English university given £900k emergency loan by regulator

A university received a £900,000 emergency loan from the higher education regulator in England this year, it has been revealed, in a move that calls into question claims by the regulator that it would not bail out struggling institutions.

The unnamed university, described only as a “small, modern institution”, was reported by the BBC to have received the emergency loan from the Office for Students (OfS), which this year took over responsibility for regulating England’s higher education sector.

“Over the summer, we provided a short-term liquidity loan to the university which was quickly repaid in full,” an OfS spokesperson said.

The news follows rumours about one or more UK universities facing difficulties after expanding rapidly and spending heavily on new facilities then failing to recruit sufficient fee-paying students.

The OfS said it had no concerns about the university’s financial viability, suggesting the loan was for bridging finance. The regulator said commercial confidentiality meant it could not identify the institution.

The university has since been accepted on the OfS’s register of higher education providers, and given a clean bill of health by the regulator over its financial sustainability.

“This means that, when we made the registration decision, we considered that it was not at material risk of insolvency for the next three years and that it had sufficient resources to deliver its plans and comply with regulation for the next five years,” a spokesperson for the OfS said.

The revelation comes just over a week after Michael Barber, the OfS’s chair, gave a speech that bluntly ruled out giving financial support to universities.

“The OfS will not bail out providers in financial difficulty. This kind of thinking – not unlike the ‘too big to fail’ idea among the banks – will lead to poor decision-making and a lack of financial discipline,” Barber said.

“Should a university or other higher education provider find themselves at risk of closure, our role will be to protect students’ interests … [but] we will not step in to prop up a failing provider.”

The OfS said the latest loan to the university was made under legal responsibilities it inherited from the sector’s previous regulator, the Higher Education Funding Council for England, which end in July next year.

The OfS said under its new framework it would not make loans to universities to allow them to meet regulatory requirements. But it left open the possibility of financial support depending on individual circumstances.

“We have been very clear that we would not bail out any university. But we have also said that where a university is in trouble, we would first ensure that they have a strong student protection plan and secondly we would act according to the circumstances – this could, for example, involve requiring them to carry out a strategic options review to identify future options including restructuring their business model, sale of property or mergers,” the OfS said.

Following Barber’s comments, higher education experts were sceptical that the government could stomach forcing a mainstream university to close.

Earlier this week a small, a private institution in London, the New College for the Humanities, was taken over by a private US university. Modelled on the Oxbridge tutorial system, it initially charged undergraduate fees of £18,000 a year when it launched in 2012. But the college failed to attract more than 200 students by the time of its takeover despite slashing fees to £9,250.