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Scandal is bad for business

Academy sponsors fear the scandal could deter businesses and millionaires from supporting the scheme.

Education commentators believe the fall-out from the investigation could also increase the grip that churches and charities have over the initiative. Of the 100 academies open or at the planning stage, 36 are sponsored by faith groups, including the nine which are already open.

Martin Rogers, of the Children's Services Network, a local authority-backed think tank, said: "It is likely to have a negative impact on the number of sponsors coming forward, but it won't have any bearing on the churches, where you can argue that it is nothing to do with personal vanity. No one is going to elevate the C of E to the Lords because they are already packing the place anyway, but it will reduce the number of individual businessmen coming forward with a whole load of money - they won't want to risk having their motives questioned."

Rev Steve Chalke, founder of the Oasis Trust, a Christian charity, which is sponsoring four academies, said: "If anyone's goal in investing in academies is to find a quick way into the Lords, then obviously they are going to think twice now.

"But some business entrepreneurs thinking of investing money back into a school in their home town for wholly honest reasons may now be put off - they won't want to see the press crawling all over their finances."

A spokeswoman for the Emmanuel Schools Foundation, which sponsors two academies and a city technology college, and plans for a third, said:

"There may be some potential threat to future academies because of the rumour and speculation and unsubstantiated allegations. That kind of publicity does not help."

Bad publicity has deterred some entrepreneurs who hoped to be involved in the scheme, including Jasper Conran who withdrew plans for a design academy in east London after opposition from parents and local teachers.

A Downing Street spokesman insisted that Number 10 was not concerned that the row might deter future sponsors. "We already have sponsors for more than half of the 200 academies we plan to open, so we're halfway there," he said.

Sir Cyril Taylor, chairman of the Specialist Schools Trust, was also sanguine. "Our sponsors are made of sterner stuff," he said. He also denied it would result in a greater proportion of faith-backed academies.

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