More than 100 colleges “need to familiarise themselves” with the new FE insolvency regime, a government document has suggested.

The government’s response to the consultation on the new regime for colleges, published today, estimates that over the next 10 years, 63 colleges could be given a notice to improve for their financial health, in addition to the 37 current subject to a notice.

While the document states “we would expect instances of college insolvency to be exceptional and uncommon”, it continues: “As a central estimate, we believe that 100 colleges will need to fully familiarise themselves with the insolvency procedures.”

This could vary between a best case number of 80 colleges and a “worst case scenario” under which 150 colleges would be at risk.

Dispelling 'apprehensions'

However the report also states: “It is important not to overstate the risk of college insolvency. The government believes that the risk of a college becoming insolvent is very low, particularly given the robust financial monitoring by [Education and Skills Funding Agency] and strengthened intervention regime which will be part of the new landscape. We envisage that formal insolvency procedures (including education administration) will be tools of last resort.”

The government’s response also addresses concerns raised in the consultation that the new rules could deter many people from becoming college governors, due to concerns about their liability, should a college become insolvent.

“We recognise the concern raised by a number of respondents”, it states adding “Our aim is for clear guidance to dispel those apprehensions and minimise the risk of good governors leaving their posts... Insolvency proceedings do not automatically result in disqualification proceedings or wrongful trading claims. So long as governors have adequately discharged their duties, then disqualification proceedings and wrongful trading claims would be very unlikely.”