The English regulator is monitoring two dozen higher education institutions over concerns they could go under in the next year, although it remains confident that there is “light at the end of tunnel” on university finances.

Speaking in front of parliament’s Education Select Committee, Susan Lapworth, chief executive of the Office for Students (OfS), said the overall picture remains challenging after expected levels of student recruitment were not achieved.

“There is some light at the end of the tunnel in terms of more confidence about income streams into the future, particularly on tuition fees but there is still a reasonably sized group that are still grappling with quite significant challenges in the medium term,” she said. 

Lapworth presented figures to the cross-party committee on how it categorises risk, with one provider – thought to be Devon's Schumacher College – “actively exiting the market”.

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She said the OfS belives there are 24 institutions at risk of exiting the market in the next 12 months, seven of which are large providers with more than 3,000 students. There are another 25 or so institutions of various sizes at risk over a two- to three-year period, she added.

“That risk assessment is us being pretty conservative to make sure we’re on the front foot and we’re engaging and having all the right conversations with each institution and the wider range of stakeholders,” she added. “We’re not saying we’re expecting any of those to exit in a disorderly way imminently.”

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Lapworth also spoke about the importance of university governance in monitoring financial sustainability by holding vice-chancellors and executive teams to account.

“That needs to be real, meaningful and quite sharp when needed. You can have a governing body being a critical friend too but that challenge absolutely has to be there.”

And Lapworth said there has to be at least a “regulatory backstop” of oversight.

“Regulation by sharp stick is perhaps not where I would start on this. I think you have to have the ability to intervene and use those sharp regulatory tools where something has gone horribly wrong, and I think institutions knowing that capability exists creates an incentive.”

Other work to improve governance and fostering a more collaborative way of working is also very important, added Lapworth.

Speaking at the same inquiry, skills minister Jacqui Smith said there was no imminent threat of a provider collapsing before the end of the year.

She said the government’s recent decision to link tuition fees to inflation had given the sector certainty about income that “very few public or private bodies have”.

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“It is undoubtedly the case that in order for us to deliver our ambition for a world-leading and financially sustainable higher education sector…we need to bring greater financial sustainability to the sector.

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“Not to respond to individual circumstances but to put right some of the decisions made that were made by the last government which has led to real terms fall in tuition fee income.”

Smith also said that this added certainty would lead to less casualisation and more security in the academic workforce – a trend she claimed was caused by an inability to forecast where funding was coming from.

“It’s a bit more than a carrot. It facilitates the ability to think strategically and I would hope and expect to see higher education leadership thinking about the stability of their staff as well as the rest of their organisation.

“Their staff being at the heart of the teaching and research, which is their essential businesses.”

Smith defended the proposed introduction of an international student levy given the education department is “not swilling with money”.

“You cannot will the ends if you’re not willing to will the means. One of the things about being in government is that if you want something to happen you need to find the way to fund it and I think this is a legitimate way to support disadvantaged UK students.”

Earlier this year the government also announced that franchised higher education providers with more than 300 students on their books will be required to register with the OfS.

Smith said franchised provision was “not inherently bad” but admitted that there had been concerns around quality because numbers have shot up in recent years.

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“Frankly, I would be happy to see much less subcontracting of courses and much higher quality and that’s what we’ll be aiming to achieve.”

patrick.jack@timeshighereducation.com