What are the key drivers for colleges to think and act more like a commercial business?

The Further Education sector is no stranger to change. FE colleges continues to respond with resilience and adaptability, even when up against considerable funding and policy pressures. But navigating the changing technical and professional education landscape is certainly not easy, and in many cases these changes have compelled colleges to adopt more commercial approaches.

While there are many issues that are driving this move towards commercialisation, this article will focus on three key factors: reductions in central government funding, increased local and national competition and the wider reforms to apprenticeships.

Reductions in funding

Colleges have faced steep reductions in government funding since 2010, most notably the adult education budget which has declined by almost 40% during this period. This shift in funding— away from direct government grants and towards direct commissioning—has required colleges to look at new approaches to diversify their income. The additional £500 million a year for the delivery of T levels suggests that the outlook for further education funding in the medium term will be an improvement on the steep reductions of recent years. Nevertheless, the overall fiscal climate will continue to be tough, and competition between TPE providers for both public funding and commercial fee income will continue to be intense.

Increasing competition

This competition is perhaps felt most acutely between colleges and HE providers, who are increasingly starting to play in the level 3-5 space. Recent reforms of the regulatory framework for higher education are designed to enable new and more diverse providers to enter the market. In future, more providers are likely to be operating on the boundary between further and higher education – for example, to deliver higher and degree apprenticeships. The current drive to enable students to base their higher education choices on published outcomes data may have a knock-on effect on further education, in due course. The outcomes of the post-18 funding review will be important to establish how colleges are best supported to provide higher level skills, particularly around levels 4-5. But equally, new partnership models between FE colleges and a range of providers, both HEIs and ITPs, will be crucial to provide a comprehensive training and education services to employers in an increasingly competitive market.  

Apprenticeship reform

But the wider changes around the apprenticeship landscape represent perhaps the clearest reason for colleges to adopt more commercial approaches. For both large employers and SMEs, the new approach to funding represents a shift to direct commissioning of apprenticeship provision by the employer, with the potential for price competition and considerable disruption to the established provider market. Through these reforms, the Government aims to deliver 3 million apprenticeships by 2020, including more higher and degree apprenticeships. A recent drop in apprenticeship volumes has caused some concern about the implementation process for the reforms and the business sector has called for a more flexible approach. This shift to direct commissioning means that colleges are increasingly looking to align their offer to the skills needs of employers, providing comprehensive talent pathways that can serve the spectrum of an employer’s workforce development needs.

All of this says nothing about the desirability of such trends, it is only a reflection on the wider changes that have been set forth in recent years. We are, after all, facing huge skills gaps in key economic sectors, and our national productivity lags at the bottom of the G7. In this context, the alignment between business and colleges to provide the skills that industry need makes sense, and if a commercial approach would facilitate such a manifestation, then so be it. But such an approach must not lose sight of the learner at the expense of revenue savings or other forms of financial efficiencies.

But if the link can be made between high quality training provision, employer demand for skills, and job opportunities and career success, then the rationale for a commercial approach, and the interests of the learner are not two opposite poles, but part of a related eco-system which can serve all sides at once.

Tom Lowe is Director of Membership and External Relations at Collab Group, a membership organisation which represents leading UK colleges and college groups. Tom is part of a team that is passionate about working with colleges to develop and deliver training that creates value for learners, government and industry.