Academies face a looming crisis

Academy schools face a looming cash crisis, as their costs rise and pupil numbers increase.

Rising staff pension costs and increases in National Insurance, plus an expected extra 450,000 pupils in the system by 2020, means 6 out of 10 Academies anticipate running at a deficit within the next two years, according to an independent survey of academy schools.

The survey of more than 500 Academy schools, conducted by the UK Academies Group of Kreston International – a global network of independent accountancy firms – contains blunt warnings of cash shortages, buildings not being properly maintained, and pressure on teacher numbers.

That will have a direct impact on pupil/teacher ratios, the scope of subjects being taught, experience of teachers being recruited, upkeep of buildings and even the ability of some schools to continue in their present guise.

Escalating costs for Academies include increased pension contributions for teaching staff (from September 2015), rising Employer’s National Insurance Contributions (from April 2016) and pension Auto-Enrolment for other staff.

According to Philip Allsop, Head of Academies and partner at BHP Chartered Accountants, a member firm of Kreston International, said: “The latest survey reveals that government funding is not reflecting the rise in pupil numbers and staff costs. Academy schools have limited options on how to deal with the imminent danger. The next two years will be a defining moment for many Academies.

“Many individual Academies are gearing up to deal with the situation and are looking at ways to increase their income, whilst others may look to band together as Multi-Academy Trusts to reduce overheads and share costs – which is what the government seems to want as it looks to devolve responsibility for the funding gap to the schools themselves.”

Other options for schools, he suggests, will include developing new income sources through the delivery of related services such as care services or sports coaching, as well as asking parents and alumni to dig deep into their own pockets to help fund capital projects.

BHP partner Mike Jackson added: “Academies face a wake-up call to become even more business-like in their operation and make some tough choices.  In some cases, they will need to recruit entrepreneurial managers who can generate new revenue streams whilst leveraging the most out of existing resources.”