Reading, writing, recession

Is independent schooling surviving the recession? In a special report for Independent Education Today, Simon Fry does the maths

News in December that the UK economy will surpass its pre-recession peak (in 2008’s first quarter) in 2014’s second half suggests emergence from the deepest slump in modern times. Throughout these years, independent education has proven itself to be admirably adaptable and remarkably resilient. While the recovery’s green shoots are metaphorical, those at one independent school are literal, as cost reduction, income expansion and the offer of value-for-money across the sector have kept pupil numbers relatively steady, albeit with pockets of regional and intra-sectoral vulnerability.

Statistics provided by the Independent Schools Council (ISC) suggest the recession has not significantly affected pupil numbers in independent schools. In 2008, 511,677 pupils attended 1,271 ISC schools, an increase from 509,093 pupils in 2007. Its 2012 census reported pupil numbers of 508,472 at 1,223 ISC schools, a rise of 0.1 percent compared to the equivalent figure for 2011 and the first such rise since 2008. While 2014 figures are due for publication shortly, the corresponding figure for April 2013 showed 508,601 pupils at the ISC’s 1,223 schools, although the total number of pupils at the 1,204 schools taking part in its 2012 and 2013 censuses fell by 0.3 percent.

ISC 2013 census selected figures:

Average school fees + 3.9 percent, the lowest rise since 1994.

Value of mean-tested bursaries +6.7 percent

ISC schools in London & south east 45 percent

Pupils in Greater London schools +1.1 percent

Pupils in northern schools -1.1 percent

Pupils in Welsh schools -2.7 percent

Non-British pupils +1.4 percent

Amount spent on new/refurbished boarding accommodation per boarding pupil +33.9 percent

Overseas campuses +45 percent (from 20 to 29)

Overseas pupils +52 percent (from 12,379 to 18,784)

While the 2014 census will provide a figure for the number of pupils at ISC schools, the ease or difficulty with which parents (sometimes supplemented by their own parents) afford their children’s fees is harder to quantify. A September 2013 Daily Telegraph article said: “The cost of independent education has almost doubled in just over a decade, with the average boarding school now charging around £27,600 per pupil.”

In February it reported: “Parents (are) offering houses as guarantee on private school fees”, suggesting that “recession-hit families desperate to keep their children in the best schools are deferring fees by effectively securing a loan against their property”. Such reports hint at a tipping point being reached by some parents, as the sacrifices needed to pay for independent schooling become unsustainable. The UK economy’s recovery should help struggling parents, while independent schools themselves are helping when possible.

That the increase in school fees in 2013 was the lowest for almost two decades reflects the measures taken by schools to either increase their income or reduce their expenditure to keep their services affordable. Steve Robinson, head of independent schools and academies at accountants Grant Thornton, has been working with independent schools for 15 years. He has experience of a trend highlighted in the ISC 2013 census. “If a school with boarding facilities starts struggling, it can focus on the overseas market while ensuring boarding does not become too large a percentage of their operations. We advise on the VAT implications of using overseas agents who ‘scoop up’ pupils in the Far East. A lot of schools are approached by India or Far East countries to use their brand as a British independent school – seen as a positive – to build schools overseas. Others don’t invest in capital but can provide a consultancy role and curriculum advice.”

More regularly, it is bricks and mortar, or grass, in situ which are used to generate income. “Schools have become quite sophisticated and seek to get the maximum use out facilities like sports pitches. Places like Stowe School stage weddings and marquee parties whereas Denstone College is one of two or three schools staging Manchester United football schools.”

The independent education sector, though, has experienced mixed fortunes. “Nationwide, some schools are oversubscribed while others are struggling,” says Robinson. “In general, places further north are finding things tougher and there remains a London bubble. One school in the north east, where HMRC and Northern Rock pulled out, saw its pupil numbers fall. Consequently, it went to the state saying, ‘We have a school with a good tradition’ and merged with another school, becoming an academy. If you think in terms of Eton and Harrow as the top tier, Rugby and Arundel as the second, the third tier is still OK, but it would be in the fourth tier where things are more hand-to-mouth. Girls’ schools are struggling more, with pupil numbers with more parents happy to go co-ed.”

