Monday, August 23, 2010

New Opportunities for Private Education in Britain

In the next few years, the private education industry in Britain will undergo a fundamental change.

Private Education is already one of the most dynamic industry sectors worldwide. Something like the transportation industry in the 1990s, this is a sector stretched for capacity, with serious quality problems and increasingly noisy demand from its constituents, students in this case, that it gets its act together.

In America, things have already moved forward quite a bit. We have already seen the emergence of some of the world's largest private education companies there, along with the accompanying innovation, dynamism and career opportunities. Britain has lagged behind, despite its stronger vocational and practical education tradition. No doubt, some of the K12 companies have done well. However, the publicly funded model of Higher Education has constrained the emergence of serious private players in this sector.

All that is changing now. Last month, the government allowed BPP Education, a private education company with 14 UK branch offices and more than 30,000 students, to have an University College status. BPP followed the University of Buckingham to become the first non-government entity to have this status, though this second act took a good thirty years to follow. This is, of course, a small step for BPP: They already have degree granting powers for more than three years. What the latest step will do is allow them a greater access to public funds. A small step, but a significant one.

It is more significant for the other private players in the segment. The government clearly is desperate for a solution to provide higher education options for its young people, more and more of whom want to go to the university because of a bad job market. Between 150,000 to 250,000 of students who passed A levels this year will not find an university place: Many more will have to do with their second or third choice courses. The universities are so desperate that they are now offering places in their overseas campuses, in the ones in Dubai and China, to the aspiring students. Dave Willetts, the Universities minister, recently said that he would want more British students to go abroad: He did not mean it to happen for lack of places.

So far, the Private Education industry in Britain survived on students coming from overseas, but that model is changing dramatically. The overseas student numbers will shrink: It will be a long time before, if ever, we can offer more than 350,000 visas to overseas students in a year. This is good in a way. The private education industry in Britain operated with and encouraged certain inefficiencies. Most players did not care much about intellectual property and cared little about processes. In a shrinking marketplace, and as the rules of the game changes, these are becoming increasingly important.

The model is changing in favour of education provision for domestic students and exporting education know how and curriculum. All this requires a much higher level of efficiency, production and development of intellectual property and a value-added business model. Only a few of the players in the private education sector are ready for this yet, but one can see the changes coming rapidly.

So, overall, the sector is in for a round of creative destruction, while rewarding the innovative and efficient ones in a big way. This is also an interesting opportunity for overseas colleges to open campuses in Britain. Not just the ones like the University of Chicago, which has a Business School campus in London, but for Privately owned companies like India's Amity University, which has opened a campus in London last year and running it successfully (this has also raised their profile considerably in their home market). We shall see efforts like Amity more often in the future, and this will push the private players in Britain even harder.

As always, more competition is good. We can reasonably hope to see the emergence of some global players from Britain soon.

2 comments:

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