Last year was supposed to be the year that put an end to endless uncertainty surrounding Brexit. The dreaded B-word caused ripples of insecurity to flow through every industry, but with the transition period ending on December 31st this was all supposed to end. How wrong could we be?
It was former heavyweight boxer Mike Tyson who said that “everyone has a plan until they get punched in the face”. Indeed, in first quarter of 2020, that punch was firmly delivered by the unforeseen, and wholly unwelcome, arrival of the Covid-19 pandemic.
The UK economy is now recovering from the double hit of a Brexit hangover and a nation which doesn’t know when, or even if, the normality of a post-Covid world will return. The impact on education is severe, and unfortunately the depth of the severity is still undetermined.
Parents are now expected to be part-time home schoolers, exams are cancelled and universities are quickly becoming online education courses. The effect on the students has been well publicised, but independent schools are also suffering with reduced admission demands, especially from international students. After all, if travel to/from the UK is banned, how can these students even attend school in the first place?
“The appeal of a prestigious ‘British education’ was a price worth paying, but parents were appeased by the cheap pound.”
The 2018 Independent Schools Council Census revealed that 10 per cent of students in the UK’s independent schools are from overseas. The appeal of a prestigious, yet expensive, “British education” was a price worth paying, but parents were appeased by the cheap pound which negated some of the expense of educating their children in Britain.
Ever since the UK referendum, the pound has dropped to multi-year lows against most major currencies. For parents who funded independent school fees in euros they enjoyed rates of exchange just above parity, whilst those funding in US dollars enjoyed rates of exchange which have rarely been seen since the 1980s.
Schools are running big business in terms of revenue and may well have significant cash on hand outside of the UK in other currencies, especially if they have international outposts. Fluctuations in the pound can have a significant impact when schools need to bring local currency back to the “mothership” and convert it to GBP.
“The uncertainty surrounding the value of the pound will weigh on school managers’ minds in the coming months.”
Furthermore, schools looking to expand abroad will need to use pounds to pay for it – in another currency. Again, a schools’ buying power will be affected by changes in the pound.
A weak pound also makes UK education more affordable for international families so should schools alter their target markets off the back of this?
To illustrate what we have been seeing this tumultuous year, take the example of a “mothership” school that wants to take 2m Hong Kong dollars in school fees back to the UK. In March 2020 those dollars would have been worth £223,214.29, but by February 2021 they would have been worth £187,969.92 – a difference of £35,244.37.
So what is in store for the pound through 2021? Last year, sterling suffered with the onset of Covid-19 and saw sharp declines. However, rescue packages and huge stimulus to aid the economy stemmed the panic. Later in the year, the last-minute Brexit deal pushed up the pound. The post-Covid narratives paint a cautiously optimistic tone, especially in the second half of the year.
“Is there a point where the appeal of a British education does not outweigh the additional cost and hassle of sending children to be educated in the UK?
The unpredictability of the financial markets is, of course, nothing new. The pound has been stronger before and schools have still thrived, but with the added complications of travel in a post-Brexit / Covid-19 world, is there a point where the appeal of a British education does not outweigh the additional cost and hassle of sending children to be educated in the UK?
Jon Goss, FX dealer at Argentex LLP says: “Fortunately, there are a range of financial products which allow those paying school fees to protect themselves against potential currency devaluation. There are also products that allow schools to maintain their affordability regardless of movements in the FX markets. Whether these type of products are used or not, the need for consideration of the financial markets in the education industry has never been greater.”
For more information contact Chris Canning at firstname.lastname@example.org or visit www.argentex.com
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