Scotland’s colleges faced growing financial strain in 2024-25, with a rising number reliant on cash advances from the Scottish Funding Council, according to a report by Audit Scotland.

The report said Scotland’s 19 incorporated colleges reported a collective £5.6 million deficit in 2024-25.

Five colleges needed a cash advance from the SFC in the same year – three more than in 2023-24.

And some colleges required advances to be rolled forward into the next financial year.

The Scottish Government allocated £721 million to the Scottish college sector in for 2026-27 – a 9.3% increase from 2025-26 in cash terms.

“Despite an increase of over nine per cent in Scottish Government funding for colleges in 2026, overall funding remains seven per cent lower in real terms than in 2021,” said Audit Scotland.

“It is not clear if this year’s uplift will help colleges reform. Meanwhile, the Scottish Government and its partners have been slow to progress reforms, including to how the sector is funded.

“The sector has cut its workforce by 13 per cent since 2019 to reduce costs, and most colleges have limited ability to generate income.

“Student numbers continue to fall but the sector has proven resilient. The proportion of students successfully completing courses rose in 2024/25, and most students went on to further study, training or employment.”

Stephen Boyle, Auditor General for Scotland, said: “The financial pressure on Scotland’s colleges is increasing, and their situation remains extremely challenging.

“Without urgent and successful reform of the sector, it’s not clear if colleges can continue to deliver for students and employers.

“The recommendations I made in 2025 remain important, but they are still in the early stages of being addressed. The Scottish Government, Scottish Funding Council and colleges need to take action to implement them at pace.”