acre plot in September 2023 for the Mayfield Point development, which aims to transform the site into a new supermarket, a care home, a hospice, sustainable housing, and an electric vehicle charging station.
But a college spokesperson added that challenges with the planning and development process have meant that “the cash receipts have not arrived as quickly as planned”.
Lee Probert, principal of Newbury College, said: “We continue to be focused on excellence for our students, embedding the key requirements for quality learning and developing skills for our communities. Whilst we are working hard with the FEC, our primary focus remains on providing ‘careers, not courses’.
“We will continue to ensure a sustainable future for the college and the communities we serve.”
Newbury’s NTI lists a range of requirements to meet before it can be released from intervention.
College leaders must “work closely” with DfE’s PFI team on the “effective management” of the contract. Governors must approve a single improvement plan which sets out detailed plans for future savings with clear milestones that DfE will monitor.
DfE also published its official NTI letter to South Devon College today, placing it in intervention for serious cashflow issues and emergency funding.
FE Week revealed last month that the college had triggered intervention after requesting a two-year, £1.5 million loan from the DfE to ease cash flow pressures.
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