Responding to trends in the wake of the war in Ukraine

Whenever there is a shock in the external environment, it should trigger a new assessment of the risks and adverse trends which may affect your school. Sadly, the latest external shock involves the very real human suffering being brutally imposed upon the people of Ukraine. The ripple effect of this through our globalised, interconnected economies will be felt by many more millions worldwide.

Therefore, as well as exploring how your school can best help those directly impacted in Ukraine, reassessing the risks facing your school’s business model is an urgent task for school leaders.

Here we explore two key trends that might negatively affect independent schools – inflation and deglobalisation – and consider how schools can become more resilient in the face of these challenges.

High inflation

We’re seeing inflation rise across many economies including the UK (currently at 6.2%, a 30-year high), the US (at 7.9%, a 40-year high) and the Euro Zone (at an average of 7.5%). This increase in the cost of living means that, in the absence of equivalent wage increases, families have less money to spend on optional purchases.

On the positive side for independent schools, the research currently shows that the most affluent consumers will see little impact in their discretionary spending power, bolstered by the fact that many of these households have savings left over from lower spending levels during lockdowns to help them weather the storm. So, there is unlikely to be a widespread fall in demand for independent education.

The Resolution Foundation forecasts that 1.3 million people, including half a million children, will fall into poverty this year

However, the poorest households will continue to be significantly impacted by the cost of living crisis. The Resolution Foundation forecasts that 1.3 million people, including half a million children, will fall into poverty this year. This may mean schools see partial bursary holders needing additional support, and it also increases the urgent need for greater means-tested bursary provision and state school partnerships nationwide to help close educational attainment gaps.

Schools will already be acutely aware that higher inflation means higher input costs, especially for energy. Economists are not agreed on how long this will last, but some prominent voices, such as Agustín Carstens, general manager of the Bank for International Settlements, have started airing their concern that high inflation may persist over several years.

Schools would be wise to model the impact of inflation of 8.7% (the Office of Budget Responsibility’s peak forecast for 2022) over a two-year period, to identify the possible knock-on impact on fees, any necessary cost-control measures and energy-efficiency projects which may be beneficial sooner rather than later.

Another shock to globalisation

Recent trends are starting to point to the possibility that we are entering an era of ‘deglobalisation’. There is no agreement on this at the moment but the debate is gaining momentum within economic, trade and financial circles. Exacerbated by the US-China trade restrictions started during Trump’s administration, Brexit, the Covid pandemic and now the crisis in Ukraine, nations and businesses are prioritising resilience over efficiency and bringing their supply chains closer to home.

We are unlikely to see an immediate impact on the internationalisation of independent education. However, a rollback of globalisation is predicted to slow growth and make it harder for nations not yet fully part of the global economic system, such as most of those in Africa, to benefit from the same wave of benefits seen by the West and emerging economies. This may minimise the growth of demand for independent education in these regions.

Given current strains on globalisation and risks of future security tensions being triggered with a wider group of countries, including China, no school should be over-reliant on one geographic region for their international student recruitment. Just as many nations and businesses are, this is a time to value resilience over efficiency.

Boosting your school’s resilience

Uncertainty over future inflation and globalisation are just two pieces of a complex picture. The lack of certainty about the outcome or length of the war in Ukraine, the medium-term costs to economies of sourcing energy from non-Russian sources, the impact of the invasion on global supply chains… The list of uncertainties goes on.
So, given these external risks and uncertainties, what might a resilient school strategy look like? Income diversification, cost control and high-quality strategic thinking are three essential components.

The Resolution Foundation forecasts that 1.3 million people, including half a million children, will fall into poverty this year

Income diversification is essential in times of uncertainty and will protect your school against unpredicted future risks as well as those we are facing today. This means diversifying within your student recruitment strategy so you don’t become overly reliant on one region of the world for international students. It also means diversifying into non-fee income generation; for example, from fundraising and commercial lettings. And for those schools with income-generating international franchises, it means ensuring you don’t allow yourself to become overly reliant on any one overseas partner.

Most schools have focused on cost control for many years now as we’ve come through the pandemic. Given you never want to put your core educational offering at risk through cost-cutting, some finance directors will be scratching their heads as to where further savings could come from. Two areas are now worth looking into in more detail: investing in projects which will cut the cost of energy or boost energy efficiency; and the possibility of involving staff and pupils more to reduce costs.

The final essential component of a resilient school is high-quality strategic thinking by senior leaders and governors. You need a culture and a meeting structure that allows you to spot external trends, understand how they may play out over time, assess the opportunities and threats they pose for your school and then take strategic action. Now is a great time to boost your team’s strategic thinking – and you’ve taken the first step here by exploring the possible impact of inflation and deglobalisation. What are your strategic actions going to be?

Continue building your strategic thinking skills and download this checklist – https://bit.ly/3OA9qji – to help you prepare for the economic challenges ahead.

Juliet Corbett is a school strategist supporting leaders to both secure their independent school’s future and help build a more equal and just world. She has an Economics degree from the University of Cambridge and was awarded the top prize on Durham University’s MBA programme in 2018. She facilitates governor Away Days, offers online support to leadership teams developing and implementing strategy and is host of the award-winning Independent School Podcast.

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