The COVID-19 pandemic has created a unique set of challenges for the education sector. Within this article we focus on independent schools, and consider the challenges schools may face in the short and longer term; factors that may make some schools more vulnerable than others; and some potential considerations to help mitigate the impacts and ensure a school thrives post-COVID-19.

The independent sector forms an important part of the wider education system, with its 2,319 schools accounting for 10% of all schools in England (DfE, 2019). The average school size is lower than the state sector, with 581,000 independent pupils representing 7% of all pupils. Nearly half of all independent schools (48%) are in London and the South East (in comparison, only 27% of state schools fall within these two regions).
The majority of independent schools have charitable status, although some operate on a for-profit or other basis. Boarding places remain important, either on a full time or part time / flexi basis, and form about 13% of the sector.

Many households will have seen a significant reduction in income, for example through the Government’s furlough scheme, redundancy, salary reductions, or loss of business income. The latest HM Treasury figures show that 8.9 million employees have now been furloughed, representing over a quarter of the workforce, and a further 2.6 million claims have been made under the Self-Employed Income Support Scheme.

The impact on employment will take time to feed through - partly due to reporting lags and partly as we don’t yet know the proportion of furloughed workers who may be made redundant when the scheme ends. However, a sharp rise in unemployment appears inevitable – the latest forecast is for unemployment to reach 7.9% by the end of this year, double the pre-crisis rate.

Independent schools are highly vulnerable to these economic effects, which directly impact the ability of parents to pay fees. In addition, many schools voluntarily reduced fees during the summer term in response to the lockdown, although many have been providing tutoring online. Also, an increasing number of pupils have been returning to schools as Government guidance has changed, particularly in the primary years. There has been considerable variation in the level of discount offered, and in most cases, boarding charges have been refunded. Many schools are also offering to freeze fees for the coming academic year and are offering additional support to parents in financial difficulty.

Given the low margins at which many schools operate, this is having a considerable and immediate impact on school finances, and is clearly not sustainable for any length of time. Much of their cost base is fixed - most teaching staff are still required to deliver online teaching, and many other costs such as property maintenance and pension contributions are ongoing. Many schools will also lose additional summer revenue (such as summer schools and room lettings), and other revenue streams such as social events.

As registrations for September are usually confirmed in the Summer Term, there is uncertainty over pupil numbers for the coming academic year. Lower intake in September will have a longer-term impact as that year’s pupil numbers may not fully recover as it progresses through the school. The current position could cause parents to push back moving to an independent school by one to two years. This has the potential to create a significant shortfall in income in short term.

Social distancing measures will be relaxed from September to allow whole classes or year groups to be educated together in a “bubble” rather than the maximum of 15 permitted during the Summer Term. This will make it significantly easier for schools to function, although some continued disruption to normal school programmes is inevitable. However, there will be an ongoing risk of localised lockdowns and temporary school shutdowns, and long-term planning will remain difficult given the uncertainty over the path of the virus.

Whilst attendance for UK pupils will be compulsory from September, international student numbers will continue to be impacted by flight restrictions, as well as parental attitudes to the risk of travelling abroad.

Whilst the COVID-19 crisis is having a severe impact across the independent sector, some schools will be more vulnerable than others. Here, we examine factors that may affect the vulnerability of individual schools.

  • The proportion of international students – statistics from the Independent Schools Council show their schools have just under 30,000 non-British students whose parents live outside of the UK, accounting for just under 5% of pupils in UK-based independent schools. Whilst the overwhelming majority of students are day pupils, they will form a much higher proportion in some schools, particularly those that offer boarding.
  • The proportion of boarding pupils – ISC figures show there are just over 74,000 registered boarding pupils, or 14% of all pupils. Boarding is a high-cost activity, and a small change in student numbers can have a significant impact on profitability.
  • Local factors – whilst many schools that offer boarding will attract pupils nationally and internationally, most independent schools primarily serve a local catchment area. Thus, local factors can play an important role. For example, if a particular employer or sector is dominant locally, their ability to weather the COVID-19 storm could have a significant impact. The level of competition for school places and any changes to the offering from other schools in the area will be important (both from other independent schools and from the state sector).
  • Low margins – independent schools typically operate on low margins, in part reflecting the charitable status of many. Pre-COVID-19 profitability and general financial health will be a key determinant of a school’s vulnerability. Many schools also rely on supplementary income (for example from overseas summer students), which will be at significant risk.
  • Type of ownership – whilst most independent schools are charities, some are owned by larger corporates (many of which are based overseas), and others are family-owned businesses. This will affect areas such as access to finance and attitudes to risk. The ownership of a school’s physical assets is also important - if the school owns the freehold of its premises, it can potentially obtain mortgage finance against these assets. Some schools may also have the benefit of access to a charitable foundation.
  • The condition of physical assets – the need for investment in physical assets may present a particular challenge in the current environment. Many independent schools have listed or historic buildings which can provide an additional layer of complexity. Some schools will require significant capital expenditure over the next few years in order to remain competitive or comply with safety standards.

COVID-19 is not the only challenge facing the independent schools sector. Other include:

  • Pensions – changes to the Teachers' Pension Scheme (TPS) have increased the financial burden on schools, with the employer’s contribution increasing by 40% in September 2019 following advice given by the Government Actuary. The alternative is for a school to withdraw from the TPS, but this is a complicated process with its own cost implications.
  • Business Rates – in England, the overwhelming majority of independent schools are charities, and are therefore entitled to a business rates reduction of at least 80% (and some pay no business rates at all). However, this is not certain to continue, with a Government review due to be published this autumn that could see rates relief for independent schools reduced or abolished. This has already happened in Scotland, and a consultation is currently under way in Wales.
  • Political uncertainty – the recent potential election of a Labour government with a manifesto clearly unfavourable towards independent schools highlighted the political risk facing the sector. However, the political momentum was already moving away from the sector to some extent (it is now considered less of an advantage for university entrance for example), and this may well continue with the present Government’s ‘levelling-up’ agenda.

