Creating an emergency administration process for universities at risk of closure could end up being counterproductive, the head of Universities UK has warned, amid continued concern over the impact of market exit.

Appearing in front of MPs, Vivienne Stern, chief executive of UUK, said such a regime could make it ¡°more likely that the institution effectively collapses¡±.

With UK universities facing growing financial pressures, there have been calls to formalise the process for what would happen should a university go bust as there are currently no clear rules for institutions to follow.

Such a regime could be modelled on one created for the further education sector in 2019 and provide more clarity for students and lenders affected by any closure, it has been argued.?

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However, Stern told the House of Commons Education Committee, which is conducting a review into higher education funding, that she feared ¡°if you go down that path, you crystallise the closure of the institution. It¡¯s almost impossible to see how you can then avert the institution ceasing to exist.¡±

Stern said that it was better to focus on how to prevent a ¡°disorderly exit, and the circumstance where a university shuts its doors overnight¡±.

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¡°We should think about what the best way of achieving that aim is, and managing a situation, either that an institution over time is wound down or that it is enabled to go from an unsustainable to a sustainable position.¡±

Funds could be used to establish a ¡°transformation fund¡± where struggling providers could access?money?to make ¡°very significant changes¡± where they are unable to continue as they are. ¡°Spend the money before, and not after, a failure,¡± Stern argued.

Neil Smyth, a partner at legal firm Mills and Reeve, said the lack of clarity around what would happen if a university entered into severe financial distress was ¡°concerning¡±.

He believed it would be helpful to have a formal insolvency route, but only when it is ¡°absolutely needed¡±.

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¡°I don¡¯t think there¡¯s any appetite on behalf of the lenders to put universities into an insolvency process and put 15,000-20,000 students out on the streets. But if there was a clearer legal structure around HE, I think that would actually assist the sector from a lending perspective as well.¡±

Introducing such a route could provide better protection for students, as ¡°from a legal perspective, it is very unclear as to whether the students actually have any higher priority than any other creditor¡± under the current regime.

¡°I think it needs to be there as a safety net. But I don¡¯t think it¡¯s there as a process that you would look to use unless you were looking at preventing a disorderly exit,¡± he said.?

The impact of such an exit would be ¡°disastrous¡± for not just the sector, but regional economies, argued Adam Leach, national civic impact director at the Civic University Network.

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He said that an insolvency could ¡°really devastate regional ecosystems¡± and potentially result in ¡°thousands of jobs lost overnight¡±.?

Leach noted that there are ¡°no protections really in place at the moment¡± to?safeguard the ¡°vital¡± civic relationships that universities have with their regional ecosystem should a university collapse, and added ¡°universities are essential partners in a lot of regions, and a large university going insolvent could lead to immediate economic devastation¡±.

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¡°We¡¯ve developed a system for higher education where these regional impacts don¡¯t even seem to be part of the mainstream debate,¡± he argued. ¡°We¡¯ve not incentivised, we¡¯ve not measured and we¡¯ve not funded the vital place-based role that happens in universities, and there are no safeguards in place to stop these impacts being felt in our regions and our communities should the worst happen.¡±

juliette.rowsell@timeshighereducation.com