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Merger 'could be a costly mistake'

plans to create a giant FE institution, twice as big as the next largest college, could end up as an expensive mistake, one of the principals involved has warned.

Troubleshooter Bill Grady has been appointed interim principal of City college, Manchester, until the end of a review into the college's future, which could mean a merger with Manchester College of Arts and Technology.

Mr Grady said he would not rule out a merger, but warned that other large mergers had damaged the finances of those involved.

He said: "Mergers are often very expensive when you go through the process of amalgamating two sets of staff and moving in and out of buildings.

Sometimes size doesn't automatically lead to economy."

Mr Grady said that the history of college mergers was not one of guaranteed increases in efficiency and effectiveness. He knew of two colleges that had racked up pound;4 million over the course of a merger.

"Where does that money come from?" said Mr Grady. "The advantage is that you can remove destructive competition. But that can be achieved without necessarily spending the money that a merger would need.

"We just need some clarity and joined-up thinking. College principals and boards can work together for the best interests of learners."

Larger colleges also find it harder to make a surplus, he said. In recent years, institutions with a budget of pound;20 million could typically make a surplus of 3 per cent, while those with a pound;35 million budget usually just broke even.

Under the merger proposals, put forward in a Learning and Skills Council review of FE in Manchester, a single college with a budget of about pound;120 million and 70,000 students would be formed.

But City college's governors said that they would reject any takeover proposal and would only consider a merger on equal terms.

The college has about 25,000 students, but its international students and prison education work are expected to increase its income to pound;80 million this year, making it the largest FE teaching institution in financial terms.

"We have a huge national role in prison education," Mr Grady said. "The college's pre-eminence in the fields of offender and international education needs to be maintained."

The review aimed to address duplication of provision, and its preference for a merger is backed by the Greater Manchester LSC, the local authority and Mancat.

The review suggested other options, such as dividing the city into exclusive territories for each college or simply improving co-operation, but it claimed that the merger would offer the best use of public funds.

The local LSC said that the merger would adopt a "federal" approach, enabling local centres to respond to the needs of students and employers in their area.

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