Unlocking hidden value and diversifying income in independent education

In fact a report from the Institute of Fiscal Studies issued in July 2023 estimated that the introduction of VAT on private school fees would lead to a 3-7% drop in attendance; with the ISC saying members reported a 4.6% fall in year 7 pupils in September 2024.

Staffing is estimated to represent around 70% of a school’s cost base with energy, food and rent taking up a significant chunk of the balance. The Government are also proposing to remove business rates relief (currently 80% for those registered as charities) from Independent Schools.

The problem facing schools in 2025 is how to continue providing top notch service on reduced fee income; 2025 is fast becoming about doing more with less.

While we can’t help with fee income there are some practical tips private schools can put in place now to unlock hidden value in their estate or diversify income; these include:

• Registering for VAT; schools will be able to (and should!) reclaim their input VAT on day to day spending and capital projects;
• Review and asses any potential business rates liability; do you know the ratable value of your buildings? Reviewing and appealing your ratable value could save significant sums in the long run.
• Are you making full use of your facilities? That new sports hall or MUGA will be in demand from community groups and local businesses while private companies may be willing to lease surplus parts of your estate for their new concepts (Padel anyone?) with shared use agreements benefitting the school in terms of income and the ability to use facilities during term time. I’ve just paid £32 to park in a school car park for the upcoming England v Italy Six Nations match…
• Consider decarbonising buildings either with solar or applying for grant funding. Switching now could lead to energy savings in the long run, not to mention it’s the right thing to do.
• If you have a property portfolio is this being actively managed or do you see it as more of a passive income? It’s worth reviewing lease agreements to ensure rent reviews have been triggered or start negotiating new leases 6-12 months out from lease expiry. Could you raise finance on commercial property to support the work the school is doing?

It’s time for independent schools to become multi-faceted businesses to unlock the hidden value in their assets. Early adopters will be best placed to navigate the headwinds of 2025 whilst continuing to provide the top tier educational experience families have come to expect from the sector. Those that provide more than the bare minimum will be the ones that thrive. If you need help with implementing these changes effectively or just want to discuss your options then get in touch and lets have an initial conversation.