Proprietors of UK-based independent schools have warned that some institutions may not survive coronavirus-induced closures should families demand refunds or reimbursements for tuition fees.
Earlier this week, the UK government announced that all schools and nurseries across the country would close by end of day on Friday, 20 March until further notice – except in mitigating circumstances – as part of nationwide confinement measures designed to stem the spread of covid-19.
The government also called off GCSE and A-level exams that were scheduled to take place in May and June as a growing number of deaths linked to the novel coronavirus prompted the introduction of more stringent containment efforts.
The UK’s chancellor, Rishi Sunak, announced that nursery owners and operators will be a granted a year-long business rates holiday to help relieve financial pressures caused by the forced closures – but has not yet set out any cast-iron guarantees for private school proprietors.
The closures will undoubtedly cause major operational and financial headaches for private schools of all stripes, as they grapple with costly and tricky transitions to online education, pressing questions from parents and the prospect of having to issue refunds and reimbursements to fee-paying families.
Contrary to popular belief, some independent schools in the UK – particularly those situated in small towns and villages – operate to slim margins, especially if they only offer prep, or primary, schooling provision. Some charge tuition fees that are lower than the annual cost of educating a child in the state system.
Asked whether he foresees permanent closures of private schools as a result of the government’s decision to close them temporarily, Matthew Adshead, chair of the Independent Schools Association (ISA), told this publication “sadly, yes”.
Adshead, who is also headmaster and proprietor of the Old Vicarage School, a prep school in Derbyshire, said that “parents with a child in year 11 or 13, who is unlikely to return to school or sit any exams… will be struggling to see why they should pay their fees next term”.
Compared to most businesses, private schools have unusual cash flows because tuition fees are paid three times a year in correspondence with terms or once a year, should parents wish to pay up front for provision. If tuition fee income starts to dry up, then schools could struggle to meet overheads and operational costs, most of which (around 60-70% on average) are related to staffing.
Ian Koxvold, head of education strategy at PwC, said in a LinkedIn post: "Clearly, there is some nervousness in privately-paid schools. Many of them already have the summer term revenue committed, but will be looking to collect the Christmas term fees during the height of the crisis.
"Some that I have spoken with are twitchy that if the coronavirus crisis hasn't been resolved by June then their cash flow will be disrupted, and if it's not resolved by August, they may lose at the best case a term of income, and at the worst case most of a year's cohort.
"These school leaders or trustees should be having conversations not just with banks, but potentially also with rescuers… and the timeline for viability of these talks may be very short indeed."
Adshead added that challenges are amplified for private schools with boarding provisions, as foreign boarders whose parents live overseas may not be able to return home due to international travel bans and would thus legally require a full-time guardian until they are lifted.
“Boarding schools could suffer,” said Adshead. “I can’t see overseas parents rushing to send their kids back over [to UK boarding schools] in the short- to med-term. They will be looking for provisions closer to home, is my assumption.” The UK's Boarding Schools' Association did not respond to a request for comment.
Adshead said he has “already heard about some parents [whose children attend private school] being laid off” due to irreparable damage that the coronavirus has inflicted on industries such as hospitality, air travel and tourism – and he is concerned that some will be unable to continue paying fees.
There will be a “knock-on effect from parents’ working conditions/situations being affected”, he says. “We will probably feel the result of that in September. We will probably lose some pupils, but luckily, we are in a strong position.”
Schools “that were already struggling” financially will be hardest hit by the enforced closures, he said – though this could present a sanguine opportunity for shrewd investors.
“If I was an overseas investor, I would see this as an opportune time to be contacting the ISA to see if there are schools that need a proprietor investor,” said Adshead. In recent years, a number of cash-strapped British private schools have been saved from extinction by foreign investors, including St Bees, one of the UK’s oldest independents, which in 2018 was bought by Hong Kong-based Full Circle Education.
Neil Roskilly, chief executive of the ISA, told this publication that his group is working with participants in the UK private school market on “sector-wide fee modelling” in anticipation of demands from parents to have tuition fees reduced come September, when schooling is expected to resume.
Roskilly and his counterparts are considering “what reductions would be reasonable on the September fees run, given the impact on parents, reduction in provision (extra-curricular activities etc.), and the extent to which a school has been able to maintain core provision via online systems throughout the summer term”, he wrote in an email.
The government’s move to close schools and cancel exams “will no doubt reset the independent education landscape completely”, Aatif Hassan, chairman and founder of UK-based independent schools group Dukes Education, told this publication. “Some organisations may not survive, whilst others may emerge stronger.”
Later today, UK school students will join some 849 million others worldwide who are currently out of school due to closures imposed in response to the coronavirus pandemic.
Date published: 20 March 2020