There are “significant risks” to students, taxpayers and the reputation of universities if there is no proper oversight of franchised higher education provision, a watchdog has warned.

The Office for Students (OfS), England’s higher education regulator, has said it will intervene when the use of franchised providers – organisations that operate in partnership with registered universities to deliver courses on their behalf –  places the interests of students or taxpayers “at risk”.

In a new Insight brief, the OfS highlighted risks that it has seen, or received allegations of, with subcontractual arrangements in higher education – more commonly known as franchised arrangements.

Examples that have raised concerns include students paying recruitment agents or other third parties to falsify English language tests to allow them to enter courses without attaining the required standard of English.

The OfS has also heard of students with very weak English language skills being told these are sufficient to allow them to study, without the delivery partner putting in place the support they need to succeed.

The report added the watchdog has heard that staff managing partnerships at lead providers have been incentivised to prioritise recruitment and retention of students above course quality.

Since 2019-20, the number of students taught in subcontractual partnerships has doubled to more than 138,000 in 2022-23 – more than 5% of students in the sector.

The OfS analysis said: “Without appropriate oversight of these arrangements, the arm’s-length nature of delivery presents significant risks to students, taxpayers and the higher education sector.”

It added that the increase in subcontractual arrangements “is being driven primarily by students taught by organisations delivering business and management courses” rather than more specialist provision.

The report said: “The practices of third party recruitment agents recruiting students on to subcontractual courses in England often lack transparency, and in some cases this has given us concerns.

“For instance, financial incentives may be attracting students on to courses that are not right for them, or students may be asked to pay recruitment agents for services they could undertake themselves, like applying to a university or college, or additional registration fees.

“In some cases, potential students may be given inaccurate information about courses or student loans in attempts to sign them up.”

The OfS has said it is “prepared to intervene to protect students and taxpayers” when subcontracted courses fall short of its requirements

It added: “We have imposed additional requirements on universities and colleges that subcontract their courses for a large number of students, where we have additional intelligence that suggests students’ or taxpayers’ interests may be at risk.”

In February this year, the OfS said it would investigate franchised provision at Leeds Trinity University after it identified “potential concerns that require further scrutiny”.

David Smy, deputy director for enabling regulation at the OfS, said franchised arrangements can play an important role in reaching disadvantaged students and “offering an alternative route into higher education”.

But he added: “In these financially challenging times for higher education providers, it’s more important than ever that they recognise that business models that rely heavily on subcontractual partnerships carry additional risks, and these risks must be effectively managed.

“It’s vital that all students in these arrangements, whatever their background, receive a high-quality education and the support they need to succeed.

“Their opportunities will not be improved if they are recruited on to courses that are not well delivered and lead to weaker student outcomes and a poor return on their time and financial investment in their education.

“There are also serious risks to public money where these arrangements are not managed properly.

“This can include universities and colleges receiving public funding for students who may not be genuinely studying on the course their tuition fees are funding, and students who may be receiving other payments they’re not entitled to.”

The OfS report comes after the Public Accounts Committee (PAC) warned in April that a lack of Government oversight of franchised higher education providers has left the student loan system open to fraud and abuse.

A National Audit Office (NAO) report in January found that 53% of the £4.1 million fraud detected by the Student Loans Company by value was at franchised higher education providers in England in 2022/23.

A spokeswoman for Universities UK (UUK) said: “Universities are committed to offering high quality higher education. Franchised provision is one way in which universities are doing this. Franchised provision plays an important role in supporting growth and opportunity.

“However, we are not complacent about the concerns raised recently and we have in place our own franchise governance framework which promotes greater controls in the management of franchised provision.

“We welcome the OfS’s insights briefing that speaks to some of these concerns and provides practical advice to providers.”