'We are talking about a move to the business world'

16th January 2009 at 00:00
Colleges think keeping quiet about their acquisitions of work-based training companies is best for all

Generally when one business buys another it is an excuse for the boss to crack open the champagne and toast their business acumen. So the reticence of colleges to talk about acquisitions of work-based learning companies seems unusual.

"It is not something we plan to over publicise," said one principal when asked about his recent purchase of a training company.

He explained that the college's market research into work-based learning found that some employers preferred to deal with training companies rather than colleges. Revealing that the firm had been bought by a college could undermine the deal, which was designed to help the college get business from new groups of employers.

He said the research found employers perceived the companies as more flexible and able to meet their needs, while colleges were tied to the academic year.

"We needed to remodel the college to make it more responsive, but that takes time and there is business available in the meantime. So what do we do?

"We formed an alliance with a private training provider who might be seen as more flexible," he explained.

The college will buy the company in stages over three years, subject to the firm meeting performance criteria, and will pay about Pounds 1 million over that time, funded from the college's reserves.

Lincoln College has also acquired a work-based learning company, taking over the training arm of the local Isis training and recruitment firm in September.

John Allen, the principal, explained that the college did not have to pay for the firm because its owner wanted to retire but did not want to close the business. The college took on the firm's staff, building leases and Learning and Skills Council contracts.

Lincoln is full of small businesses, rather than big employers, so it is time consuming to build up relationships with them all.

"They have staff that talk to businesses that we never got in touch with and a brand name that is different from Lincoln College," Mr Allen said. "We did it because Isis has positive reverberations in the business community."

The two colleges are among the latest to snap up private training companies. Other examples include Wiltshire College, which took on Avon Vale Training in 2002, and Brunel and Gordano Training, which joined City of Bristol College in 2007. Newcastle College's purchase of a significant chunk of the training business of Carter and Carter, which collapsed last year, remains the most spectacular example of college activity in the area.

These colleges are unlikely to be the last to buy work-based training expertise. The anonymous college principal in the opening example told FE Focus that he had spoken to at least three other colleges who wanted to know how to go about buying training companies.

One reason for these takeovers is the growing amount of government funding being channelled into work-based learning. In 2007-08 the Learning and Skills Council put nearly Pounds 990 million into employer-responsive programmes, such as Train to Gain, employer-based national vocational qualifications, apprenticeships and work-based learning, and this will rise to Pounds 1.58 billion by 2010-11.

While the money is available to both colleges and independent training providers, success in work-based learning comes down to the strength of providers' connections with local businesses and their ability to provide exactly what those employers want where, when and how they want it.

"Buying a training provider is a quick way to get a lot of expertise many colleges do not have," said David Sherlock, director of the Beyond Standards consultancy firm and former chief inspector for adult learning.

A key difference between training providers and colleges is the terms on which their staff work.

"Training is delivered throughout the year whenever the client wants it, which can mean being there at 3am when people come off a shift," said Mr Sherlock.

Private training staff will often work on employers' premises, travelling around between clients. They may also be paid less than lecturers, get shorter holiday entitlements and not have a final salary pension scheme, he said. Buying a training company means the college can keep the staff on their existing terms and conditions.

As well as getting a different brand for their employer-focused work, colleges that have a training firm can also keep that work separate from their other provision of longer and more traditional qualifications and 16 to 18 provision. Such separation can ensure that the two types of learning do not detract from one another.

Aidan Relf, communications director for the Association of Learning Providers, which represents about 470 independent training providers, understands the motivation of colleges. "Independent learning providers are an attractive proposition at this time because of their close links with employers," he said. "They are buying up the know-how and companies' contact books."

Mr Relf said that smaller training providers could suffer during the recession as their access to credit is restricted. Many private training providers rely on credit to deliver contracts that are often paid partly up front and partly on completion, he said. This could leave independent firms weakened and more vulnerable to takeover by colleges.

However, given the investment in Train to Gain, and the additional Pounds 500 million to help the long-term unemployed get back into work, announced by Gordon Brown this week, Mr Relf thinks that there is sufficient business for all.

Paul Head, principal of the College of North East London, agreed that there was plenty of business around but thought not all private providers would be in a position to secure a share of it.

"There are great opportunities out there but you need working capital to take advantage," he said. "One of the advantages of working with a college is that you can get that working capital."

Whether the recession affects colleges' willingness and ability to buy more training companies remains to be seen. Certainly, neither the anonymous college first mentioned, nor Lincoln College needed bank loans to buy their training companies. Even Newcastle College's significant purchase - the price has never been disclosed - was funded to a significant degree, possibly in total, from the college's reserves.

Colleges will also be aware that, in addition to their often greater financial muscle than private trainers, they enjoy the advantage of not having to turn a profit or keep shareholders happy.

In the longer term, the growth of work-based learning could trigger a change in the way colleges work. Some principals are talking about colleges gradually becoming more like private training firms by being more flexible and responsive to what students and employers want.

"Colleges need to be more responsive still to the government agenda," said Mr Sherlock. "We are talking about a move to the business world."

Perhaps in time, then, as colleges remodel themselves and adapt further to the skills agenda, they can engage in work-based learning activities without the secrecy.

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