The challenges facing UK independent schools are all too obvious and appear daunting. School operators will have taken a financial hit in 2019/20 and most are likely to under-perform previous forecasts for 2020/21, not least if the latest government lockdown is prolonged. Revenues were impacted by fee remissions in the summer term of 2020, commonly in the region of 20-30%, and reduced income from hiring out facilities, extra curricula activities, summer schools and tutoring. Bad debts are also expected to have increased.
Whilst schools were able to recover some costs through use of the government’s furlough scheme, they were required to maintain teaching personnel to provide an online service. Other running costs were increased, in particular equipment and enhanced cleaning required to maintain COVID secure environments. The Teachers Pension Scheme remains extremely costly and looks increasing unsustainable for all but a few schools. In September 2020, school fees were largely frozen at prior year levels, albeit before the latest lockdown a few planned to inflate fees from January 2021.
The backdrop is therefore, highly uncertain which makes the forecasting of future trading performance more challenging. Most operating costs are reasonably identifiable and therefore, pupil numbers is the principal factor determining performance. Economic conditions, consumer confidence, demand from international pupils, differentiation with the state sector and competitor schools will all have an important influence on future demand.
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