More than 100 colleges have been warned that they “need to familiarise themselves” with the new Further Education Insolvency rules.
Following a consultation into the new regime, under the Technical and Further Education Act (2017) the Government has estimated that over the next decade, 63 colleges could be given a ‘notice to improve’ their finances, in addition to the 37 colleges that are already subject to a notice.
The Government’s written response to the situation states that “we would expect instances of college insolvency to be exceptional and uncommon”, whilst admitting that “as a central estimate, we believe that 100 colleges will need to fully familiarise themselves with the insolvency procedures.”
The report suggests a minimum of 80 colleges are at risk, with a “worst case scenario” of 150 colleges.
The report continues: “It is important not to overstate the risk of college insolvency. The Government believes that the risk of a college becoming insolvent is very low, particularly given the robust financial monitoring by [Education and Skills Funding Agency] and strengthened intervention regime which will be part of the new landscape. We envisage that formal insolvency procedures (including education administration) will be tools of last resort.”
Carla Jones, an Associate with Palmers, who specialises in debt advice for the education sector, said: “Where cash flow becomes an issue, it is crucial to get advice at an early stage in order to put in place measures which will help to secure the educational establishment’s recovery.
“Seeking advice from a legal professional who has experience of both commercial debt issues and the education sector is particularly important.”
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