New case studies explain how OfS responds to risk of closure at universities and colleges

The case studies set out a range of regulatory interventions the OfS has made to protect students at a number of different universities and colleges. The OfS has also published a summary of its approach to monitoring the financial sustainability of individual universities and colleges, and how monitoring and other interventions can be escalated according to risk.

The case studies include action the OfS took last year in response to financial concerns at ALRA. The drama school, which had campuses in London and Wigan, closed in April 2022. Following intensive work by the OfS and others, all ALRA’s students were offered places to continue their studies at Rose Bruford College. Other cases involve higher education providers that have successfully responded to financial problems, and are anonymised.  

The case studies set out some of the formal regulatory action the OfS has taken – including imposing student protection directions – as well as other activity to protect the interests of students in the event of a university or college closing. The OfS has not generally commented on these issues in real-time, as doing so could increase the likelihood of a disorderly closure, to the detriment of the university or college’s students. 

For ALRA, the OfS convened a taskforce including key personnel from ALRA and its validating partners, the Department for Education, Office of the Independent Adjudicator and Student Loans Company. These bodies worked closely over several months to identify and support the agreement with Rose Bruford College, after considering a range of options to allow students to continue their studies or receive credit for their attainment.

All universities and colleges registered with the OfS must demonstrate they are financially viable and sustainable to stay on the Register. As well as taking regulatory action where appropriate, the OfS monitors the financial health of individual institutions, gathers intelligence and publishes analysis on sector-wide trends and risks.

A total of 250 universities and other higher education providers were required to complete the OfS’s annual financial return for the financial year ending in 2021. Of these:

• 117 were subject to further assessment after an initial triage process
• there was informal engagement and monitoring of 51 providers
• 31 are subject to formal monitoring

Three student protection directions have been imposed since their introduction in April 2021. ALRA remains the only registered provider that ceased operating due to financial failure since the OfS was formed.

David Smy, Director of Monitoring and Intervention at the OfS, said:

'There is rightly continuing interest in the financial sustainability of universities and colleges, and supporting students where universities and colleges run into financial difficulties is an especially important element of the OfS’s work. These case studies provide detailed information about how we have intervened in response to concerns about the financial sustainability or viability of a university or college.

'Students should be reassured that – despite the challenges of the pandemic – the higher education sector as a whole is in good financial shape. There are, though, differences between individual providers, and greater financial pressure can be expected in the coming year, in part due to the pressures of inflation. For the large majority of universities and colleges that are currently performing well, we will continue to ensure that regulatory burden in this area is appropriate for the low likelihood of financial failure.

'But where we do have concerns about a provider’s financial position we have clear legal powers to intervene. These case studies show how we have done that – and point to examples of providers successfully addressing our concerns. Much of our work on financial sustainability is not visible at the time, and we intend these case studies to demonstrate the approach we have taken to protect students’ interests. The nature of the OfS’s role means that formal regulatory action will always be in the spotlight, but these case studies demonstrate the collaborative approach we have taken in challenging circumstances, alongside the use of our formal regulatory tools.

'We also wanted to say more about the actions we took to protect ALRA’s students. ALRA is the only higher education provider registered with the OfS which has closed in this way. It’s not the job of the OfS to prop up a university or college which is not financially sound. Instead, we work to ensure that students are able to continue their studies elsewhere, receive credit for their attainment, as well as high quality advice and guidance about their options. For ALRA, we did use our formal powers, but it was our ability – working with a range of partners – to identify and support delivery of a solution which was especially effective in protecting students. As a result, over 90 per cent of ALRA’s students chose to continue their studies at Rose Bruford College.

'It is important that all universities and colleges understand the financial risks they face and the OfS’s approach to monitoring financial sustainability and intervening where appropriate. We have recently hosted a series of roundtable events with the sector’s finance directors to explore our collective understanding of financial risk, and will continue to engage with universities and colleges to share perspectives on these important issues.'

Notes

1. The Office for Students is the independent regulator for higher education in England. Our aim is to ensure that every student, whatever their background, has a fulfilling experience of higher education that enriches their lives and careers.
2. All registered providers are required to submit an annual financial return to the OfS, except further education and sixth form colleges that instead return financial data to the Education and Skills Funding Agency (ESFA). The OfS receives relevant information about these providers from the ESFA to ensure they are not subject to dual reporting requirements.