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UK independent schools: Meeting the funding challenge

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UK independent schools: Meeting the funding challenge

Increasing pressure on education, rising competition amongst independent schools and spiralling costs - how are the UK’s independent schools overcoming funding challenges and what does this mean for you?

Supporting your children to meet their full potential is the aim of parents. Whether doing so means providing access to elite universities, leading professions or the right social circles, a private education at one of the UK’s top independent schools can open a lot of doors.

However, with the UK education sector as a whole facing increasing scrutiny and a growing number of budgets under pressure, the question remains – how will the country’s independent schools and the parents who fund them be affected?

Threats to the status quo

 

Independent schools experience intense pressure to offer the best facilities. With income from fees limited to the number of places on offer, alternative funding sources are vital. Boosted by historically low interest rates, debt finance to support either capital investment or refinancing – perhaps in a state-of-the-art auditorium or gymnasium – is increasingly attractive.

Alternative funding options

 

For many schools, financing through the capital markets is an appealing alternative for the long-term. Public or private placements are increasingly seen as a viable funding method. Schools in the UK are also turning towards public or private bond issuance, similar to their peers in the US.

Additional revenue streams

 

In addition to sponsorships or bequests by wealthy alumni, many independent schools source additional revenue through renting facilities to the private or commercial sector, which can make the investment in state-of-the-art facilities generate worthwhile returns.

A growing business area is the establishment of offshore franchises, drawing on international demand for what is often deemed the gold standard of education. The establishment of these overseas offshoots enables the school to enter new markets and can open new income streams through the sale of licences or the creation of strategic partnerships. In recent years, the number of overseas campuses overseen by UK independent schools has doubled.1

With many schools looking to the longer-term, financing through the capital markets can be an appealing alternative.

What does this new funding climate mean for you?

 

The number of students attending day school has increased on average by 59 per cent in the past 10 years. As fees make up the largest and most flexible form of funding for schools, it’s important that parents consider planning ahead to minimise the impact of rising fees.2

Here’s a look at an example of the expense you might incur over the school life of one child:

  • Current rates mean even a GBP30,000 annual fee of sending one child to school can equal GBP420,000 over the duration of their education
  • With inflation-busting increases, a 6.5 per cent annual increase will add another GBP275,000 over the 14-year school life
  • This means the final total of educating your child could increase to GBP695,000, not including uniforms, textbooks, school trips and having more than one child

Investing early can make all the difference. To find out more about how HSBC Private Banking can help you plan ahead to fund your children’s education, contact your Relationship Manager today.

1 Pupil numbers at British Independent ‘franchises’ rocket, TES, 2017
2 How private schools are risking their charitable status, The Spectator, 2017

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