We’re not “alternative providers”, we’re higher education’s SMEs

This blog, authored by IHE’s Chief Executive, Alex Proudfoot, was first published on Wonkhe.

‘Tis the season for manifestos, after the surprise calling of the first winter general election in 45 years generated a blizzard of rapid policy prescriptions from industry and professional bodies.

Independent HE has taken a little longer because what we are putting forward for consideration is more than an election manifesto – it is definitely not just for Christmas – but a blueprint for a new way of building higher education in the UK.

The sector is changing beyond the recognition of many commentators, whose personal experience is of large, multi-faculty institutions. These are world-class knowledge factories and centres of economic gravity, but the truth is there have always been smaller, independent and specialist colleges flying under the radar. Government finally acknowledged the growing success of such providers and the pressing need to support the students who choose them through the reforms which led to the Higher Education and Research Act in 2017.

But reforms which are as necessary now as they were then are only part-complete, and most actions still outstanding relate to a new category of institution that we are defining for the first time as “the SME HE provider” and setting out to support in our SME Manifesto for Higher Education.

Small but enterprising

While a small number of SMEs do operate in the traditional HE and FE sectors, the independent sector comprises 89 per cent SMEs, 49 per cent of them small and 19 per cent micro companies, all developed entirely without state support and very few even now with access to public funding. That the SME label fits so well, however, is not down entirely to their small size, but also to the entrepreneurial energy and ideas which course through their organisational veins.

SMEs are everywhere. Wherever you look, every sector of the economy is sustained by SMEs: an invisible chain connecting industries and individuals, setting business on a human scale, and communicating in a language that different communities understand. The knowledge economy of higher education should be no different.

SMEs are on the rise. Savvy purveyors of culture and commerce in every walk of life are drawn to the different, the small and the perfectly formed. Whether that means boutique hotels, independent coffee shops or intimate live music events, the twenty first century consumer understands the value of a unique experience and the difference that the personal touch can make.

It is time for higher education to embrace SMEs too, not least for the role they can play in sustaining the biodiversity of an educational ecosystem increasingly under threat. The last 20 years have been punctuated by a steady drip of courses closed, faculties merged and subjects dropped – ground under the wheels of restructuring as universities adapt to harsh economic truths. Student numbers judged unviable by university administrations can appear quite different to a small institution with lower overheads and a specialist approach. Increasingly SME HE providers have stepped in to preserve subjects which have fallen out of fashion in the mainstream sector.

There have of course been small and specialist institutions in the past which have joined the publicly funded sector. But the pressures of higher education have made for an uncomfortable environment for the small independent. Meeting all of the expectations placed upon higher education institutions has required a minimum student body in the low thousands, not the mid-hundreds which are average for an independent college today. Many felt compelled to grow to be sustainable. Others have merged or been assimilated to larger institutions as independence became impossible.

A call to action

The SME challenge is not new but has been worked around, not addressed head-on. Our manifesto calls on government to do so, with an SME plan as is common in other sectors. New research is needed to establish the true scale and impact of HE SMEs and inform the specific measures necessary, but some initial steps are clear.

An SME champion for higher education would work to ensure SMEs are heard wherever and whenever decisions which affect them are made. Critical to this role and the overall plan will be ensuring that regulation is fit for purpose and the burden and cost of compliance is proportionate to the positive difference it makes to students.

New rules should be subject to SME impact assessments, while guidance and communications from the regulator should be SME friendly. When we asked SME HE providers what they thought of the Office for Students (OfS), 25 per cent felt they had received guidance on ongoing conditions which was clear, timely, and supported them to be compliant. 15 per cent felt that OfS understands their particular context (including mission, student needs and provision). Only 19 per cent felt that OfS regulation will enable students to choose from a more diverse range of high quality higher education provision – a key objective underpinning its creation.

SME HE providers include start-ups offering innovative new programmes or meeting unmet demand for specific subjects, delivery models or professional development. Rather than rely on private equity or large parent companies, government should make finance available in the form of HE start-up loans, targeted towards provision which either meets skills needs or serves HE cold spots. Without such encouragement, 78 per cent of SME HE providers today are based in London and the South East.

More essential even than access to finance is access to expert advice and guidance attuned to SMEs’ circumstances and needs. That is why we are calling for the establishment of a small business support hub and accelerator programme for higher education, which could follow the successful example of Tech Nation. Independent HE already offers practical advice to members and our Launchpad subscribers, but a little extra support would go a long way to unlocking the potential of HE’s SMEs.

Other barriers remain for them. 42 per cent offer FE, short courses or CPD alongside undergraduate provision, but the compliance costs of multiple regulators impose a heavy burden; these processes must be streamlined. The prospect of degree awarding powers for such providers is remote because of the arbitrary requirement that 50 per cent of provision must be at level six or above. Meanwhile the systemic flaws in the validation system remain untouched three years after we flagged them in our joint report with QAA and the Open University – they have only been exacerbated by the expectations of OfS, the body tasked with fixing them.

Nevertheless, SME HE providers are perfectly placed to deliver on the UK’s economic priorities with a focus on adult learning, professional development and training for new careers. 62 per cent have a specific industry or professional focus, and are particularly well attuned to the needs of those industries which are themselves SME-led, including the UK’s fastest growing sector, the creative industries. We propose a retraining pot and the funding by credit of short courses to allow students to determine the amount and pace of learning they need.

Government alone cannot provide answers to all of the questions we have asked. There are cultural and structural challenges for an SME model for higher education which may mean change for institutions, sector organisations and perhaps even students themselves. Over the next year we will be thinking through these implications and articulating this SME model in more detail, and would very much welcome the input and ideas of others. Embedding the role of SMEs in higher education will require a long journey which I hope you will be willing to take with us.

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