No statutory failure regime or transition finance for universities restructuring under AI-era demand

OfS reports ~45% of English providers in deficit in 2025-26, with two dozen institutions at risk of ceasing degree-awarding activity within 12 months; 12,000+ jobs went in 2025. Unlike FE colleges (statutory insolvency regime since 2019), HE has no special administration regime protecting students if a provider fails, a hole pressed by the Commons Education Committee's 'Threat of Insolvency' report. The post-16 white paper (Oct 2025) adds OfS intervention powers but no transition finance. Meanwhile AI is eroding the graduate-premium proposition, and distressed institutions have no funded route to pivot toward modular, lifelong, AI-era provision.

A disorderly university failure would strand tens of thousands of students, devastate a regional economy, and force an unplanned bailout. Managed transformation is cheaper than crisis response, and the AI skills transition needs universities reconfigured, not merely shrunk.

Legislate an HE special administration regime with student-protection priority, paired with a conditional Transformation Fund financing mergers, specialisation and conversion to modular/LLE-aligned provision.

// State-led: Instrument: primary legislation creating HE special administration regime plus Treasury-funded Transformation Fund.

Around 45% of providers are in deficit with a dozen at risk of ceasing within twelve months, yet HE has no insolvency regime or transition finance and the white paper is live.