Responsiveness and flexibility are key to institutions' success, Hefce chief executive tells Melanie Newman. Universities will not be allowed to fail in future but some may have to shrink in size, according to the higher education funding chief, David Eastwood.
Professor Eastwood, chief executive of the Higher Education Funding Council for England, said he was often asked: "Is it Hefce policy that an institution should go under?"
The question was sometimes asked out of fear and sometimes in hope that the council would bring a "stern market discipline to bear" on the sector, he added.
"It would be a market discipline, but I think it would be the wrong one," he said.
Delivering the annual guest lecture to the Association of University Administrators, Mr Eastwood said: "Our approach is to move towards a light-touch interaction, recognising that higher education in England is a low-risk sector."
Agreeing that there were questions about the sector's sustainability and responsiveness, he said "raising the spectre of market failure" was not the right response.
If the sector was to remain successful and low risk, however, he warned that its ability to react to changes in the market would be essential.
"If things are going wrong we get early warnings. We see it in the income stream, recruitment and ability to attract staff. (Institutions) don't suddenly collapse, but heeding those early warnings and then repositioning is crucial."
In the next decade the "dash for growth" that had characterised the past ten years would not serve all institutions well, he suggested.
"Some will be best served by finding their market niche even if that involves some shrinkage."
Mr Eastwood outlined challenges for the sector, including increasing global competition and free open access to knowledge.
"How do we respond to the challenge of the knowledge revolution?" he asked. "Universities have traditionally been places where knowledge is created, ordered and imparted. That's their essence and that needs to be reimagined in a world where knowledge has never been so freely available but understanding so tantalisingly elusive."