Boom times may have led to spending now regretted. “We are increasingly being called to produce a strategic review of a site. A school may have, in the past, built one building for £3million and then another for £2million, but I hear bursars saying if they had a clean slate they would start again! A school may come to me and say they have a 10-year, £15million project and ask if I can provide a review. People are looking further ahead to ensure maximum return on capital employed, surmising if they build a sixth-form block for 120 pupils their income will rise. Sport, IT and science are the main areas of construction, with music and drama less so.”

Financing such expansion can be done innovatively. “Banks remain interested in lending to the sector but with more robust terms and conditions. Schools need to appear more business-like and prove they are going to make a surplus; banks don’t want to be forced into an asset sale. A 5-10 percent surplus is needed to maintain your estate. Charity mini bonds allow the school to partner with a funder, which can be parents lending at favourable rates. This can see the school paying less than they would when borrowing from a bank and the parent receiving more than they would get from a bank. If, for example, the parent lends £10,000 annually while little Johnny is at the school for five years, the school has a chance the parent will turn some of these funds into a gift and not ask for full repayment. It’s like peer-to-peer lending.”

King’s School, Canterbury, the country’s oldest, is reducing its utility bills innovatively. Founded in 597 by St Augustine, it boasts not only a Norman staircase and Medieval buildings (the upkeep of which require employment of a stonemason) but a sport and leisure centre with 3,000 public members used by 1,000 swimmers weekly. This centre is self-sufficient in water, thanks to a borehole sunk 60m down around a year ago. The centre’s roof also has solar panels providing electricity pumping the water to the surface as well as for use elsewhere.

Mark Taylor, King’s Canterbury bursar and ISBA chairman, says: “We are not alert to other schools having a similar arrangement to this. We knew we were well-placed to tap into this source and after getting an abstraction licence from the Environment Agency we hired a drilling rig. Payback will be in five years. When you look at the box of tricks on top it’s not that exciting, but the principle is there and we’re keen to give pupils the opportunity to know about it. We have smart metering links to the geography classroom so pupils (13+) can see live-time utilities consumption as part of the curriculum.”

The provision of excellent sports facilities at Rutland’s Oakham School is one way it provides parents with value-for-money. One of the sector’s largest, with over 1,060 pupils, it boasts 48 acres of grass, used for nine rugby, six football and five hockey pitches in the autumn and six cricket squares, grass nets and an athletics track in the summer, when the England and Wales Cricket Board stages training courses and fixtures.

A natural choice for sporty children, England cricketer (and ODI team captain) Stuart Broad is one of several England international alumni.

Keeping this land green and pleasant had required much artificial fertiliser, but the school’s grounds department sought to manage their fields in a more environmentally sustainable manner. A move was made to brew compost tea, made by suspending quality compost in water for 24 hours to increase bacteria, before carbon and liquid seaweed feed are added. This tea is applied in smaller amounts but more frequently than the artificial fertiliser had been, with a stronger and deeper root system and greater adverse weather resilience two of the ensuing benefits.

After the tea started going down a treat, a professional, tractor-powered composting machine was bought, meaning the school no longer spends £3,000 annually on green waste skips and does not buy in mulching materials. Further environmental sustainability at Oakham includes wind turbines and solar panels.

Highfield and Brookham Prep and Pre-Prep School in Liphook, Hampshire is using biomass to save financially and promote sustainability. Currently, the school requires 1.3million kWh per annum. Paul Harris, estate and facilities manager, says: “Last year we spent around £98,000 on oil which we now will not need, so this will be a direct and instant saving. We are also applying for the renewable heat incentive scheme which should give us approximately £50,000 per annum index-linked for the next 20 years.”

Incentive payments are linked to the amount of renewable heat generated and even small-scale users will generate at least, and often more than, the cost of the wood chip or wood pellet fuel annually in incentive payments. Initially, the school is buying the woodchip needed to fire the boilers but has extensive woodlands on site and plan to use this to source their own woodchip, ultimately becoming self-sufficient. The estate has installed several other sustainable technology systems including solar thermal, solar PV, ground source heat and air source heat.

The processing of school fees can be costly and labour-intensive. Cambridgeshire’s approximately 950-pupil Kimbolton School’s solution has been to select WCBS’s PASS finance package, a fully integrated system designed specifically for the independent schools sector incorporating payroll, administration, academic and HR operations.

“We needed a system that meant we didn’t have to enter and update information across multiple systems, would always be up-to-date and could support many features and tasks unique to our sector,” says bursar Stephen Oliver.

