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Academies fight to stay afloat as reserves crisis looms

Eight out of ten academies are running at a deficit, as they battle to hold on to their dwindling resources under a deluge of rising costs and increasing scrutiny, according to the latest survey of academy schools.

The seventh Kreston Academies Benchmark report, a leading independent survey of the financial health of the academy sector, is a clarion call to government for greater funding to keep the sector afloat, as nearly 80 per cent of schools report accounting deficits, after including depreciation.

The 2018 report lays bare the limits to the ingenuity of academies to continue operating under the current regime of funding uncertainty, following years of cuts and exhausting negotiations for extra loans, grants, and greater parental contributions.

Cash-strapped and failing single academies are sacrificing their independence to join Multi-Academy Trusts (MATs) as an act of survival, and to benefit from economies of scale. Academies are having to do more with less.

The survey reveals staff costs rising to as much as 80 per cent of the total costs of an academy, even though in many cases all but the most essential staff and teachers have been avulsed from a school, or exchanged for those on lower salaries. Rises in pension costs, National Insurance Contributions, the National Living Wage, the Apprenticeship Levy, and depreciation of the school estate are all cited as key factors contributing to the challenging environment.

And with government projections showing overall pupil numbers rising by another 650,000 by 2026, the report paints a stark picture of crumbling schools, out-of-date technology and an insufficient number of teachers. Those schools which are still reporting a surplus, have seen their figures fall.

Nearly half of all the academies in the report have shelved maintenance and infrastructure spending, leading the National Audit Office to predict that it will cost a massive £6.7bn to bring all existing school sites up to “satisfactory” condition.

The survey of more than 750 Academy schools responsible for over 420,000 children, conducted by the UK Academies Group of Kreston International - the global network of independent accountancy firms – highlights falling cash and reserve balances, delayed buildings maintenance, and experienced teachers leaving the profession.

The report warns that in the absence of significant extra public funding, academies will need to make even deeper cuts in teacher numbers, impacting on the quality of education and breadth of curricula on offer. The report claims that teacher recruitment could become a “full blown crisis” if extra funding is not made available; fewer teachers in the profession will drive up salaries for those who remain, forcing schools to compete for staff in an ever decreasing market, abandoning national pay scales for a bidding war.

In a further worrying development, the report also highlights the dangers facing trustees of insolvent schools where, in such instances, they could find themselves personally liable for school debts.

The latest survey reveals that funding is not keeping pace with rising staff costs and pupil numbers, so academies are being increasingly inventive to keep going, including further cost cutting and scrapping subjects. Academy schools have already made significant cost savings in recent years, but their options are becoming limited on forestalling a reserves wipe-out.

Pam Tuckett, Chair of Kreston's Academies Group

Pam added: “There are some positive aspects in the sector in that the larger, more professionally managed MATs are operating well, though even their surpluses are getting smaller. It remains a tough environment for academies.”

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