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Tough year for academies

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Seven out of ten academies are operating with accounting losses, as budgets are being squeezed and schools seek to find cost savings, according to an independent survey of academies.

In its 2017 release, the sixth Kreston Academies Benchmark report, one of the leading reports on the health of the sector, raises concerns about the future viability of a number of academy schools, as the government seeks to encourage even more schools to become academies.

Furthermore, existing cost-cutting and cash-strapped independent academies are being increasingly forced into arranged-marriages with larger Multi-Academy Trusts (MATs) as an act of preservation and to generate economies of scale, in response to the postcode lottery of government funding.

The report highlights rising staff pension costs, increases in National Insurance, the National Living Wage, asset depreciation, and the imminent Apprenticeship Levy as key factors contributing to the tough environment. And with an extra 450,000 pupils expected to be in the system by 2020, the report states that many more academies anticipate running at a deficit. Those schools which are still reporting a surplus, are reporting much lower figures than before.

The survey of more than 600 Academy schools responsible for over 300,000 children, conducted by the UK Academies Group of Kreston International – the global network of independent accountancy firms – highlights cash shortages, buildings maintenance being delayed, and experienced teachers leaving the profession.

The report warns that in the absence of any significant extra government funding, academies may need to reduce teacher numbers, impacting on the quality of education and the scope of subjects being taught.

According to Philip Allsop, Head of BHP Chartered Accountants’ academies’ team which acts for over 30 local academy trusts, “The latest survey reveals that increasing staff costs are not being covered by government funding, meaning academies have to look for cost savings on top of those they have already achieved. Academy schools have achieved significant cost savings over previous years but now have limited options on how to deal with the imminent danger: they can dip into their dwindling reserves, further tighten their belts, join a MAT or seek to diversify their income.

Philip added: “Whilst it is not all doom and gloom, I do expect to see a continuing trend of fewer, less experienced teachers in place, with academies having to use ageing technology and with buildings that are not being properly maintained. It’s a tough picture for academies at the moment.”