There are many ways in which a school can look to mitigate the impacts of COVID-19, and it is also a good time to think about planning for the longer-term when conditions return to greater normality. Schools may consider a range of ideas including:

  • assessing areas of potential savings in running cost, including estate management
  • examining opportunities to achieve cost savings and increase sustainability credentials through use of renewable energy, for example ground source heat pumps or solar PV
  • obtaining additional financing, perhaps through mortgage finance where assets are owned.
  • hiring out any facilities they are not able to use in the short term
  • rationalising, repurposing or selling under-used assets
  • merging some functions with other schools (administration activities for example) or share facilities (trends that were already happening pre-COVID-19).
  • more fundamental structural changes, including becoming co-educational, merging with another school, or potentially converting to academy status.

The COVID-19 crisis will be a catalyst for permanent change across swathes of the UK economy, and society more broadly. The independent schools sector will be no exception.

There will probably be fewer independent schools post-crisis, but we believe the sector will continue to thrive in a challenging environment. In the immediate term, achieving cost savings and managing cash flow will be key.

However, the crisis also provides an opportunity for schools to take stock of their offering. This includes considering the role their physical assets play in managing the immediate impacts of the crisis, aiding recovery, and helping to ensure a school thrives in the longer term.

Carter Jonas advise school Governors, Boards and Trustees across a range of strategic, planning and development issues. We can:

  • undertake condition surveys and appraisals of school estates to help find savings, raise finance, or increase operational efficiency
  • advise on estate strategies, rationalisation and surplus asset disposals
  • provide development advice, including viability, planning applications and appeals, masterplanning, feasibility studies, cost consultancy and project management
  • provide strategic advice in relation to development or refurbishment works required to bring premises to market
  • sell or acquire buildings or development opportunities on behalf of clients
  • provide expert advice on valuations connected to disposals, mergers and restructuring, with specialist experience with respect of Charity Act reports (s117-119)

For further information on our education services, please click here.

To speak directly to one of our professionals about your property requirements, please contact us.

*Percentage of pupils who board in those schools who are members of the ISC, 2019
**HM treasury-compiled average of consensus forecasts, June 2020

@ Daniel Francis
Daniel Francis
Head of Research
020 7518 3301 email me about Daniel
@ Michael Lunt
Michael Lunt
Associate Partner
01865 404421 email me about Michael
@ Mark Charter
Mark Charter
Head of Estate Management
01865 404406 email me about Mark
Daniel Francis has been Head of Research at Carter Jonas since 2018. He is responsible for delivering the firm’s programme of market and topic-based research, providing clients with the insight they need. Daniel’s main focus is the commercial market, and he works closely with his rural and residential research colleagues. 

Daniel is a member of the Investment Property Forum and the Society of Property Researchers.
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Career Highlights:

The Haberdashers’ Company School Surveyor
Michael has been advising Schools and College bursars on Planned and Preventative Maintenance (PPM) for over 20 years throughout England and Wales.  He first started advising Haberdashers’ Monmouth School for Girls in 1998.  He has subsequently provided planned maintenance advice for Monmouth School, Haberdashers’ Aske’s Boys’ School and his team also inspected Haberdashers’ Aske’s School for Girls and their Adams Grammar School in Newport for Planned maintenance.  Michael has also been engaged to organise and coordinate re roofing and repairs recommended within his reports at the Haberdashers’ Monmouth schools.  In January 2017 Michael was formally appointed by the Haberdashers’ Company to also advise them on all of their schools which include their Academy schools.

Worcester College, Oxford  – Front Quad Surveyor
Whilst Michael has been advising the College for over 20 years on various property maintenance matters, prepared a strategic plan to prioritise maintenance and improvement works and for a number of years dealt with refurbishment projects  up to £400,000 in value, in 2016 Carter Jonas were asked to tender for the role of Front Quad Surveyor.  Against tough competition Michael and his team have been appointed by the College to advise on a program of refurbishment of their Grade I listed Front Quad property which will be phased over the next 7 – 10 years.

Thorpe Mandeville Manor, Oxon.
Carter Jonas have provided professional advice on rural estate properties to  this family client for many years.  In 2011 Michael was appointed by the next generation of the family to own the Manor and advise on prioritising and specifying phased re roofing works to their Grade II* listed Manor house, in close consultation with the local Conservation Officer and Historic England (formerly known as English Heritage).   He is currently coordinating the internal refurbishment of this property which includes a new Biomass boiler and district heating situated in the stable block to heat the Manor and stable cottages, re plumbing and re wiring and associated modernisation and conservation of the interior.

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Mark is a Partner and head of the Oxford office. He is a member of the firm's Rural Division and has experience of advising private and institutional clients on all aspects of estate management, strategic advice, valuation and professional consultancy matters across the rural and residential sectors. Mark’s extensive experience in advising clients in the aforementioned areas allows him to as an expert witness in valuation and other property matters. Additionally, he is a member of the Ashmolean Museum's Corporate Advisory Board, a trustee of The Lady Nuffield Home, Oxford and a governor of The Manor Preparatory School, Abingdon.

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