Education minister Bridget Phillipson faces being sued by a college over the financial damage caused by her decision to de-designate its courses.

The secretary of state lost a High Court battle with the Oxford Business College (OBC) last month after stripping it of the ability to access student loan funding.

OBC, which has been at the centre of debates about franchising in the English sector, argued Phillipson’s decision was unlawful because an investigation by her department had concluded without finding evidence of fraud.

It has now announced its intention to pursue “substantial damages” after being left “severely damaged” by the minister’s actions.

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No students have been enrolled at the college, which offered degrees in areas such as business, events management and health and social care across five English campuses, since the announcement was made in April, while its existing programmes ended at the start of September.

The college, which was not itself registered with the Office for Students but was able to access student loan funding via its agreements with universities, has also lost many of these partnerships because of the media and political attention it has faced.

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“All our degree students have since been forced to leave our college and many staff have lost their jobs,” said Padmesh Gupta, the managing director of the college, in a statement announcing the legal action.

He said that the de-designation had been a “wholly unjustified action which has threatened the future of the college and our students”.

“The DfE [Department for Education] ignored all procedural fairness by denying the college leadership a proper opportunity to make a full and informed response to sweeping, unevidenced allegations,” he added.

Phillipson, who is currently running to become deputy leader of the Labour Party and was kept in post during the ministerial reshuffle earlier this month, has come under pressure to act on franchising after concerns were raised about malpractice and a lack of oversight in this area of the sector.

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Many universities have expanded this type of provision in recent years in search of new revenue streams and as a way of expanding access into hard-to-reach groups.

When stripping the college of its access to student loans, Phillipson accused it of “falling well short” on recruitment and attendance.

The High Court heard last month that while the government’s investigation found “irregularities” in the courses that OBC was providing – especially in regard to student absenteeism and lack of evidence of students’ English language proficiency – there was no evidence of abuse of the student support system.

Court documents show the minister’s decision in effect “destroyed the business”. Of its 5,000 students enrolled in April 2025, 4,700 have since withdrawn or transferred while a further 1,500 new students who had been due to commence in September have not been able to do so.

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OBC has only received “nominal payments” from lead providers since the decision, the judgment says, and claims to be owed more than £18 million.

A new franchise agreement with Southampton Solent University, which had been in the final stages of being agreed, collapsed in the wake of Phillipson’s decision, it adds.

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The DfE was contacted for comment. 

tom.williams@timeshighereducation.com