Date posted: 10th Feb 2025
Academy trusts in England continue to face growing financial pressures, with rising staff costs and demand for special educational needs (SEND) provisions among the key challenges for the sector, according to a report published by Kreston UK, a leading global network of accounting firms.
The 13th annual Kreston UK Academies Benchmark Report, encompassing the 2023/2024 academic year, has revealed that cost pressures have outstripped income in the academy trust sector for two consecutive years.
Chris Beaumont, Partner and Head of Academies at Darlington-headquartered accountancy practice Clive Owen LLP is a co-author of the report. The firm currently acts for more than 100 educational institutions in the North, including 75 academy trusts alone.
Established in 1983, Clive Owen LLP has grown from a small business with just one partner into a well-respected firm with nearly 150 colleagues across five offices in Darlington, Durham, York, Middlesbrough and Newcastle.
The report showed that the percentage of trusts making in-year financial deficits has tripled since 2021, equating to around three in five trusts.
Most trusts (81%) indicated that their biggest financial challenge is the cost of teaching and support staff. A key contributing factor is government funding for teachers’ pay, which has not kept pace with rising costs. Growing demand, coupled with significant budget deficits in SEND provision, are adding further financial pressure on the sector.
Single academy trusts (SAT) have been hit hardest by cost rises, where staff costs as a percentage of revenue income exceeded 75% for the first time since 2022 in both primary and secondary schools.
While on average Multi Academy Trusts (MATs) have made surpluses, they have dwindled significantly. Small trusts averaged surpluses of just £1,000 compared to £203,000 in 2022. Larger trusts reported just £99,000 surpluses, down from £1,564,000 over the same period. The data analysed in the report reveals a net deficit of £8 million in free reserves for 2023/24.
Additionally, Trusts’ financial safety nets are collapsing, with reserves as a percentage of income showing a clear downward spiral as more were forced to tap into them in 2023/24.
Almost a third (31%) of trusts are now holding less than 5% reserves as a percentage of income, a threshold the Education and Skills Funding Agency (ESFA) considers to be a sign of potential financial vulnerability. This figure has risen from 17% in 2022.
As a result, many trusts have been left with no choice but to draw down from already shrinking reserves to cover the cost of essential buildings maintenance and repairs.
The removal of the Trust Capacity Fund (TCaF), financial aid to support trusts when they take on more schools, has thwarted many trusts’ plans to grow, with more than half (50%) expecting growth plans to slow in 2024/25.
However, there were some positives to draw from the report, demonstrating the resilience of the overall academies trust sector. These included:
- Increased investment income has been generated in some trusts that have actively sought out more favourable banking interest rates for their cash balances.
- Some trusts have made over £1m in the year 2023/24, with increased financial returns on surplus cash deposits and managing multiple savings accounts to spread risk.
- Only around 12% of trusts listed the cost of heat and electricity among their top three financial concerns as prices have fallen and schools continued to reduce their carbon footprint.
- The sector reduced carbon emissions by an average of 0.027 tonnes per pupil in 2024 compared to the previous year – a 13% reduction. Further progress could be made with additional financial support to cover the costs of reducing carbon emissions in schools.
Other key findings included:
- More than 60% of large MATs reported feeling confident in their financial stability. This figure fell to less than 50% in smaller trusts.
- Per-pupil costs rose by around 8% in 2023/24, down from 16% in 2022/23, which means inflation experienced by the academy trust sector has been much higher than in the wider economy.
- The average number of schools in a MAT is just under 12 (11.7), up by 11.4% from last year.
- All MATs with over 7,500 pupils now have a governance professional or an additional role such as a PA to the CEO, to support their volunteer boards. In 2022/23, the percentage of MATs with a governance professional was 94%.
- After stagnating in 2023, with increases of only around 2%, CEO salaries across medium and large MATs increased by 6% in 2024.
Commenting on the findings of the report, co-author Chris Beaumont said: “The Kreston UK Academies Benchmark Report delivers a considered state of the nation evaluation of the sector, and this year’s report highlights the myriad of challenges facing academies.
“It is worrying that around three in five trusts are reporting financial deficits, which will only be exacerbated further by the changing political landscape, rising operational costs and wage increases. This has the potential to deplete smaller Trusts, in particular, of their reserves entirely. They should only be used as a measure for unexpected financial emergencies or planned projects, not day-to-day running costs that some Trusts are having to draw down from, which is not sustainable in the long-term.
“Now more than ever, Trusts must scrutinise their budgets even further and be bold when making tough decisions in order to offset the multiple challenges affecting the sector as a whole.”
Published annually by Kreston UK academies group, a network of accounting firms, the report is a financial state of the nation survey of 260 trusts representing almost 2,300 schools. The survey covers the 2023/24 academic year.
