Will Jordan, CEO, IMP Software
The financial outlook for school trusts is becoming increasingly concerning.
Our new MAT Finance Sector Insight Report compiled budget forecasts from 267 trusts from 2024/25 to 2026/27 to gain insights into planning across the sector.
One startling result we found was that 37% of trusts are projected to drop below the Education and Skills Funding Agency (ESFA) threshold for revenue reserves as a percentage of income within the next three years.
In this blog we explore this and four other key findings from the report.
1. Trusts expect reserves to drop – and it’s worse for primary-only trusts
According to the ESFA, reserves below 5% of a trust's income can be a sign of financial instability, leaving trusts vulnerable to unforeseen challenges.
The report paints a worrying picture, especially for trusts that serve predominantly primary schools. Here, nearly 40% of school trusts expect their revenue reserves to dip below the 5% safety margin by the end of 2026. This is a clear indicator that many primary-majority trusts foresee rising costs outpacing income growth, leading to budget deficits.
On the other hand, trusts with a majority of secondary schools expect to fare somewhat better. Fewer than 15% of these trusts are predicted to experience a similar dip in reserves over the same period, suggesting secondary trusts might have more room to absorb rising costs.
2. Difficult decisions on staffing are inevitable
Among primary-majority trusts, a nearly 5% reduction in teacher numbers is predicted, along with almost 6% fewer teaching assistants by 2027. For a trust serving ten primary schools, this could equate to a loss of six teachers and six TAs, significant cuts that could impact class sizes and the level of support for pupils with additional needs.
Secondary-majority trusts, while still anticipating staff reductions, are projecting smaller cuts, around 1% in teacher numbers and nearly 2% in TAs. While reductions are less dramatic, they still highlight the strain that trusts are under to balance rising costs with declining reserves.
A key factor driving these cuts is the projected 17% increase in teacher costs over the next three years. With the average cost of a teacher rising from just under £60,000 in 2022/23 to over £70,000 by 2026/27, many trusts may find themselves making painful decisions about staff levels just to stay afloat financially.
3. Declining pupil numbers and financial pressures
For primary-majority trusts, a forecasted 2% decline in pupil numbers by 2026/27 adds further financial pressure. The national trend of falling birth rates is likely contributing to this decrease in student enrolment, with fewer pupils leading to less funding. This further compounds the need for staff reductions as trusts attempt to balance their budgets.
Secondary-majority trusts, however, are expecting a 3% increase in pupil numbers, which could help offset some of the financial challenges. However, even these trusts are not immune to cost-cutting measures, as the overall financial outlook remains precarious.
The cuts to primary teaching staff are more than double the projected drop in pupil numbers, and secondaries are still projecting cuts, even though their pupil numbers are growing, suggesting that trusts are having to control costs for reasons beyond declining enrolment.
4. The impact of the Core Schools Budget Grant
On a more positive note, the government’s recent announcement of a Core Schools Budget Grant (CSBG) in July 2024, designed to help cover a 5.5% increase in teachers' pay, has provided some relief for trust leaders.
Before this announcement, more than 60% of trusts forecasted their reserves would dip below the 5% threshold. After the CSBG was factored in, this number dropped to 37%, indicating the funding boost has helped prevent some of the worst-case scenarios for many trusts.
However, despite this financial lifeline, earlier knowledge of the funding increase could have spared trusts from making tough decisions, such as cutting staff or trimming services that are essential for maintaining quality education.
5. The road ahead: How can trusts navigate these challenges?
In the report, CST’s Chief Executive Leora Cruddas CBE acknowledges the worrying forecasts but also sees opportunities.
"We know the funding landscape is challenging and balancing the books is a never-ending task, but this report equips us for the first time with a trust-specific view of the sector, the scale of the challenge, and how together we can tackle it head on,” she says.
While the financial future of trusts remains uncertain, the report underlines the importance of strategic planning, collaboration, and effective resource allocation to weather the storm. It also highlights the need for ongoing dialogue between trusts and government to ensure funding keeps pace with rising costs to safeguard quality education.
Will Jordan is Co-Founder of IMP Software, a sponsor of the CST Annual Conference 2024
The CST Blog welcomes perspectives from a diverse range of guest contributors. The opinions expressed in blogs are the views of the author(s), and should not be read as CST guidance or CST’s position.
