Financial sustainability

It provides our view on financial sustainability, including our regulatory requirements, and what we commonly see in programme delivery.

This information should be considered by education providers when developing new and existing programmes, linked to this area.

Our threshold requirements

Summary reflections 

Financial sustainability is currently a significant challenge within the education and training sector, with many education providers facing difficult financial positions. This can have an impact on programme sustainability and resourcing. There is no easy answer to these challenges, but education providers who are cognisant of the current financial landscape, internal and external initiatives and challenges, and their own data, are best equipped to manage their resources and finances. Planning is key to this, and understanding the environment and specific situations helps education providers plan and deliver on those plans.

For example, new provision can facilitate investment in physical resources, but this comes with challenges for staff recruitment and availability of practice-based learning. Understanding and planning to mitigate these challenges is a key part of ensuring there is a return on investment, and that programmes remain fit for purpose.

Education provider approaches 

All education providers have mechanisms in place to consider resourcing, including financial stability. At higher education institutions (HEIs), these are embedded into cyclical validation and review activities. Many education providers run an annual planning exercise, where they consider data about applicants and learners (including retention), partner organisations (such as number of practice-based learning opportunities), and other institutions delivering education and training. This helps education providers understand workforce need and training capacity, to ensure staff and learner recruitment in line with staff to learner ratio expectations, and within other resource conventions.

Education providers have different financial models, which may be linked to centralisation of  funding within nations, the type of organisation, and / or the type of education provision. With some exceptions, for the professions we regulate:

• English HEIs are market driven, but operate within constraints primarily linked to the availability of practice-based learning;
• Northern Irish, Welsh and Scottish HEIs are generally commissioned to deliver training from devolved governments and / or health services;
• some other types of organisations have directly commissioned numbers from national sources;
• professional body programmes sit within a broad portfolio of the work of the body, and fees from professional programmes often cover operating costs for those programmes; and
• for private organisations, education is often a small part of income – this is seen as investment in the next generation of employees.

External commissioning comes with an additional layer of scrutiny. Education providers presented ongoing engagement with the requirements of commissioning organisations as integral to their continued sustainability, and an influencer on quality.

When proposing new programmes:

• education providers normally integrate newly proposed programmes into existing business plans, which demonstrate the ongoing financial stability of the institution; and
• programmes aligned with existing sustainability arrangements, through the involvement of relevant stakeholders who provide resources and commitment to deliver parts of programmes.

Education providers are aware that continued investment is needed to ensure their provision is attractive and delivered to high quality. There is often continued investment in physical resources, such as skills facilities. These are usually to replace existing facilities to ensure they are up to date, or as part of investments for new programmes.

Current sector focus and challenges 

There are significant financial issues within the sector, and we recognise that education providers need to operate within a budget and the wider economic landscape.

Specific challenges we see are:

• The relative value of learner fees for HEIs in England. These fees are set centrally, and our findings suggest that education providers have and will continue to experience pressures on their finances, despite recent increases (Nov 2024). This is due to the relative value of fees. To combat this, education providers have needed to think innovatively about programme resourcing and delivery, but this challenge has also led to some programmes being less viable.
• There are consistent challenges with maintaining and increasing the numbers of academic staff to maintain staff to learner ratios, or when delivering new programmes. Education providers are generally able to recruit and fulfil commitments in interim periods by enacting contingency planning, such as using ‘visiting lecturers’. However this solution does not work long term, and we have seen education providers not being able to resource their programmes as intended.

We are increasingly seeing education providers putting new financial strategies in place to proactively manage financial challenges, and address them where it is in their control. In some instances education providers have also reviewed, or are in the process of reviewing, their staff resourcing. This has often led to changes to support staffing arrangements, or redundancies of support and academic staff.

Education providers have saved costs through modernising and digitising initiatives, and outsourcing areas of their operations. This saves academic staff time, and enables more focus on programme delivery and quality. In turn, staff to learner ratios can be reviewed, to consider viability of increases in learner numbers, or reductions in permanent staff numbers.

Learner numbers present opportunities and risks or issues. Often education providers aspire to increase learner numbers, and can see increased numbers as positive, or due to facilitate investment. There is also sometimes a focus on ‘growing income’ through learner fees. Where education providers can demonstrate a maintenance of quality whilst growing provision (through investment in staff and resources, and where this is supported in the practice setting), we are satisfied.

Some education providers in England noted restrictions on growth, due to the capacity of practice-based learning and increased competition in the market. Capacity of practice-based learning is an important consideration for education providers when making judgements and decisions to increase learner numbers and when proposing new programmes. This is a core part of our regulatory assessment, and without satisfying these requirements, programmes cannot be (or remain) approved.

International learner recruitment is an important part of financial modelling for some education providers, with the larger fees they can charge for international learners. Some education providers faced challenges in international recruitment due to a drop in applications from the European Union.

Some education providers are unable to recruit to intended learner numbers, and have needed to consider how this might impact the ongoing sustainability of specific programmes. In these cases, education providers applied mitigation plans, and were considering how they could drive up recruitment numbers, or consider resources for their programmes, in the longer term.

Areas commonly explored further through our assessments 

We explored areas through our assessments where we needed to. For example, sometimes increases in learner numbers were not fully explored by education providers in their initial reflections, and in these cases, we needed assurance that increasing learner numbers did not come at the expense of quality, and growth did not happen without relevant investment.

Proportion of performance review assessments with quality activities / referrals