How we regulate financial sustainability within higher education

We take a risk-based approach to monitoring a provider's financial performance.

This means that we go through different stages of monitoring depending on our judgement about risk, filtering out providers at each stage. As we move through the stages, or down the funnel, a provider will be subject to greater scrutiny or intervention.

Higher education providers at each monitoring stage (return for 2022)

1. Triage

We undertake a triage process to identify individual providers that need more detailed financial assessment. This involves considering a provider's financial performance, position and forecast information, supplied to us in the provider’s annual financial return.

We also consider any intelligence to suggest increased risk such reportable events or notifications submitted to us.

2. Detailed assessment

If a provider has been identified for further assessment, we look at their financial performance, position and contextual information in more detail.

We analyse the provider’s plans, forecasts and the degree of uncertainty and risk relating to its future position. We overlay the risks facing the sector, and how they apply to a particular provider.

Our analysis determines whether we need to engage with a provider.

3. Informal engagement and monitoring

Following detailed assessment, we may decide to engage informally with a provider.

This usually involves a phone call or meeting to understand a provider’s individual context in more detail. We are going to be increasing the number of providers we engage with directly in light of the increased pressures on the sector.

We also work with external financial consultants to provide additional capacity and a range of expertise to support our monitoring where a provider's financial context is particularly complex.

At this stage, we may also consider whether early intervention is required to support the institution to take action to improve its financial position.

4. Formal monitoring

When we judge a provider to be at increased financial risk we adopt a formal monitoring and engagement approach.

This may include more frequent engagement or the requirement of more detailed information, through an F3 Notice or, where appropriate, specific conditions of registration or student protection directions.

This allows us to understand in more detail the nature of the risks faced by a provider and consider what further interventions might be appropriate.

It also encourages a provider to take seriously the need to mitigate the risks it is facing and consider planning for scenarios in which market exit is a credible outcome.

5. Student protection directions

Where there is a risk that a registered provider may be unable to continue to provide higher education, we can require a provider to put a market exit plan in place to protect student interests.

This should include considering and planning for how students can continue their studies, if they choose to, with minimal disruption.

6. Institutional closure

When it appears that there is a material risk that a university or college could be unsustainable we can require the provider to deploy the student protection measures it has developed.

We may also engage with a range of other organisations, including the Department for Education, Student Loans Company, Office of the Independent Adjudicator for Higher Education, insolvency practitioners and the provider’s validators to deliver the best possible outcomes for students.