Contains public sector information licensed under the Open Government Licence v3.0.

Sources:
The impact of college mergers in Further Education Research report September 2019
Area review: end of programme report - Restructuring of the FE Sector 2015 - 2019

One of the biggest changes in FE over the past decades has been the increasing incidence of college mergers. Between 1993 and 2018 there were 171 mergers, with big increases in recent years; between 2015-2018 there were 53 mergers - more than the entire previous decade.

The increase in recent years happens against a backdrop of drastic reductions in FE spend of 8% per learner for 16-18 and a reduction of 45% in the adult education FE budget (it’s worth noting that 45% reduction was matched in large part by a corresponding reduction in FE learner numbers, meaning that per-learner spending in adult education has remained more or less constant.)

A critical observer might conclude that the poor financial health of colleges comes - at least in part - as a direct result of a decade of cuts. In any case, combined with an ongoing shift toward apprenticeships, colleges are under unprecedented financial pressure.

Effects of College Mergers Pre-Area Review Process

Have mergers been effective?

As far as non-financial outcomes averaged out nationwide are concerned, it’s not clear at this stage. Success rates are, to be fair, marginally higher in post-merge colleges. However, merged colleges are more likely to face financial difficulties, with average profit margins falling by 128% (1.4% to -0.4%), interest payments as portion of income rising by 16% (0.75% to 0.87%), and debt as a portion of income rising by 20% (16.93% to 20.31%).

DfE researchers speculated that any negative differences in outcomes suffered by merged colleges can be explained by the fact that colleges in financial difficulties are much more likely to merge. However, they also noted that “there is no statistically significant relationship (positive or negative) between merging and financial[...]outcomes.”

For those unfamiliar with statistics, this means that, based on the data available, the researchers couldn’t pinpoint mergers as being a factor to explain the difference in outcomes. So, statistically speaking, profit margins, staff cost, income, debt, and success rates have shown no discernible change, particularly when compared to the overall sector trend.

However, individual colleges tell a different story. In short, the top performers among merged colleges have seen big improvements in nearly every measure, whereas the worst-performing mergers appear, at a glance, to have been an unmitigated disaster:

Variation in college performance post-merger – top 5 and bottom 5 performing colleges:

Post Area Reviews

Following the National Audit Office’s July 2015 report on financial sustainability in FE, which noted “the rapidly declining financial health of the further education (FE) sector,” the area review programme was commissioned. Its broad objectives were to boost financial resilience in the sector, improve the FE offer in each area of England and Wales, increase the prevalence of specialist providers, improve access to FE, and enhance the ability of colleges to respond to changes and expansion.

The process resulted in a broad consolidation with a corresponding reduction of the original 93 sixth form colleges and 241 FE colleges to 54 and 193, respectively.

Prior to the process, 37 colleges had a Financial Health rating of inadequate, whereas in 2017- 18, just 21 did. Based on currently available information, it’s impossible to fully assess the impact of the process, but the DfE reports that “early indications suggest that area reviews have had a broadly positive impact,” and, via mergers of stronger colleges with those which were underperforming, that “it has been possible to protect provision in areas that had been under threat of losing access to a local FE college.”

To date, however, the publically available evidence is thin on the ground although, at first glance, the results look promising:

We do know that, in order to facilitate mergers of those colleges which were in financial dire straits, the government has paid out over £432m in loans and grant funding (of which £353m consisted of grants.)

Whether this massive investment results in long-term improvements in FE and whether independent analysis confirms the government’s assertions about the programme’s success to date remains to be seen.

Will ITPs see a similar consolidation?

Anyone familiar with the ITP sector will know that a similar consolidation has been well underway for pretty much the last decade, with increasing numbers of contracts awarded to a handful of major players. Smaller providers have increasingly had to specialize and trade on local knowledge and contacts to survive. The disastrous effects on ITPs’ income caused by the COVID-19 crisis can only accelerate the process. Again, only time will tell whether - long-term - this turns out to be a good thing for the industry. Do you have the inside scoop on college mergers? I’d love to hear about your experience. Let me know in the comments!