What are the top 10 challenges faced by independent schools?
Ian Wakeling, Partner at Bidwells, predicts the top ten key challenges faced by independent schools in 2018
Property Consultancy Bidwells has recently carried out research to identify the key challenges faced by independent schools and their implications. Rising running costs, a diversified parental market, competition from state schools, lack of financial reserves to carry out property improvements and the political threat of losing this charitable status and the subsequent business rates and VAT liabilities are all important issues on the agenda. From the research, Ian Wakeling, Partner at Bidwells, predicts the top ten key challenges faced by independent schools in 2018:
1. Rising running costs
There is a growing tension between the affordability of fees for parents – particularly at smaller schools – and the rising cost of delivering all the educational elements expected. Throughout the UK, fee increases have exceeded inflation over the last ten years. This means that some parents are finding it harder to fund independent education. Independent schools need to be even more creative in seeking other income-generating activities which can help to offset rising costs.
2. Competition from state schools
With the affordability of school fees under pressure, and some local state schools performing well and highly rated by Ofsted, some parents are understandably questioning what additional benefits they are buying from independent schools. Staying competitive and adapting facilities suitable for the next generation of pupils will be key.
3. Parental demographics
The demographic of parents is changing, with traditional boarding families and ‘first-time buyers’ having different expectations and aspirations. This can bring added pressure to schools in terms of their marketing as they try to appeal to both groups. In addition, for schools to appeal to a wider market, many have looked to to market their brand abroad and expand with franchises across the world.
4. International students
UK students are being ‘priced out’ of independent schools by international students who can afford higher fees, driven up by increasing costs.
5. Crisis of identity
With pressure to generate extra income, against maintaining a charitable status, some schools struggle to balance being an educational provider, a charity and a business.
6. Lack of financial reserves
Many schools do not have financial reserves for property improvements and are ‘fire fighting’ in terms of keeping old or listed buildings fit for purpose. There are usually other issues such as site constraints, access and transport links. Maintenance is also a challenge with many establishments needing to ‘fly the plane whilst building it’. Jobs often take longer than the scheduled period during the holidays and run into term-time, causing timetable disruption.
7. Limitations in terms of generating additional income
Some schools are trying to raise income by letting out facilities during the holidays for conferences and events. However, this is currently not proving a successful financial strategy for many schools as the opportunities are limited and the profit margins small. Such activities are a further burden on – often stretched – facilities staff and adds to the maintenance costs of the property.
A way forward could be looking at innovative ways to create revenue in the same way as some Oxbridge Colleges which invest in property outside the campus and use the rental income to support academic activities. Other options including fundraising from alumni which has varying degrees of success in the UK and for the top schools, overseas franchising.
8. Skillset and commercial acumen
There are increasing and rapidly changing demands on a school’s senior team, its bursar and its governors need to be commercially astute to ensure their establishment survives and thrives with the emerging challenges that lie ahead. Long-term financial strategies need to be in place, as well as consideration given to more radical ways to manage the school estate.
9. Property expertise
Bursars need to access professional advice on property maintenance and improvements to ensure that initiatives meet with success. Having close relationships with the local planning department is key, as are project management skills to see new developments delivered on-time and on-budget.
10. VAT and end of relief on business rates
The threat of changing schools’ charitable status will see increased tax liabilities for both schools and parents; the loss of all or part of the tax relief may have to be passed on to parents in some form, rendering many unable to afford independent education. Schools have few options, and many will be reluctant to increase headcount because of building constraints and the sizes of classrooms. Many independent schools pride themselves on smaller class sizes and the enhanced teaching environment this creates. These interventions could result in a split market with independent education becoming a luxury brand, financially accessible only to the very wealthy.
Bidwells will be holding a series of roundtables and workshops during 2018 with independent schools to explore some of these issues in depth and discuss possible solutions. If you are interested in attending and would like further information, please go to www.bidwells.co.uk/news/schools-workshops