Monday, December 16, 2013

Can Private Colleges in UK Survive?

The private colleges in the UK, and I am talking about the ones which are small, mostly run by owner-operators, and privately funded, have taken a terrible beating in the last couple of years. The British Government's across the board clamp down on student migration, the burden of which fell disproportionately on private colleges, made their business model disappear overnight. Some enterprising ones survived the onslaught by adapting quickly to the new student finance regime established in 2012, where the government made money follow the student and opened it up for private sector, even For-Profit, institutions. 

This strategy has had some stunning successes, as the quick climb of numbers of students opting for private institutions, as opposed to a Public University, show. The success was primarily because the private colleges, leaner institutions without a mandate for public duty or unionised staff, could afford to charge the students lower fees compared to the universities. They could also attract the students with lower grades in the school-leaving examinations as the public universities were subject to a quota for these students, and had to turn down applicants, whereas the private institutions were not subject to any quota numbers.

However, the success has brought out another round of controls, suspension of some very successful private colleges from the student funding entitlements. The student quota for public universities now are due to be abolished, though the private colleges will be subject to a quota, based on their current year's recruitment numbers, which will reverse the equation that led to the recent successes of some of the players. 

This, coupled with the government's projection that the number of college-going students will start to fall from 2015 (a trend that is likely to continue till 2020), and the smaller private colleges look as doomed as ever. Besides, the changes in the regulatory environment has significantly increased the cost of doing business for the private colleges, and this cost will continue to rise in line with the very British indulgence with red tape more of which is sure to follow. The remaining private college owners in Britain are clinging to their businesses in the hope that the current student visa regime will be reversed given the intensely competitive international environment (for example, as the new Australian Minister for Higher Education vows to welcome more International students to Australia and the US regulators start showing openness to payments to educational agents). However, both the Government and the Opposition have worked themselves into a corner on this issue, and helped create the 'island under siege' mood on the main street: It would be hard to get out of this position despite the competitive dynamics. Besides, even if the UK policy changes in a few years, the International student market may have moved on: Apart from a freshly welcoming Australia and United States (and indeed Canada, which gained most from UK shutdown), various significant regional dynamics have emerged, such as accounting students travelling to Malaysia rather than UK for British Accounting Qualifications. This will effectively rule out any turn of fortunes for the private colleges with regard to international students.

So, then, can they survive as they have always done in the past? Indeed, the private colleges in Britain was enormously resilient, often inventing new business forms making the public system play for a catch up. The achievements of the sector have often been overshadowed by various scandals and abuses, but it is timely to remember that private schools led the way in Accounting and Business Education, Correspondence Courses and Distance Learning, and indeed, International Education, before significant public provisions were created. The message there is that the private provisions have always thrived on innovation and creating new programmes and areas of study, and always withered when up against the public sector. While there may be significant changes in the public sector itself which will make it more vulnerable to private sector challenge, the investors and entrepreneurs in the private sector colleges will be well advised to remember this lesson and avoid direct competition with public sector.

The UK private college sector has enjoyed a period of unparallelled prosperity for almost twenty years, as the international student market took off and the British universities started charging significantly higher fees to international students. This has come in the way of innovation and new thinking, as excess demand usually does. However, the period of next ten years is unlikely to be the same: The easy ride on Britain's student loan system is unlikely to save the sector as the events in the last few weeks have shown.

I shall argue that the education businesses now has a greater significance than they ever had. This is a time of disruptive innovation in higher education: While the rhetoric has reached a fever pitch in the States, innovation and new forms of Higher Education are emerging across the world. Britain will be well served by its own breed of 'edupunks and edupreneurs': The last thing one wants at the time of breaking of the Higher Education systems is a Higher Education landscape completely dominated by the Public Sector and a few large conglomerates, which will be essentially anti-disruption. 

One would hope that this big picture, the opportunity of disruption, will spur some education entrepreneurs and make them look beyond the stock constituencies of international students and student loan recipients. This may indeed mean creating new formats, such as employment-based education that Pearson College is already trying out. This may mean emergence of better Online formats, global learning opportunities and new methods of gaining academic credits. In many ways, the cozy days of selling Britain's colonial heritage is somewhat over: The time now is for real innovation and a new kind of private college may be best placed to seize that opportunity. 

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