Education sector’s challenges laid bare

A study from the Institute for Fiscal Studies (IFS) is reporting that as many as 13 UK colleges and universities could face insolvency as the education industry, like many other sectors, battles to deal with the effects of Covid-19.

Experienced insolvency practitioner and CVR Global Partner, Charles Turner, has outlined some of the challenges that the education sector faces over the coming months.

He said: “The university sector is facing pandemic-induced losses on a number of fronts, including an estimated 10% fall in the number of domestic students studying, while the number of overseas students could halve. Tuition fees from overseas students amounts to some £7 billion or about a third of all tuition fees so the impact from losing half will be huge. 

“Together with on-going losses of income from student accommodation, conferencing, catering and a substantial increase in pension deficits, total predicted losses could amount to an estimated £11 billion in the longer term, or a quarter of a year’s income for the sector – and much more on a worst case scenario. 

“What is particularly noteworthy is that the impact across the sector will be disproportionate. The IFS makes it very clear that whilst most universities have adequate reserves a number of institutions were borderline insolvent pre Covid-19 and are now at the greatest risk of insolvency. Will the Government let them fail? Or should there be a more targeted bailout to avoid insolvencies? As opposed to the more across the board approach currently being proposed by Universities UK, which will be insufficient for the weakest and given most of the sector can afford to shoulder their own likely losses, they may not need bailing out? 

“The recently introduced insolvency legislation for the further education and sixth form college sector, introducing a Special Administration Regime, could perhaps be extended in scope to include universities as one way of managing insolvent universities and enabling students to complete their studies without the threat of massive disruption to those studies.”