By Shaun Barton

The private education sector faces myriad challenges in an era marked by rising costs, declining pupil intakes and shifting demographics. That has led to a spike in the number of education providers struggling financially and, sadly, even closing, writes Shaun Barton, Education Advisory Specialist at Education Advisory.

In the face of these headwinds, it has never been more important for independent schools to have board members, trustees and governors who are attuned to the financial challenges they face, and knowledgeable about the tools they have to overcome them.

Where once they were concerned with policy decisions and academic aspirations, now the primary role of many of these critical bodies is the financial stewardship of their schools. It’s no exaggeration to say that their ability to identify and manage the financial risks can mean the difference between more devastating closures and thriving institutions.  

Governance and financial responsibility in independent schools

Unlike state-funded schools, which rely on government funding determined by pupil numbers, regional cost adjustments and special educational needs requirements, independent schools primarily fund themselves.

They do so through a diverse range of income streams, including tuition fees, philanthropic and charitable donations, fundraising initiatives, investments, business partnerships and ancillary services such as holiday camps or facility rentals. Each of these revenue sources, along with school budgets and broader financial decisions, requires careful oversight to ensure the school remains on a stable footing.

In an independent school, that financial responsibility rests firmly with boards of directors, governors and trustees. They provide guidance and strategic direction to ensure the school remains financially sustainable, achieves its educational mission, and operates in the best interests of students, staff and the wider community.

If a private school is struggling, the responsibilities of directors, governors and trustees become even more critical. First, they must recognise if and when the school becomes insolvent. They must then act in the best interests of creditors, report the situation to the Charity Commission (if the school is a registered charity) and seek guidance from a licensed Insolvency Practitioner. Failure to do so can lead to severe consequences, including personal liability for losses, legal action and reputational damage.

Who are the financial stewards?

The board of directors, trustees or governors serve as the ultimate financial stewards of independent schools. They don’t usually manage day-to-day finances directly, which is the role of the headteacher and finance team. However, they play a critical role in shaping the school’s financial direction by approving budgets, monitoring financial health, managing risk and making strategic decisions that safeguard the school’s long-term future.

Not every private school will have all three bodies, and their responsibilities may overlap, but their purpose remains the same.

Trustees – Common in charitable schools, trustees are legally responsible for overall governance, including the school’s financial health, and their duties are defined by charity law.

Governors – Governors are similar to trustees, but they may take a more hands-on role in the school’s operations and educational leadership.

Board of Directors – Incorporated independent schools have boards of directors with legal duties under company law to act in the school’s best interests. Directors can serve as trustees in schools that are also charities, holding dual responsibilities under both company and charity law.

What is the role of educational financial stewards?

• Their duties can cover a wide range of governance and oversight tasks, including:
• Ensuring the school operates in a financially sustainable way
• Protecting the school’s assets and resources
• Approving and monitoring annual budgets
• Reviewing financial performance
• Evaluating long-term financial strategy, including tuition fee policies and investments
• Identifying and monitoring financial risks, including cash flow and insolvency
• Ensuring compliance with legal, regulatory and tax requirements
• Approving major financial decisions, such as large capital projects, loans or investments
• Ensuring transparent financial reporting to stakeholders, such as parents, staff, regulators and charitable donors
• Protecting creditors’ interests when the school is insolvent

Financial stewardship in practice

Financial stewardship in private education often involves making difficult but necessary decisions. Here are two examples of what that looks like in the real world.

Responsible closure

Brookes UK School in Oxfordshire was facing mounting financial pressures, including unpaid fees and declining enrolment. Despite exploring additional funding and restructuring options, neither proved viable. In consultation with stakeholders, the school’s leadership made the difficult but necessary decision to enter voluntary liquidation, prioritising the interests of creditors.

Although the school ultimately closed, the financial stewards fulfilled their legal and ethical duties under charity and company law by recognising insolvency and acting responsibly on behalf of its creditors.

Effective restructuring

Not all financial challenges lead to closure. Some schools and universities successfully navigate their difficulties with the help of their leadership.

For example, St George’s and City University in London recently underwent a voluntary merger to address rising costs, declining student numbers and reduced international enrolment. The merger strengthened financial resilience, diversified educational offerings and reinforced the long-term stability of the two institutions.

That demonstrates how proactive governance and careful planning can protect a school’s mission while adapting to changing circumstances.

Where fiscal reality meets responsible leadership

Through careful oversight, strategic decision-making and decisive action, trustees, governors and boards of directors play a pivotal role in protecting a school’s mission. Their leadership ensures that, even in challenging circumstances, schools can be managed responsibly and their fiduciary duties upheld.