International expansion is the way forward to keep up with demand from overseas students
More than half of colleges teaching international students are planning to set up campuses abroad.
The proportion of colleges that have sites in foreign countries is set to rise from one-third as institutions seek to take advantage of booming economies in countries such as India and China, where the local education systems cannot cope with demand.
A report by Warwick University for the Association of Colleges reveals that FE institutions believe the opportunities for recruiting foreign students to the UK will decline compared with the market for opening franchises abroad.
For some colleges, overseas campuses are a long-standing practice: Wigan and Leigh College in Greater Manchester has franchised operations in India for more than 11 years, as well as campuses in China and Malaysia. The Indian campuses are run by a private firm, but it pays to use the college brand, its support and quality assurance.
In China, colleges work alongside government institutions. Trevor Ashton, head of international operations at Wigan, said: "It's a two-way process. Our staff go to India, working with the lecturers and delivering courses.
"We can learn a lot from international systems of education. And our international operations make a surplus, which then gets reinvested back into the college here in the UK."
The report said countries such as China, India, Vietnam and the United Arab Emirates were growing faster than their education systems could cope with, presenting an opportunity for UK colleges.
In India, the government expects the proportion of people receiving a technical education to rise from 5 per cent to 50 per cent over 13 years.
But the report conceded that the international operations could be expensive and risky, so it proposed the creation of a new agency to co- ordinate the work and bring in the support of businesses and government.
UK colleges also face competition from those in countries such as Australia, Germany and the United States. The German and Australian systems are centrally planned and may find it hard to be flexible, while in the US there is no universal accreditation to market, the report said.
The UK system splits the difference, with colleges having some autonomy alongside nationally recognised qualifications.
Britain also benefits from a good reputation internationally, although the report said the range and complexity of qualifications in FE were difficult to sell.
Catherine Vines, international operations manager at Ealing, Hammersmith and West London College, sounded a note of caution about setting up campuses abroad.
Her college last month won a Queen's Award for international trade after dramatically expanding its overseas recruitment, but has resisted opening branches abroad.
Speaking from Singapore, she said: "We have done it slowly, slowly. I don't think you can guarantee the quality to deliver overseas until you know them and work with them as partners.
"A lot of colleges set up in China and it didn't work for them. It's a much more high-risk strategy. They hope 10 or 15 per cent would come to the UK for second-year courses, but nothing happened really."
The college does hope to open centres in India, where it recruits 1,000 students a year, but it only intends to hold introductory six- or eight- week sessions to help students get used to the new experience, and reduce their living expenses at the same time. "The first half of term can be lost through culture shock," said Ms Vines.