THE future of a cash-strapped city college is hanging in the balance as it has been urged to improve its finances.

Southampton City College, which is currently operating on government bailouts, has been asked to continue to work with education bosses on finding a solution “to the on-going challenge of inadequate financial health which is facing the college”.

The news comes as the college’s latest financial statements published last year and referring to 2018/19, revealed that “the college has a reasonable expectation that it has adequate resources to continue in operational existence until October 2020. At that point the college would require additional financial assistance".

The college did not confirm nor deny whether the information is still correct but it said it is planning to merge with Itchen Sixth Form College later this year.

Now the Education and Skills Funding Agency (ESFA) has re-issued a notice to improve (NTI)to City College, following the one sent in 2016.

The college stressed the latest one is not a new notice but a re-issue of the old one and said the ESFA “are doing this to all colleges who have a notice to improve to ensure the policy applied to them is consistent”.

In the letter to the college the ESFA said: “I am re-issuing this NTI (originally sent to the college on 7 December 2016), following review, to reflect the updated policies, processes and requirements placed on colleges that fail the ESFA’s financial health assessment. Southampton City College is still classed as being in formal intervention. The college must continue to attend regular meetings with ESFA. If, in ESFA’s view, the college fails to take the necessary actions (in whole or part) within the timescales set out, or if evidence of progress is not appropriate or not available, the ESFA will take further action. The ESFA will determine when the college has made sufficient progress for the NTI to be lifted.”

The meetings will focus on the college’s finance, cashflow, quality improvement and progress in finding a long-term financial solution that does not require ongoing emergency funding, an official document revealed.

As previously reported, plans to merge Southampton City College, Itchen Sixth Form College and Richard Taunton Sixth Form were unveiled last year.

Now in a statement Southampton City College, which has just over 5,000 students, said: “Due to the funding challenges affecting the sector a lot of colleges have a financial notice to improve, City College is one of these. City College is recognised by the ESFA as managing itself appropriately but is financially weak. The challenge for City College is that our provision is highly technical and inclusive and this is more expensive to deliver than other types of Further Education. It is a small college, so it cannot achieve the economies of scale that larger colleges achieve, which is why a merger to create a larger college is a sustainable long-term solution. Our plan is a merger with Itchen College later this year, but before this happens there are a lot of details to go through, including a public consultation which is likely to start late spring. To merge three colleges at the same time would be extremely complicated, so this would be very unlikely to happen all at the same time.”

The City College’s financial report referring to last year, also showed that the college had a deficit of £1,65m, £1m more than the year before.

In August 2019 the college lost a £500k overdraft facility agreed with Santander as the bank withdrew it following a breach of loan covenants, according to the report.

The document revealed that City College currently has £5.86m of loans outstanding with Santander but “there is no intention by the bank to recall the loan while the College continues to work collaboratively with stakeholders on its future position.”

The college confirmed that Santander remains supportive of the college and that the ESFA is supporting the college financially as necessary.

Following the latest news, councillor Darren Paffey, cabinet member for aspiration, schools and lifelong learning at Southampton City Council said: “City College makes an important contribution to Southampton’s education and we are monitoring the situation there. More broadly, we are keen for colleges to explore options that would place Further Education in the city on a more sustainable foundation.”