07/11/24: According to the latest budgeting data from schools, there is a distinct increase in the percentage of multi-academy trusts (MATs) predicting significantly lower financial reserves by the 2026/27 academic year.

The MAT Finance Sector Insight Report 2024 published today by IMP Software shows that more than one in three (37%) multi academy trusts are projected to fall below 5% revenue reserves as a percentage of income within the next three years.

Holding financial reserves below 5% might indicate financial vulnerability according to The Education and Skills Funding Agency (ESFA).

The bleak financial outlook is most stark in those trusts made up of a majority of primary schools,* where two in five (40%) anticipate revenue reserves will fall below 5% by 2026/27. This suggests trusts are projecting income to rise at a lower rate than costs, leading to increased budget deficits.

Trusts with a majority of secondary schools* are expected to fare far better, with fewer than 15% to drop below 5% reserves over the same period.

The report, which will be unveiled today at the Confederation of School Trusts’ Annual Conference, compiles future budget forecasts from 267 multi academy trusts and is the only forward-looking analysis of trust finances to cover the three-year period from 2024/25 to 2026/27. The data sample represents over 3,000 schools, offering an insightful snapshot of the financial trajectory of the academy trust sector.

Will Jordan, co-founder of IMP Software, said: “Our report exposes the daunting financial challenge ahead for multi-academy trusts, particularly in the primary sector.

“Funding must keep pace with rising costs and cover the additional expense required to ensure all pupils get the help they need. Without this, difficult decisions will be inevitable as revenue reserves are stretched, and trusts will need to act decisively to safeguard quality education.”

Stephen Morales, chief executive at Institute of Business Leadership (ISBL), said: “Trusts need assurance that the funding they receive will fully cover the cost of delivering a quality education. Even trusts with relatively healthy reserves can face unforeseen financial challenges that may force them to draw more from their reserves than planned, putting additional strain on already tight budgets.” 

Planned reductions in teaching staff

In reaction to the financial outlook, staff cuts are planned across the board to help balance budgets. MATs with a majority of primary schools predict a nearly 5% cutback in teacher numbers and reductions in teaching assistants (TAs) of almost 6% by 2026/27. For a primary majority trust with ten schools, this equates to a loss of six teachers and six TAs, a significant loss for an education team**.

Secondary majority MATs, those made up of mainly secondary schools, forecast a 1% reduction in teacher numbers and a nearly 2% contraction in TAs, representing six fewer teachers and three fewer TAs in a ten school trust**.

The data suggests some of the cuts are required to cover the nearly 17% forecasted rise in teacher costs in the next three years. According to the report, the average cost of a teacher, with elements such as employer national insurance and pension contributions factored in, will rise from under £60,000 in 2022/23 to more than £70,000 by 2026/27, excluding London.

Will Jordan, co-founder of IMP Software, said: “Painful cuts to education staff will be essential to plug financial gaps. These decisions are not taken lightly, which shows the scale of the challenge facing the MAT sector, as fewer teachers and TAs could mean bigger class sizes and less support for children with additional needs.”

David Clayton, chief executive at Endeavour Learning Trust, said: “It’s difficult for a small primary school with declining pupil numbers to reduce staffing costs without impacting on children’s learning and pastoral support. One way to mitigate this is to share financial and teaching resources across a trust to deliver an equitable experience for all children.”

The key budget influences

MATs with a majority of primary schools in this sample expect an almost 2% decline in pupil numbers by 2026/27, which may relate to falling birth rates nationally. This potential loss of funding could also be an influencing factor in the cuts to staffing levels being considered in these schools.

In addition, staff reductions are anticipated in trusts with mostly secondary schools, despite the expectation that pupil numbers will grow by 3% in the sector during the same period.

Will Jordan, co-founder of IMP Software, said: “What’s notable is that the percentage cuts to primary teaching staff are more than double the projected drop in pupil numbers expected over the next three years, while secondary schools are reducing staff despite student numbers increasing. This strongly suggests that reductions in teaching staff are being considered to address wider financial challenges within these trusts.

“It is worth noting that while trusts with mostly primary schools are forecasting pupil numbers to fall in line with DfE projections, secondary majority trusts in the sample are forecasting growth that is higher than the national pupil projections, so will need to put contingency plans in place to mitigate any unexpected financial shocks if pupil numbers and the resulting funding fall short of their growth forecasts.” 

Impact of the Core Schools Budget Grant

The government’s Core Schools Budget Grant (CSBG) announcement on 29^th July 2024 was designed to cover a 5.5% increase in teachers’ pay and provide an additional financial buffer for schools. This has had a significant positive impact on the financial outlook for MATs.

Prior to the announcement more than 60% of MATs forecasted they would fall below the 5% revenue reserves safety zone over the next three years. This dropped to 37% reporting this position after the teachers’ pay funding increase.

Will Jordan, co-founder of IMP Software, said: “Our report underlines the outstanding work that goes in to balancing the books in a MAT, particularly in challenging financial times.

“As details of the CSBG were announced, it represented a stay of execution for the sector, with many MATs pulled back from the financial brink. However, knowing the level of this funding much earlier would have enabled trusts to avoid difficult decisions, such as staffing cuts, which can have a major impact in the classroom and on morale across a school.”

Leora Cruddas CBE, Chief Executive of the Confederation of School Trusts, which supported this work, said: “There are lots of worrying forecasts in this report that we must not let become a reality – but there are also 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. I am delighted CST is supporting this work; together, we can use its insights to build the best system in the world at getting better”.

The MAT Finance Sector Insight Report 2024 published by IMP Software is a national snapshot of the state of trust finances.

The data included in the report represents the projected financial position of MATs as at 27 July 2024. 

To download the full report visit: www.impsoftware.co.uk/whitepapers/the-imp-mat-finance-sector-insight-report