We must stop chasing unicorns and start valuing sustainability

The dominance of private equity and venture capital in FE is leaving behind quality, sustainability and learners. It’s time to question the system we’ve taken for granted

The dominance of private equity and venture capital in FE is leaving behind quality, sustainability and learners. It’s time to question the system we’ve taken for granted

9 Sep 2025, 6:44

I don’t like how a few people at the top walk away with the lion’s share of the wealth, and the duplication and waste that arises out of competition rather than genuine collaboration in our capitalist system. Saying that probably marks me out as naïve to my peers.

  But In the FE world, many larger private providers in the ‘quasi’ funding market are now owned or backed by private equity (PE) and/or venture capital (VC). A number of large providers are also now at least part owned by venture capitalists.

The widespread belief across the sector seems to be that there’s no problem in ‘entrepreneurs’ benefitting personally from the quasi funding market, be it from the proceeds of a company sale, or in executive salaries that are many multiples of their organisation’s median salary.

 The idea of a smaller provider, such as the one I manage, delivering slow sustainable growth doesn’t appear to be part of the DfE’s current thinking, which seems instead intent on betting the house on potential large provider ‘unicorns’. The recent response of someone I respect when discussing the pros and cons of PE/VC investment was “well, if people are prepared to invest in private providers why shouldn’t they be allowed to – that’s capitalism”.

Everyone knows equity investment is a risk. But, like the national lottery, every investor hopes that they’ll be the one to win big. No one thinks they will be the ones to lose, despite the contrary evidence.

Such thinking also allows ministers and civil servants to ignore the fact that current funding levels are insufficient to deliver quality training, because there are large providers that are closing the funding gap with external investment income. Unfortunately when such investment is burnt through, which it inevitably is in most PE and VC cases, the losers are the learners and staff of the companies that go into liquidation, the investors and the remaining providers expected to pick up the pieces.

These investors are more likely to be institutional pension funds than they are wealthy individuals who can afford to lose some of their disposable wealth. New investors often procure the failed enterprise for very little and start the whole sorry cycle over again.

 The current system is self-perpetuating because it is operating from the perspective of self-interest; a quick internet trawl shows just how intertwined the establishment and PE/VC companies are.

 Rachel Reeves recently doubled down on the government’s support for private equity in her mansion house speech, even pushing for pension funds to be taking a greater investment risk.

The industrial strategy talks about ‘taking a punt’ to generate rapid growth. And DfE are self-evidently tolerating poor financial performance in large PE/VC backed providers in a way they absolutely don’t do with other smaller (less politically relevant) providers.

Anyone who suggests that there isn’t a two-tier system of education providers is deluding themselves! Such ‘trusted’/politically relevant providers are also much more likely to be invited to DfE roundtables, public launch events and pilot initiatives.

The continual rhetoric from both government and PE/VC investors is that private equity leads to economic benefits and growth, despite the clear evidence that the majority of PE/VC ventures fail, that many of the new jobs created are insecure and short term, and that most wealth generated goes back into the pockets of the PE/VC investors – and definitely not into public services or the average citizen’s pockets.

PE/VC companies also hide behind impenetrable financial instruments whilst claiming that they ‘promote growth and innovation’ and/or that they are ‘saving good businesses from failure’. The reality is that both PE/VC investors are looking to make a substantial profit from a planned exit point – PE from underutilised assets and cost cutting, and VC from an IPO (initial public offering) or sale. PE will often leave a company saddled with unsustainable debt and a reduced workforce. VC will often require a company, if it survives at all, to rationalise its staff and pivot into other markets.

Before PE/VC ventures fail they often deliver an uneconomic product, which can appear high quality to external observers (such as Ofsted) but more often than not is being subsidised by equity burn, and not being produced by a sustainable business model. This gives such companies an unrealistic advantage over others trying to operate genuinely sustainable business models. Competitors are going out of business because they cannot compete with an equity subsidised product.

A subsidised operating model also promotes an unrealistic impression of what is achievable from the smallest economic unit, which with the apprenticeship market is determined by funding bands. The government actively supports and tolerates this flawed process because it is hamstrung by 100 per cent GDP debt levels and its own fiscal rules. Such ventures also offer the short term political benefit of creating an illusion that the economy is growing in a sustainable manner.  The reality s is just as likely that the government will ultimately be forced to bail out a company that they have allowed to operate in an unsustainable manner, and that other providers with suffer the inevitable regulatory backlash. The taxpayer will be left to pick up the costs, whilst the PE/VC investor move on to the next ‘opportunity’.

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