A new academy survey issued by BHP warns that financial uncertainty risks hampering academies in Yorkshire and North Derbyshire.

Yorkshire’s largest independent firm of Chartered Accountants, BHP, on behalf of Kreston UK Group has issued its Academies Benchmarking Report for 2019 – the largest independent survey of the financial health of the academy sector.

The report reveals that half of academy trusts had an operating deficit again last year with only stringent cuts and the sharing of resources within multi-academy trusts stopping the figure from being higher.

Although the report identifies that progress has been made in reducing the size of deficits overall, it warns that further spending reductions will be hard to achieve, and future funding uncertainty could start to hit the way in which education is provided.

The report states:

“Our clients across England are telling us that the ‘easy savings’ have already been made. We are already seeing reductions in learning support assistants, and staff contact ratios will be increased to save costs. This means teachers spend longer in the classroom so, in theory, schools wouldn’t need as many teachers. There has been several years of cost cutting and the trusts that we work with are telling us that there are no more areas where they can save significant costs without impacting on the way in which education is provided.”

Furthermore, the ability of trusts to effectively plan is severely restricted by uncertainties caused by higher pension contributions, increased teachers’ pay and crumbling school infrastructure. The report highlights that in 2018, the government agreed pay scale increases of 3.5% and a 7% increase to Teachers’ Pension Scheme (TPS) contributions to 23.4% of gross salaries. 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 Kreston report is based on a survey sample of 370 academy trusts nationwide, made up of 1,000 individual schools, including 106 schools in Yorkshire and North East Derbyshire.

Philip Allsop, specialist Academies Partner in BHP’s Sheffield office, said: “Many of the academy trusts which we act for in Yorkshire and North Derbyshire showed a higher average operating deficit than the national picture and one factor in this is the continuing delay in fully implementing the national funding formula.

“Successful academies have taken on the task of sponsoring struggling schools in some very challenging catchment areas and investing their reserves for this purpose. However, there is a risk that the distraction of financial pressures could detract from this core purpose of improving teaching and learning.

“Tough decisions have been taken to balance staffing levels 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. A number of our academy trust clients have however bucked the trend and posted very impressive results this year. This year’s report is a testament to the hard work of academies, in reviewing spending to bring down deficits but a warning for the future financial health of the sector.”

Julia Delaney, Chief Operating and Finance Officer of Tapton School Academy Trust, commented:

“The financial risk for Academies is significant given the lack of certainty of funding for the implementation of the national funding formula, teachers’ pay and pension funding post 2020.

“Academies need a long-term strategy to improve the outcomes for all our students and ensure Academies are a great place to work. Schools working together within Academies have a clear vision of what we can achieve. This is hindered by the level of uncertainty over our future funding and pay and pension rises. Sheffield schools have faced many years of financial cuts and although the national funding formula is meant to address this lack of funding, it is being introduced over a number of years meaning that most current students will not see the benefit of this before they leave school.”

The key points in the benchmarking report will be presented and discussed at academy conferences which BHP are running in conjunction with Irwin Mitchell on 6 and 12 March 2019.