Independent schools have come under enormous financial pressures in recent years. Brexit, Covid, rising interest rates and, more recently, the consequences of high inflation have not been the sector’s friend.
Although most families have had to rationalise household spending of late, parents will often cut back in other areas before pulling their child from independent school, and for good reason.
Despite moves to shake up admissions to widen pupil demographic and intake, private schools still succeed in getting a disproportionate number of pupils into top universities.
How much!?
Private education is expensive. Fees have persistently risen beyond typical levels of inflation, so school fees will increase - often dramatically - during a child’s school years.
Full fees often amount to sums well above the average UK annual income – and that’s before optional extras. The Good Schools guide analysed independent day school fees and concluded a family whose child starts school (in reception) in 2022 at a school which prices itself at the UK average, will be committing themselves to circa £270,000 over the full period of their child’s education to A levels.
Despite the cost, for those who have the means, private schooling remains the preferred option and there is still strong demand from UK and overseas families.
However, the question of affordability and value is more acute than ever and schools are having to review their strategies to ensure success and legacy.
What might further impact fees…
Tax breaks: The Labour party has renewed its call to strip schools of their charitable status, calling tax breaks "inexcusable". Without charitable status, fee-paying schools would no longer have to pursue charitable objectives or to act for public benefit; this could prompt schools to scale back the number of bursaries and scholarships and to maximise full fee-paying pupil places. It might also mean VAT would be payable on fees. The pressures that such a move could place on the public purse, let alone the legal and other repercussions may however lead to a diluted or long-phased transition.
Staff pensions: The increase in employer contributions to the Teachers' Pension Scheme (TPS) in September 2019 went from a cost of 16.4% of teachers’ salaries to 23.4%. There are expectations that the employer contribution rate will again rise significantly in 2024. Full details of how and when these changes will be implemented have still to be confirmed, but we do know the level of benefits will be higher than under the transitional arrangements and the associated cost is expected to be passed on to schools in the form of higher employer pension contributions.
Solutions?…
Schools will need to be proactive and innovative. Strong core values and leadership are required to monitor strategy and implementation. Establishments will need to measure Key Performance Indicators and carefully consider how any proposals sit alongside the core education purpose.
We have already seen schools specialise to narrow their offering, or adopt co-educational models, broadening their intake; and implement competitive pricing or structures (such as increasing day pupils) to boost numbers.
We have also seen families move away from London schools to provincial locations, and more intensive use of combining private and state-funded education.
Schools can also seek to diversify income. Some more traditional schools and sixth-form colleges also offer a very attractive ‘heritage’ setting for high-end events such as wedding ceremonies and receptions. Furthermore, one of the most exciting areas that has developed in recent years has been demand for filming and photography locations. This can provide a boost in finances without putting pressure on fees – although any opportunities cannot detract from pupil health and safety, safeguarding, and wellbeing.
Strategy might also include consolidation or collaboration with a syndicate group, or sale or transfer of excess assets.
What does this mean for fees?
It is inevitable that independent school fees will continue to come under scrutiny. This may have the knock-on effect of pushing some children into state funded education. But with strong strategy built on fundamentals, commercial forethought and delivery of exemplary education, independent schools will still be an attractive sector.