A group of colleges in the West Midlands have predicted they could lose £22 million in income as a direct result of the coronavirus pandemic, Tes can reveal.

Data from Colleges West Midlands – a collaborative partnership of 21 colleges in the West Midlands region – shows that five colleges – City of Wolverhampton College, Dudley College of Technology, Telford College, Walsall College and the Warwickshire College Group (WCG)– recorded a loss of income of £5.4 million due to the fall in apprenticeship starts between March and July 2020.

The same five colleges predict a further loss of £9.1 million by July 2021 – a combined loss of £14.5 million. The colleges are also expecting a fall in commercial income and additional Covid-19 health and safety costs, bringing the total to more than £22 million. 

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Background: 13% of colleges fear their solvency is at risk

At WCG, just 54 per cent of income is government funding, with the remaining 46 per cent generated through higher education courses, commercial work and apprenticeships.

Coronavirus: The impact on colleges and apprenticeships

Angela Joyce, principal and chief executive of WCG, said that without extra funding or a grant from the government, it would be a "huge challenge" to keep the current apprenticeship infrastructure in place. 

"We run a really successful apprenticeship scheme. We train 75 per cent of Jaguar Land Rover's apprentices. We believe very strongly in employer partnership and so, at a time of likely recession, one has to recognise that employers may not be in a position to take on apprentices," she said.

"But the big worry is that a recession will pass and colleges such as mine need to be in a position to train apprentices when employers are in a position to restart apprenticeship programmes, but how do I afford to retain the infrastructure?"

She said that "cutting costs" associated with that delivery would be "devastating" to the region, the college and the employers. 

Looming redundancies 

Neil Thomas, chief executive and principal at Dudley College of Technology, said that without government support to mitigate against the loss of revenue, redundancies at the college would have to be made. 

An Association of Colleges survey published in July found that almost half of colleges were planning to make redundancies in 2020. 

Mr Thomas said: "Pretty much all our expenditures is on staffing delivery. If we start to have big drops in income, it nearly always has to manifest itself in reductions in staffing and we've been desperately trying to resist that because it's just strategically absolutely the wrong thing to do.

"Our big areas are manufacturing and construction and it would just be madness to turn off that provision. It will absolutely be necessary as we start to climb our way out of recovery over the coming months and year. Although it's having a horrible time at the moment, those employers will want that provision there and it takes a long time to build these things back up again."

He said that he was "losing faith" that extra funding would come from the government. 

"It's been a bit of a rollercoaster over the summer – there seems to be lots of positive things said about skills, and even some positive news that there might be some announcements coming about flexibilities in funding or other support that would help us, and then they don't manifest themselves," he added.

"I'm probably losing faith now that there is going to be a solution forthcoming. I was probably reasonably positive a couple of months ago because I just thought it was completely illogical for us as a nation to start to let provision disappear at colleges as a result of what's happened, and surely we could find a solution. It does feel like we're being ignored with lots of other bigger ticket things happening."

Colleges 'hung out to dry'

Lowell Williams, chair of Colleges West Midlands, said that the more apprenticeship provision a college had, the bigger the impact on finances of a drop in starts. 

He said: “In short, those colleges who have wrung themselves inside out to deliver the government’s apprenticeship target and to reduce their reliance on public funding now find themselves financially hung out to dry by Covid-19.

“It is widely recognised that the underlying financial health of the FE sector, pre-Covid, was fragile – the aftermath of some 10 years of underfunding. In the absence of any meaningful support, colleges with high volumes of apprenticeships are faced with two stark choices: use up their reserves, if they have any and whilst they last, to mitigate their current trading losses; or cut their costs now – that is, make redundant large numbers of their apprenticeship delivery staff. In reality, without support, these colleges will do both.”

An Association of Colleges survey published exclusively in Tes in May found that 13 per cent of college leaders believed there could be "a significant threat to solvency". 

Speaking in front of the Commons Education Select Committee in June, AoC chief executive David Hughes warned that £2 billion out of £7 billion in college income could be at risk for the next academic year as a result of the coronavirus pandemic. He said that the government “must, must, must” do something to support those colleges at risk.