The package has transformed billing at Kimbolton. “Using PASS we are able to handle 820 direct debit bills. It takes just five minutes to process the BACS file and it is straightforward to create a single bill with all disbursements included. For example, if we need to add the cost of books or a school trip to a whole class, we can simply use fee codes and apply to multiple records in seconds.”

Credit control and data accuracy have been tightened. “With the built-in debtors report, it is easy to see which invoices need to be chased. With our previous system, because it wasn’t joined up, there was more margin for error if communication between the school office and the bursary did not take place. For example, a bill might be sent to an old address.”

The overall result has been major financial and time reductions. “With the ability to email rather than post bills we save between £5,000- £8,000 per year in postage, paper and administration costs. Within four hours of bills being created they are with parents. Previously this has taken three staff three days to do.”

When it comes to paying fees to their child’s school, parents are increasingly choosing Premium Credit’s school fees plan (SFP.) Operational for 18 years and registered in nearly 20 percent of UK independent schools, it allows parents to pay fees monthly by direct debit, as opposed to a single upfront charge, and has numerous benefits for parents and schools.

Among other advantages, parents can spread the cost of large termly payments and enjoy the flexibility of adding in extras such as meals and music lessons to give one single consistent monthly payment. There is no need to deal with their child’s school’s bursar, bringing privacy and discretion, and the facility can even move with their child if they change to a new school, provided it is registered with SFP. What’s more, SFP can complement other funding sources such as partial payments from grandparents. Benefits for schools include a reduction in administration (it is paperless), freeing up resources for more important matters and a widening of access to education, which can help maintain or even increase pupil numbers. Parents expect such a service and SFP gives a school a competitive edge. Highclare School’s finance manager Neil Hitchman says: “The school’s cash flow has been improved as we receive payments straight into our bank account on agreed payment dates, providing us with financial certainty.”

Parents, schools and software and credit companies are combining to ensure the most important parties – the children – remain in receipt of an independent education. Occasionally, however, even these efforts fail, as Grant Thornton advisory partner Nigel Morrison explains. “There are probably less than 10 private schools ending up in insolvency proceedings annually, but there are probably as many again avoiding insolvency by entering into an urgent merger or takeover. Schools becoming insolvent usually have less than 200 pupils and tend to have seen steadily declining pupil numbers in the last three or four years. Other difficulties come via geographical remoteness or historical reliance on good numbers of MOD-funded pupils where regional MOD bases have been scaled back.”

Bad management, rather than bank managers, lies behind many failures. “Whilst bank debt and gearing is obviously a key factor, it is not often the key reason why a school fails,” says Morrison. “Banks lending in this sector are usually covered by security on the freehold premises (which often have substantial alternative use value) and they are, naturally, cautious about attracting adverse publicity if they are seen to be the cause of the failure.

“It is probably fair to say in failure cases there is usually a lack of robust management at trustee level and often there has been a delay to recognise the seriousness of the situation and respond quickly enough. I am often called in just towards the end of the summer term when they realise they cannot pay the salaries over the summer holiday. That should rarely come as a surprise but it often seems to.”

 

Contacts

Independent Schools Council W: www.isc.co.uk

Steve Robinson, Grant Thornton T: 01908 359682 E: steve.robinson@uk.gt.com

King’s School Canterbury T: 01227 595544 E: m.taylor@kings-bursary.co.uk

Oakham School Email: Bursar Mrs Annika Hedrich-Wiggans

ahw@oakham.rutland.sch.ukW: www.oakham.rutland.sch.uk

Highfield and Brookham Prep and Pre-Prep School, Liphook, Hampshire W: www.highfieldschool.org.uk

WCBS W: www.wcbs.co.uk

Premium Credit W: www.sfpschoolfees.co.uk

Nigel Morrison, Grant Thornton T: 0117 305 7811 E: nigel.morrison@uk.gt.com

Thanks to the Independent Schools Bursars’ Association for their assistance with this article W: www.theisba.org.uk

Send an Invite...

Would you like to share this event with your friends and colleagues?

Would you like to share this report with your friends and colleagues?

You may enter up to three email addresses below to share this report

UPCOMING WEBINAR

Are your students future ready?

FREE TO JOIN

Thursday 4 November 2021, 11am (GMT)