Exclusive: Fears 30% of private schools will go bust

Independent schools forced to cut fees but cannot furlough teachers, in an 'impossible position' and running out of cash
8th May 2020, 1:55pm


Exclusive: Fears 30% of private schools will go bust

Pupil With Cup

Senior sources in the independent sector have told Tes that as many as 30 per cent of UK private schools could end up going out of business because of the coronavirus pandemic.

They are warning that the outbreak is pushing already struggling schools "over the edge".

Insiders expect the numbers closing between now and September "to be quite small", but say that "more will decide during the course of next academic year that they're in an impossible position".

Analysis: Five reasons independent schools are 'on the edge'

Exclusive: Hundreds private schools 'bust by Christmas'

Related: Private schools 'wrestling' with fee cuts

Coronavirus: 'Will our pupils ever come back?'

Many private schools were under severe financial pressure before the pandemic because of the need to pay a rise in contributions to the Teachers' Pension Scheme, which has already forced some smaller schools to close or merge.

Last month, Tes reported fears that hundreds of private schools could be 'bust' by Christmas. But now, well-connected sources in the sector are saying that they think the long-term outlook could be even worse.

Some have told Tes that almost a third of the sector is at risk, although others have criticised such warnings as "alarmist".

Cost of cutting fees

The fee discounts that schools are having to offer to parents suffering their own financial difficulties are one factor.

"Many of the schools making fee reductions for this term are, as a result, losing a lot of money, which they are in fact going to have to spend - mainly on teachers' salaries, which form a high proportion of the total cost," one high-profile figure in the sector told Tes.

"We have cut the fees but this presents us with a difficulty."

It is understood that some independent schools are now running out of cash and are likely to apply for loans in the summer. But schools' problems in predicting reopening dates and pupil numbers is likely to make it difficult for them to qualify for loans because they won't be able to demonstrate an ability to repay them.

Private schools have had less scope than other businesses to save money by furloughing staff because their teachers are providing online learning.

'Clear and present danger'

David Woodgate, chief executive of the Independent Schools' Bursars Association, said: "Covid is a catalyst for change - to use a cliché, it's a clear and present danger. Schools have had to consider the level of fee they're offering this term." 

He said he was so far aware of 15 schools that had closed permanently. Other sources say the sector is facing the "scary" prospect of the pace of closures picking up.

Most of those closed so far are understood to be small schools with existing problems. 

"They were heading in that direction anyway. In other words, they had financial difficulties," a source said. "This event has simply pushed them over the edge."

Risk of pupils not coming back

But there are fears that bigger schools reliant on overseas boarders are also threatened. Sources say the longer the wait grows for these pupils to come back, the greater the risk that they will not come back at all. 

Tes understands that even the largest and best-known public schools might face difficulties, while others would reduce the number of subjects available for pupils in order to remain financially viable.

One source said that some schools could weather the storm through "a number of mergers and acquisitions" over the next academic year, with smaller schools being bought up by UK or overseas investors.

So the number of schools overall might fall, but pupil numbers would remain stable. But they added that "the next year is going to be very difficult".

Chris King, chief executive of the Independent Association of Prep Schools (IAPS), said the sector was under significant stresses but would be "resilient" in facing them.

"At the risk of stating the obvious, all fee-charging schools are under a great deal of pressure at the moment because of the circumstances that have been unleashed by Covid," he said.

"The schools that are most likely to struggle are those who were facing issues before the virus came along. So those who had not recognised the state of the market in front of them, and were poorly governed and managed - those are the schools who are really going to struggle now that they're faced with everything that's happening with the virus outbreak."

But he added that the projection of 20 or 30 per cent closures across the sector next year was "alarmist and ill-advised".

More mergers

"IAPS has been around for 127 years and represents plenty of that resilience under stress over that period of that time, so I am confident that schools in my association will largely come through," he said, adding that it was more likely that schools would see changes in ownership, with groups of prep schools merging.

Mr Woodgate also predicted mergers and new investors. "In the last two weeks, I've spoken to 22 investors in schools, some of whom are international, and some of whom are UK based," he said.

"And these are investors who tell me that they are in it for the long haul, in that they are interested in running schools within a small group structure."

Barnaby Lenon, Independent Schools Council (ISC) chairman, said: "Independent schools seem to be doing a brilliant job with online teaching, and we have had many complimentary comments from parents.

"We know that next year will be tough, particularly if social distancing measures still apply, as they probably will, and if there is a significant fall out in terms of overseas pupils during the continuing health crisis."

Most private schools 'hit hard'

Julie Robinson, ISC chief executive, said: "The majority of independent schools do not have significant reserves, large foundations or surpluses to fall back on.

"We know the majority of independent schools have been hit hard by this pandemic, just like other SMEs [small and medium-sized enterprises].

"Fee-paying parents are suffering financially, too. Independent schools have proven their adaptability and resilience over the years and no doubt will again through the Covid-19 crisis.

"For the moment, their priority is delivering continuity of care and education for pupils and wider school communities. The impact of this pandemic will be felt across the months to come and it will be some time before we ascertain its full effects."

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