Academy School finances in the South East ‘show small surplus’, but future uncertainty locally and nationally to continue

Published by Peter Manser on 31 January 2019

Share this article

Academy school finances in the South East now show a surplus according to figures but nationally the picture is more uncertain with schools reporting a deficit and there is a risk that this financial distraction diverts attention from their core purpose of teaching.

We have published our figures for the South East, alongside the eighth Kreston Academies Benchmark Report which is the largest independent survey of the financial health of the academy sector.

Kreston Reeves South East *based on 25 academy trusts, made up of 80 schools in Sussex, Kent and London.	Kreston Academies Benchmark Report *based on 370 academy trusts nationwide, made up of 1,000 individual schools.
Average SE primary school shows a surplus of £39,009.	Average primary school deficit nationally fell to £17,544 in 2018 from £155,765 in 2017
Average SE secondary school surplus of £17,521.	Average secondary school deficit nationally fell to £145,889 in 2018 from £252,982 in 2017
43% increase in teacher pension contributions from 2019 equating to an increase of £160k per year for SE secondary schools and an increase of £30k for SE primary schools.	43% increase in teacher pension contributions from 2019 equating to an average increase of £200k per year for secondary schools nationally.
	All schools face a 3.5% increase in teacher pay announced in 2018 and funded until 2020, which raises future question over budgeting.
	Staff costs as % of total costs in SE Multi-Academy Trusts equates to 74% compared to national average of 72%
	SE Primary and secondary single trusts are in-line with the national average of 70%
	Massive underfunding of school infrastructure following a National Audit Office report £6.7billion needed to bring buildings back to a satisfactory condition.

The Kreston Academies Benchmark Report commends the work academies have made in delivering savings but offers a warning that further spending reductions will be hard to achieve, and Trusts cannot rely on their reserves forever. They will run out in 5-6 years without any changes.

Peter Manser, Head of Academies and Education, comments: “Although schools and trusts locally have done great work in ensuring they are not reporting an in-year deficit, there is a risk that the distraction of financial pressures could detract from their core purpose.”

“The national report describes several factors which contribute to a climate of financial uncertainty in the sector. In 2018, the government agreed pay scale increases of 3.5% and an increase to Teacher’s Pension Scheme (TPA) contributions of 7%. The TPS increase alone will cost in the region of £200k to the average-sized secondary school. Currently the government has agreed to fund these costs until 2019/20, but not beyond.”

The report states: “The ability of trusts to effectively plan is severely restricted by the landscape of uncertainty.”

“Indeed 80% of academies surveyed for the report identified 1) changes in government funding and 2) unfunded changes to pay and conditions as their greatest risks. Since July 2018, academies are required to submit three-year budgets but, the report says they lack the long-term guarantees to do so effectively. They can put a budget together, but uncertainty undermines this.”

“The added uncertainty around teacher recruitment and retention is also proving a challenge with schools continuing to fill gaps with agency support staff. This can be a costly exercise, but it would appear that locally MATs are achieving better economies of scale on this front than single schools thanks to their bargaining power.”

“Tough decisions have been taken to balance staffing levels in schools and there has also been a clear focus on cost management. However, it is unsustainable for the sector to record in-year deficits year after year. Eventually the reserves will run out. This year’s report is a testament to the hard work of academies nationwide in reviewing spending to bring down deficits of balance the books but a warning for the future financial health of the sector.”

Make sure you download your complimentary copy of Kreston’s Academies Benchmark Report 2019 here: http://eepurl.com/ge8wvr

This year the report includes over 350 Trusts representing nearly 1000 schools and is based on those Academies that prepared financial statements for the period ended 31 August 2018 and which were audited by member firms of Kreston UK.

Share this article