The UK government has been accused of “bending over backwards” to support England’s biggest for-profit college – by letting it continue to access public funding despite officials knowing about its serious financial problems – while “refusing to back” public universities.
GSM London’s recently published accounts reveal that it made a net loss of £9.9 million last year, and that £26 million of its debt has been waived as part of a turnaround plan agreed with its private equity owners.
The accounts, overdue since June but finally published on 14 November, also say that the turnaround plans are “not without risk”. If events were to “crystallise in a materially negative manner…then the group may need to secure further funding”, the accounts add, and “if further funding was not arranged then there would be a significant doubt over the group’s ability to continue as a going concern”.
However, the Department for Education has approved the turnaround plan and allowed GSM to access public funding for students this year.
GSM has the highest number of students claiming Student Loans Company funding of any alternative provider in England, with 4,587 students receiving a total of £17 million in tuition fee loans in 2017-18, according to SLC figures.
DfE officials have been in talks with GSM – which featured in a 2017 BBC Panorama investigation into external recruitment agents used by some for-profit colleges – about its financial worries over the course of the year.
Financial problems at GSM followed a drop in the number of students being retained to the end of their courses, Times Higher Education understands.
The Sunday Telegraph reported in August that the DfE had been “in talks” with GSM and that “accountants from BDO were placed on red alert amid fears GSM…could collapse into administration”.
GSM is owned by Clipper Group, which is in turn majority-owned by private equity firm Sovereign Capital. The owners were looking to sell GSM earlier in the year, THE understands, but subsequently agreed to stay in charge.
GSM’s accounts say that Sovereign has now “provided further equity to fully fund” the groups headed by Clipper, including GSM’s “turnaround plans”, a deal completed on 8 November.
This deal “includes creditors waiving in excess of £26 million of long-term loans”.
The accounts add: “The Department for Education has confirmed its approval of the changes and has designated GSM London Limited [for students to access SLC funding] for [the] 2018-19 academic year on 6 November 2018, based on the ongoing structure and the turnaround plan presented to the DfE.
“The DfE has identified that it will monitor the delivery of the group’s turnaround as an ongoing condition of the designation.”
Sam Gyimah, the universities minister, recently said that “we do not see it as the government’s role to bail universities out when they make reckless financial decisions”.
But Matt Waddup, the University and College Union head of policy and campaigns, said: “This looks like a government bending over backwards to help the profiteers while refusing to back our public universities.”
A GSM spokeswoman said that the refinancing deal “leaves the group free of bank and investor debt”.
“Our focus is ensuring that all our students continue to access a quality education, and this investment will provide GSM London with the support we need to successfully implement our detailed five-year plan for the college,” she added.