Outcomes and expenditure
23. The UKeU failed to meet its targets, aims,
and objectives. The launch of the first UKeU courses was delayed
until September 2003. When launched, they attracted just 900 students
against a target of 5,600. Furthermore, despite it being
a condition of grant, UKeU failed to attract significant private
investment. The following summary of UKeU progress against
its targets is taken from the Business Review of the UKeU, conducted
from September to December 2003 by PA Consulting:
'From initial incorporation in 2001, the e-University
didn't move from its initial start-up into its business launch
phase until September 2003, when the first tranche of 16 courses
were made available on-line and the first wave of 900 students
signed up. However, this position was still significantly behind
that originally targeted for this stage of the business plan agreed
with UKeU in April 2002.[12]
'The original business plan forecast rapid growth
to 110,000 students within the UKeU's first six years, reaching
over 250,000 by Year 10. Revenues were forecast to grow commensurately,
breaking even by Year 5 (2006-07) and generating gross profits
of more than £110m by Year 10. Even by Year 2 (2003-04),
the original plan forecast student enrolments of more than 5,600
(downgraded from 12,600 in the first PwC plan) and revenues of
£2.7 million. In practice, the UKeU has underperformed against
the results forecast by the original plan in respect of courses
available, students enrolled, platform delivery and external investment
secured.
'A new and substantially revised business plan was
approved by the UKeU Board[13]
in November 2003, containing updated forecasts for enrolments,
product launches and operating costs. The revised plan was based
on significantly lower business volumes than the original plan,
targeting growth towards 45,000 students and revenues of £40
million by 2009-10. Expected break-even was forecast for 2007-08.
'The revised plan was predicated on the availability
of a further £30m of capital from HEFCE in addition to the
£27m already invested. Unlike the original plan, the revised
business plan contained no provisions for private sector investment
within the next six years, although this option was still being
explored.'[14]
24. The original Government objectives, and the original
HEFCE/PwC business plan, stated that the UKeU was meant to be
an effective partnership with HEIs, and that it was meant to be
a joint public-private venture. Indeed, one of the conditions
of grant was that the business should seek 50/50 public/private
funding to put commercial drive and accountability into the venture.
Other than Sun Microsystems, who signed a strategic alliance with
UKeU in October 2001 to develop the technological platform, and
one relatively small private investor (around 1% of the HEFCE
grant),[15] UKeU did
not secure any private investment. Furthermore, many HEIs pulled
out of their partnership with UKeU in the later stages of the
project.
25. On 25 February, the HEFCE Board considered a
review of the company's business plan by PA Consulting. The HEFCE
Board had to decide whether UKeU's new business plan justified
further public investment. The Board decided that in future HEFCE
funding should support the development of e-learning in universities
and colleges rather than through UKeU. In February 2004, HEFCE
announced it was holding immediate talks with UKeU on restructuring
activities and servicesin effect the HEFCE terminated UKeU
and set about deciding which activities should be maintained and
transferred to HEIs.
26. In evidence to the Committee, Sir Howard Newby,
Chief Executive of the HEFCE, explained that the advice to the
Board came essentially from him:
'
in light of the
disappointing recruitment,
and in the light of what was going on in the financial markets,
the risk
had tilted the other way. This was an unacceptable
risk for us
our recommendation to the Board was that the
business plan was not sufficiently robust on which to base further
investment. The Board took the view to restructure the company
in light of that.'[16]
27. Project management of the successful e-China
project has been transferred to the University of Cambridge. The
e-learning research centre will continue as a partnership between
the Universities of Manchester and Southampton and the Higher
Education Academy.
28. £62 million was allocated to the e-Universities
project for the period 2001-2004. Of this £62 million, £50
million has been spent. The expenditure breaks down as follows:
Table 1 Public expenditure on the e-University
project to date