EPI urges government to focus on financial health of Further Education sector ahead of October Budget

The Education Policy Institute (EPI) has released new analysis spotlighting the growing financial concerns within the Further Education (FE) sector, often overshadowed by the ongoing debates about funding for Higher Education (HE). As the sector prepares for Labour's first budget, EPI's research calls on the Treasury to give equal attention to both FE and HE funding. 

While the plight of universities dominates discussions, the EPI blog emphasises that the financial stability of FE institutions is equally troubling. 

Key Findings: 

• A greater percentage of FE providers are operating at a deficit compared to HE providers, despite both sectors facing significant challenges. 

• Not only are more FE providers in deficit, but the size of those deficits are also larger relative to income, on average, in the FE sector than in the HE sector.  

• While both sectors have improved their ability to meet short-term debt obligations, FE institutions exhibit weaker liquidity, with a higher proportion of FE providers reporting a low ratio of assets to liabilities. 

Recommendations: 

• EPI urges the government to ensure that the forthcoming budget addresses the needs of the FE sector alongside HE, particularly in bolstering funding for Level 4 and 5 qualifications and apprenticeships for young learners.These initiatives, crucial for social mobility and meeting national skills demands, are not only more affordable but also deliver positive employment outcomes, often even comparable to traditional university degrees. 

• Further Education must be treated as a fundamental part of the UK's post-18 education system. Both the FE and HE sectors must be financially sustainable for the nation to achieve a cohesive and effective post-18 system that can improve outcomes for all students. 

Background :

The analysis compares financial health across both sectors from 2017/18 to 2022/23, revealing alarming disparities. Notably, a higher proportion of FE providers are running deficits compared to their HE counterparts, and while a slight improvement was seen in 2022/23 due to additional funding from the 2021 spending review, the sector's financial outlook remains bleak without further support.