Strategic implications for higher education

As noted previously, the political, academic and financial drivers and targets of the Academies Programme were very different to the circumstances the HE sector is facing now. 

Academisation resulted in taking schools out of local government control and, in many senses, bringing them under more direct influence from central government under a new, uniform legal and regulatory framework. Universities, on the other hand, are largely autonomous, albeit with varying degrees of reliance on public funding. 

In the absence of any appetite to create a completely new framework for MUTs or incentive packages, the MUT structure will likely only apply to select universities. 

However, the MUT model offers some features worth exploring, alongside other collaborative legal models – ranging from informal partnerships and shared services to group structures and full mergers – with the aim of achieving long-term financial sustainability for institutions delivering the government’s growth agenda. 

Bringing operations and services together must deliver substantial benefits for this model to be worthwhile.

Financial sustainability through scale

To begin with, the Academies Programme demonstrates how collaborative structures can achieve financial sustainability through economies of scale. 

Given that the largest trusts now operate with revenues in the hundreds of millions, there’s an argument that similar consolidation in higher education could address current financial pressures while maintaining institutional identity at the local level.

However, it must be noted that the Academies Programme was a government policy geared towards the promotion of MATs and complemented, in the formative stages, by a financial package to deliver on the DfE’s aims. 

Without a similar framework or innovation fund being developed to implement this in the HE sector, the success of a MUT will depend purely on the merging universities realising sufficient economies at a large-enough scale to drive mutual benefits. As a result, developing solid business models for such activities will be crucial. 

It is widely recognised that additional economies of scale in the HE sector are possible and needed. 

A recent Universities UK-commissioned report, led by JISC, called for a sector-wide action plan to increase shared services. Obstacles under VAT legislation currently contribute to universities holding back on adopting wider shared services initiatives across the sector. 

However, VAT legislation does not apply to the sharing of services across several universities that form part of a MUT, given the provision takes place within the same legal entity. As a result, such economies of scale can be achieved within a MUT independently from changes to tax legislation. 

Autonomy within structure

The academies model shows how institutions can maintain some operational autonomy through the three-tiered governance model while benefitting from shared services, strategic oversight and collaborative governance. 

This balance could be particularly attractive to universities seeking to preserve their academic independence but still access the benefits of scale.

It must be acknowledged, though, that there are greater differences in the culture and operations between universities than there were between schools pre-academisation. 

The HE sector also has a wider variety of legal structures (royal charter institutions, statutory corporations and companies) and types of institutions (research-intensive, teaching-focused, undergraduate, postgraduate, specialist niche providers) than schools, which were operated by local authorities with a basic operating model that is more uniform.

Equally, while the sector is collaborative at heart, the replacement of state funding with consumer-led funding means that HE institutions now operate within a competitive environment, with the downsides all too apparent. From a regulatory perspective, significant restructuring of universities – such as mergers or the coming together of several universities in one MUT – may need to be cleared from a competition law perspective. 

This, therefore, provides for a different starting point. As  with any other type of merger, universities considering the establishment of a MUT will need to think through balanced governance arrangements at member, board of trustees and local board levels in order to preserve the right level of institutional autonomy for each participating university. 

Phased implementation strategy

Given the drivers for higher education restructurings are unique to the sector, any strategy to create MUTs will be different to the Academies Programme. University mergers will require a more bespoke approach. 

As with other types of mergers, some may be on geographic grounds, while others may involve collaborations based on shared offerings, teaching or research specialisms.

If the Academies Programme is taken as a model, the first step for a MUT is more likely to be a merger between two institutions. Setting out governance arrangements from this lower base will make it easier for others to join in the future, highlighted perhaps by Prof Jane Harrington, Vice-Chancellor at the University of Greenwich, when speaking of the potential for further future expansion under the Kent and Greenwich model.  

Institutions that are struggling with financial sustainability and viability may choose to build a MUT structure around them that will guarantee the survival of their offerings that students and communities benefit the most from. The OfS may be involved in facilitating such MUT projects. 

Other MUT projects could consolidate and expand longstanding collaborations between universities, as is the case of of Kent and Greenwich. 

With 429 HE providers in Britain registered with the OfS, compared to 30,000 schools, we won’t see the same level of expansion, and a  large MUT would likely comprise only three or four universities. 

It is also possible for a MUT to include education institutions other than universities, such as a further education provider or schools.

However, the particular regulatory and operational challenges of a cross-sector MUT should be borne in mind, given that the same legal entity would need to ensure compliance with the frameworks applicable to several types of education institutions. 

Also, from a charity law perspective, the institutions joining a newly formed or expanding MUT will need to be comfortable that they are not exposing their charitable assets to excessive legal, financial and operational risks. 

We would expect MUTs to make use of trading and other subsidiary companies in order to manage some of the risks related to operating several institutions.  

Governance innovation

The three-tier governance model offers universities a framework for maintaining local academic governance while benefitting from strategic oversight and shared expertise at MUT level. This could help to deliver collaboration without loss of the  institution’s autonomy and culture.

While universities, unlike schools pre-academisation, already have very complex governance arrangements, MUTs could help them to simplify structures by sharing the best practice of two institutions within one legal entity.