At least a third of colleges face radical restructuring or merger as news emerged this week that some providers will see their adult education budgets cut by a quarter.
FE Focus understands that the Learning and Skills Council (LSC) is working on a worst-case scenario where more than 100 colleges will require a major reconfiguration of their provision up to and including merger with another provider.
The figure echoes claims by some FE leaders this week that about 120 colleges were expecting cuts of up to 25 per cent in their funding for adult education and training.
Early signs were that the cuts are having a more severe impact in certain regions. But the full national picture was unclear as colleges and providers tried to make sense of their funding statements, which arrived at the end of last week.
Julian Gravatt, assistant chief executive of the Association of Colleges (AoC), said: "I would not underestimate how difficult this funding round will be.
"There will be a big restructuring because of the changes. How colleges respond is partly in the Government's hands and partly in theirs. The issue for colleges will be whether merger helps them achieve their aims."
Mr Gravatt said money would be required to help colleges to achieve any necessary restructuring.
Lynne Sedgmore, executive director of the 157 Group of leading colleges, said: "We are beginning to see a worrying level of percentage cuts emerging across our membership. They are varying anywhere between 10 and 25 per cent, but we are yet to gain a full picture of the implications. We are hoping for a strategic overview of what this means for the sector."
The LSC is understood to have a list of providers that it thinks will decide on a major restructuring of provision, including rethinking the type and mix of courses they run, and who may decide to pursue full or partial merger or federation.
The council has refused to confirm the number of institutions likely to require major restructuring or merger but has said it is setting aside money to help colleges that want to restructure.
It is expected that a majority of the 353 colleges in England will have to make some changes to their structures and provision, although the LSC feels that most of them will be able to cope with the challenges arising.
David Hughes, the LSC's national projects director, said: "A large number of colleges are going to have to think about change and we are keen to identify, with providers, where we think the potential pressures are in the next few years.
"Some providers might not need support, but where they do we are keen to do it in partnership with the sector."
Mr Hughes said that the LSC is planning to publish some criteria for help in the next few weeks that will set out the rules for any future restructuring interventions.
The council is working with the AoC and the Learning and Skills Improvement Service to devise the criteria.