UK: Independent Schools - Change Brings Opportunities

Last Updated: 30 July 2013
Article by Craig Aitchison

Craig Aitchison explores the changes you can make for the better.

The education sector has been, and continues to be, subject to increasing scrutiny, regulation and challenge. Never has the phrase 'there is nothing permanent except change,' been more apt.

Independent schools continue to cope with issues such as:

  • uncertainty over what constitutes 'public benefit' as a pre- requisite of maintaining charitable status
  • increasing constraints on parents' ability to meet education costs, especially with the introduction of £9,000 per annum university fees
  • additional competition, not only from other independent schools and state sixth form colleges, but from the rising number of state academies and free schools (2,724 academies at 1 March 2013, being 48% of state secondary schools and 79 free schools, with more of both in the pipeline. See www.education.gov.uk)
  • demographics in local areas reducing the pupil population
  • cost inflation, particularly in respect of the key categories of staff, property, utilities and catering
  • falling property prices reducing the value of security available to support borrowing.

Looking at the state of the sector, the latest ISC annual Census (taken in January 2013 and based on responses from over 1,200 schools) reported that:

  • at the 1,204 schools completing the census in both 2012 and 2013, pupil numbers were down by 0.3% (compared with a 0.1% survey increase in 2012)
  • the average overall fee is up by 3.9%, the lowest annual fee rise since 1994
  • the value of means-tested bursaries rose by 6.7%, an increase of almost £19m.

It is interesting to note that the percentage of pupils attending independent schools in the UK still appears to remain at approximately 7% of total UK pupils and there is opinion that this will continue. On the other hand, anecdotal evidence suggests that many schools expect fewer pupils. How can this be reconciled?

Recent years have certainly seen increasing school insolvencies and undoubtedly, this trend will continue. However, in my experience, the majority of pupils either continue as pupils in the restructured school (with new owners, often a schools group) or move to alternative independent schools, frequently local rivals. This would tend to suggest that we are seeing sector changes in how independent school services are delivered (and to whom) rather than an overall decline, a scenario reflecting the nature of all business sectors – in which there are both winners and losers. The winners are those who are most able to identify and adapt to change.

Winning strategies in the independent schools sector include:

  • a strong board of trustees - including areas of expertise such as finance, law, property, fundraising, education and human resources
  • knowing your market and acting accordingly - a continuous process which might lead to rationalisation, growth organically or by merger or acquisition, academy conversion or joining a wider schools group
  • understanding changes in pupil numbers - if reducing, ascertain and be realistic about the reasons; if increasing, how best to capitalise on this
  • strict financial control - staff scheduling, supplier contracts, purchasing groups with other schools, joining a wider schools group, reliable and timely accounting information and forecasts
  • managing the bank relationship:

    • avoid surprises; identify issues early and present the bank with your proposed course of action to address these
    • funding remains available with banks (and certain equity houses) for investment into viable education proposals
  • no 'sacred cows' - rigorously question the existing business model as to whether it is still the most relevant and make appropriate changes based upon a realistic and objective SWOT analysis.

In summary, changes in the independent schools sector do bring opportunities to continue to deliver the best outcome for pupils – the overriding objective of all schools.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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