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Two in Five Learning Providers Show Signs of Financial Distress
August 26, 2017

Introduction of apprenticeship levy and wider uncertainty has created issues for sector, data reveals.

The number of training providers in financial distress has increased by 147 per cent in a year, data seen by People Management has revealed, signalling a difficult period ahead for apprentices and trainees.

Analysis from Begbies Traynor’s Red Flag Alert statistics, which tracks businesses at risk of insolvency, found 962 companies that provide adult training and education facilities showed signs of financial distress in the second quarter of 2017, the equivalent of two in five (39 per cent) organisations in the sector.

By comparison, just 390 companies, or 22 per cent of the sector, were showing the same warning signs in the second quarter of 2016.

Mark Dawe, chief executive of the Association of Employment and Learning Providers (AELP), said the figures indicated a period of substantial change in the sector, which has included the introduction of the apprenticeship levy along with wider uncertainties for the world of adult education and learning.

“A lot of employers are taking a planned approach before they start spending their levy, which is fine for them – but for providers, it means there will be significantly less apprenticeship work on offer over the next couple of years, which could be problematic in the short term,” he told People Management. Broader uncertainty was also impacting non-levy trainers, Dawe added.

Dawe pointed out a chief concern for organisations would be the fate of existing apprentices and trainees who are learning with providers in financial difficulty. “If you have a provider go bust, getting learners to another provider and continuing their apprenticeship experience is much more of a challenge,” he said. “The last thing we want to do is damage learners, which is a key concern that has emerged through the Learndirect issue.”

Learndirect, the UK’s largest adult learning provider, was plunged into disarray last week following the publication of an Ofsted report branding its services ‘inadequate’, raising serious concerns for the future of 73,000 trainees currently under its provision.

Following the report’s release, the Department for Education announced it would be withdrawing government funding from the organisation. However, it has agreed to gradually wind down the provider’s existing contracts between now and July 2018 – a more generous period than the standard three-month termination phase other providers would be given.

During this time, trainees will still be able to start Learndirect courses paid for by the Skills Funding Agency’s adult education budget, or other loans, as long as they finish by July 2018 – but other organisations have said they will not be taking on any new contracts.

The Queen Elizabeth Hospital King’s Lynn NHS Foundation Trust is one of many organisations that held partnerships with Learndirect. “We only have one learner with Learndirect,” said Karen Charman, director of human resources at the Trust. “Their course is due to finish in the coming weeks and there are no other learners scheduled with the company.”

Experts last week stressed the most important thing HR professionals and managers concerned about their adult learning provision can do is make sure existing apprentices and trainees are not having the quality of their experiences compromised. But Dawe warned other providers could be forced into administration over the next few years if they do not have appropriate support in place.

“It’s not a surprise that, given the existing challenges of this sector, some providers might be under financial distress,” he said. “If things carry on this way I’m sure we will see more going under; if they don’t have reserves and a strong strategic approach over the next 12 months, it’s hard to see how they will get through this difficult period.”

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