Pearson is closing one of the country's largest training providers at a cost of pound;120 million and the potential loss of 500 jobs, because it claims that changes to the apprenticeship requirements have made the work financially unviable.
Two years ago, the education and publishing conglomerate bought a collection of apprenticeship providers called Melorio for pound;99 million, intending to use it to provide UK apprenticeships abroad and extend the company's reach into teaching.
Rona Fairhead, head of Pearson's professional education business, who will depart the company in April, said at the time of the deal that "the lion's share" of the value of education could be found in "teaching and placing or employing" a student, rather than Pearson's existing role of publishing content, testing and accreditation.
"Pearson's geographic reach will provide Melorio with faster access to international growth markets and other new training sectors," she said then. "We will invest in the Melorio business and its people and apply our scale, technologies and expertise to support its growth."
The rebranded company, called Pearson in Practice, said last year that it had begun some international work in the Middle East and South Africa.
But the international expansion depended on practices that were banned in UK apprenticeships last year: students were recruited on to a largely classroom-based programme with no guarantee of a job, instead of being employed from the start of their apprenticeship.
Zenos, an IT apprenticeship company acquired by Pearson as part of the 2010 deal, had 3,000 learners and a turnover of more than pound;30 million. But by September, the changes to apprenticeship rules meant Pearson was considering closing some of its 30 centres. In October last year, the company said it was launching a review of the whole of Pearson in Practice's work, which has led to this week's decision to close.
"Over the past year, changes to the apprenticeships programme - and in particular the shift from a programme-led to an employer-led model - have reduced demand for the type of programmes offered by Pearson in Practice and limited the funding available to support their delivery," the company said in a statement. "Pearson believes Pearson in Practice no longer has a sustainable business model and that we can better address learner needs in other ways."
Attempts to find new markets by developing apprenticeships for new industries, such as public relations, have now been abandoned.
"Pearson in Practice has provided quality training programmes to thousands of young people who have a real need for skills that help them secure a job," said John Fallon, Pearson's chief executive. "We very much regret the decision to plan for closure but we believe we have explored and exhausted all alternatives. Our focus in the coming months will be on working with our partners in the further education sector and industry to ensure minimum disruption to learners who are currently enrolled in one of our programmes."
The company said there was "no deadline" for the winding down of the company and that all current students would be able to complete their programme, either with Pearson or by transferring to another provider.
Graham Hoyle, chief executive of the Association of Employment and Learning Providers, said he had already been contacted by one member who was keen to take on Pearson's apprentices.
While changes to the funding regime have meant apprenticeship providers are increasingly expected to do more with less, he said there is no widespread financial distress. "Most of them are hanging in there," Mr Hoyle added. "They're finding life difficult but they're hanging in there."
The University and College Union said the closure showed the risks of the Skills Funding Agency's policy of only offering large contracts, which is encouraging a consolidation of private training providers. This means more student places are at risk when they fail, as with the collapse of Carter and Carter in 2008, when places had to be found for 25,000 learners.
"We have warned about the dangers of large-scale consolidation of the skills sector by private companies," said Sally Hunt, the union's general secretary. "It is all the more important that the FE sector learns these lessons and stays away from risky experiments with private investors."
Pearson in Practice was allocated pound;65 million of publicly funded training this year, pound;50 million of which was for 16 to 19-year-olds.
Purchased for pound;99 million (as Melorio), the company's closure will cost Pearson pound;120 million and put 500 jobs at risk.
Ofsted rated Zenos, the IT training company that formed the largest part of Pearson in Practice, as outstanding in 2008.
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