The likely merger of the academy chain Floreat with a larger trust will be the “first of many”, primary leaders have warned.
As TES revealed on Saturday, Floreat Education Academies Trust, a chain established by a former policy adviser to David Cameron, is in talks about joining another multi-academy trust (MAT) due to financial challenges.
The trust was founded by Conservative peer James O’Shaughnessy, and despite recently opening its third primary free school, it is “exploring a number of options” to ensure it has a more stable financial footing.
It comes as two of the country’s biggest primary academy sponsors said they needed between 10,000 and 12,000 pupils to be financially secure.
The warnings will be a particular concern for the Department for Education, which is still ploughing on with its plans to move toward a universally academised school system.
Hugh Greenway, chief executive of the Elliot Foundation, which runs 22 primary schools in London, the West Midlands and East Anglia, said cuts to school budgets had made it harder for small academy chains to survive.
“If you are opening a free school you may only have 90 pupils, or fewer, and the difficulty is the funding comes per pupil but the problems come per school,” Mr Greenway said. “If you have two or three small schools you have huge obligations and no real revenue streams to meet them. I would be very surprised if Floreat wasn’t the first of many."
When the Elliot Foundation first started out the trust set its “break even” point at 5,000 pupils, and looked to top slice 6 per cent from school budgets to run the trust itself.
But Mr Greenway says this has now changed as a result of the government’s decision to remove the education services grant at the same time as requiring schools to raise their national insurance and pension contributions.
“Since the cuts, the break even threshold has moved to 10,000 pupils,” Mr Greenway said. “You might be able to do it at 7,500, but you would probably need to rely on volunteers or charitable donations.”
His comments were echoed by Russell Hobby, general secretary of heads' union the NAHT, who said the cuts to the education sector had made it far harder for smaller primary chains to function, and predicted there owuld be more Floreats to come.
"This is a very real risk that we will see in the future," Mr Hobby said. "It is not what many schools or parents envisaged when they converted. It is just swapping one large bureaucracy for another."
To date, primary schools have been far more reluctant to convert to academy status than secondary schools, as it is far more difficult for a primary school to reach the economies of scale due to their smaller budgets.
Dean Ashton, executive director of Reach2, which runs 52 primary schools, said to be self-sufficient and sustainable a trust needed 12,000 pupils.
Mr Ashton, speaking at a roundtable event in London last week, said while being a small MAT was “challenging”, it was even harder to be medium sized with more than seven schools but fewer than 20.
“The reason it is hard is because the regulators of the world expect you to have a capacity, in terms of infrastructure and expertise – finance directors and all the rest of it – appropriate to the scale of operation to which you still cannot afford,” Mr Ashton said.
“It is really hard. If you can punch through that you start to get the economies of scale where you can afford to bring in that level of expertise.”
Last week, Floreat’s chair Martyn Rose issued a statement to TES stating that running a “small multi-academy trust is challenging, especially when the schools involved are newly opened”.
“For that reason, the board is looking at what is the best path for Floreat, whether that is continuing with our own development plan or merging with another trust,” he added.