The UK Higher education sector is facing unprecedented challenges across all aspects of the competitive landscape from increasing numbers of universities, government policy aimed at freeing up the sector, students becoming more demanding under the impact of tuition fees, and new entrants in the form of private providers.

Private provision will become an increasingly important element of the Higher Education landscape in coming years and there is no doubt about the thrust of government policy in making the market more accessible to private providers  and reducing barriers to entry by addressing the regulatory framework.

The private HE sector contains a range of different types of institutions, which can be broadly divided into for-profit and non-profit sectors. For-profits include international corporations with a UK presence such as Kaplan (owned by the Washington Post) and the Apollo Group (which in 2009 acquired BPP, a for-profit provider of professional qualifications, some at HE level), as well as small colleges, often offering non-accredited programmes.

Private providers employ business models ranging from partnerships with UK institutions overseas, partnerships with UK institutions to accredit courses, gaining degree awarding powers themselves and acquiring existing institutions.

There has been a sea-change in attitudes to Higher education under the impact of tuition fees. Employability is the number one driver amongst applicants along with the course and its importance in helping deliver career aspirations. Return on investment is a key driver.

These developments in student attitudes to UK Higher Education offer significant opportunities to those Institutions and private providers who can tailor their offer to meet these three drivers – cost, employability, and relevant student experience.

The US experience offers some salutary lessons when it comes to the regulation of providers and the maintenance of quality parameters, but the private sector is quick to respond to market demands and on current trends, they are clearly putting pressure on UK Universities in the areas of professional and vocational programmes. However, this is also a marketing opportunity given the increasing emphasis on employability and the trade-offs being increasingly made by students between courses, costs, employment outcomes and the overall student experience.

Private providers are more flexible, can react quickly to market demand and do not carry the large overheads associated with a traditional University model. In addition, they invest heavily in marketing themselves at levels around 10% of turnover, whereas most UK Institutions invest less than 3%.

The biggest challenge facing Higher Education in the next 5-10 years is a change of mind set, from “funding” to “income generation”, from thinking like a public institution to thinking like a commercial enterprise, from marketing communications to marketing strategy, and from corporate identity to creating a powerful brand.

Universities need to embrace the potential for private sector business partners to develop more flexible business models and tailored service offerings whilst putting in place managerial processes to manage risks, based on experience in other countries.

This is an extract from “How Will The Rise In Private Providers Affect Traditional HE Models – threat or opportunity?” published in the EMS vision series. For more details or to order the full report please email ivor.lawrence@underlyingform.co.uk