Private funds halt campus crumble

August 18, 2000

Further education colleges are to be encouraged to borrow millions of pounds to replace crumbling campuses through a new lending agency.

The Further Education Funding Council has launched a public-private loans "intermediary", Education Capital Finance, which it hopes will help bridge a Pounds 280 million gap in capital funding for the sector.

The agency has been set up as a company, with college heads and FEFC representatives on the board, to attract private sector funding houses and investors to lend to colleges using standardised terms and conditions.

The idea has been developed from a similar scheme devised for housing associations, which proved successful because it spread the risk of lending across the sector.

Tony Holloway, FEFC assistant director and head of finance, said the agency should be able to negotiate favourable fixed interest rates and would cut the hassle out of loans applications for colleges. Colleges are increasingly looking to move to new sites or build campuses rather than replace buildings on a piecemeal basis, he said.

"Many colleges will only borrow this kind of money once, and so they do not have the requisite skills to sift through the competing offers... This way they can cut through that daunting process and be sure they are not going to get ripped off," he said.

Mr Holloway said the FEFC had applications from colleges for capital projects worth a total Pounds 400 million, but it is able to finance only 35 per cent of them. A survey of colleges earlier this year found that 346 were planning to bring forward new capital developments over the next two years, worth about Pounds 829 million.

"If you look at the value of the applications we have and how much we can finance, it leaves another Pounds 280 million to find from somewhere. This new scheme should be an important part of the process of trying to make up that difference," Mr Holloway said.

Earlier this year, Canterbury College celebrated further education's biggest public-private finance deal to build a new Pounds 40 million campus. The FEFC contributed Pounds 25 million, while the rest of the money came from the Norwich Union and Pounds 5 million from the sale of the old site.

The FEFC believes there has been a growth in bids for capital projects because the traditional 1960s buildings in which many colleges are housed are in a poor state of repair and are inadequate for the learning needs of students.

Mr Holloway said projects financed through the new agency could be turned around quicker than many that have in the past taken the private finance initiative route, which was heavily promoted by the former Conservative government. The up-to-date public-private partnership model has proved more efficient, but colleges are often hard-pressed to find a private backer.

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