Pandemic causing colleges to have more financial pressure

Ofsted's second report in a series looking at the effects of the COVID-19 pandemic has found that further education and skills providers had been affected by increased financial pressure because of the pandemic.

Nearly all leaders said that the pandemic was placing them under increased financial pressure because it had increased their costs at the same time as reducing their stable income. Examples of costs that had increased included costs related to moving to remote learning, such as purchasing IT equipment, licences for software, online servers, upgrading Wi-Fi, purchasing laptops for staff and learners, and buying and posting textbooks and workbooks to learners.

Colleges had also been burdened by increased day-to-day running costs to make sites COVID-19 secure, such as buying hand sanitiser, staffing costs, such as additional pastoral support and increased cleaning.

In terms of reduced income, a few leaders said they were initially unable to recruit new learners using their usual face-to-face methods. They had moved recruitment and enrolment online, which had enabled them to recruit more learners towards the end of the summer. Some leaders also said that their income had been reduced because they were unable to run commercial activities.

Leaders were responding to these increased pressures in different ways. A few said that some or all of these increased costs were being offset by savings in other areas, such as reduced transport costs. Some leaders had restructured their staffing and pay models and had reviewed recruitment for staff, either delaying hiring new staff or furloughing existing staff. One leader was reducing subcontracted provision to reduce spending.

A few leaders had been working with the Education and Skills Funding Agency to become more financially secure, but they had started doing this before the pandemic. A few leaders said they had got local council grants and catch-up funding. Some had spent this on baseline assessments for new learners and on extended induction.

A few leaders of community learning and independent learning providers told us they were frustrated because they felt there had been comparatively little support for them compared with other providers in the sector, such as colleges. Some leaders were concerned about the longer-term future.

One said that, due to apprentices being furloughed, they were required to pay money back to the Education and Skills Funding Agency and that if the same happened again it could cause them serious financial problems. Other leaders were worried that, if learners remain on the course for longer than originally planned, it might lead to funding and capacity issues in the future. Leaders were also concerned about what will happen when the funding flexibilities for EPAs come to an end.

More than one leader was concerned that, without further funding, they would need to make staff redundancies. To manage this uncertainty, some leaders were looking to diversify their courses, for example,  by training staff to deliver new courses in new areas, such as adult education. That said, one leader said that they are concerned about the long-term security of adult courses, as it is an already flooded market. They saw the Department for Education’s skills toolkit, which offers free online courses to adults, as potentially restricting which areas they could diversify their business into.