LSC debacle: Colleges need £8 billion to rescue projects
Cash-strapped colleges would need to raise £8 billion to complete all their rebuilding plans, a taskforce has found
A report published this morning by the Association of Colleges’ Capital Task Group calculated that this would leave the sector owing up to £800 million per year.
Scores of colleges were left without funding for projects through the Building Colleges for the Future scheme when delivery body the Learning and Skills Council ran out of cash earlier this year, reports Construction News.
The LSC has insisted that colleges have the ability to take on private debt to rescue the projects, but the AoC taskforce branded the level of debt needed ’simply not affordable’.
The taskforce analysed 110 colleges and calculated that they could afford to borrow £7.8 million each, against an average project size of £45 million.
The report said: ‘Currently affordability has been assessed by the LSC through looking at detailed financial forecasts with an assumption that colleges could borrow roughly 40 per cent of their turnover.
‘This was done when there was also significant capital grant funding. It is a very rough guide and takes no account of the income and expenditure as well as the balance sheet of the college.
‘Talking to a variety of lending institutions, the key measure is affordability, often reflected in covenant requirements in any loan transaction with a college.’