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The differential between schools that are doing well, and those that are financially struggling, appeared to widen further throughout the year
In our latest Business Outlook report, we reviewed the independent schools marketplace in 2023 and took a look ahead at what we can expect in 2024. Here are some of the key takeaways.
Overview
While 2023 saw a number of notable independent education transactions, overall market activity for operational assets remained relatively subdued for schools with smaller student capacities.
The differential between schools that are doing well, and those that are financially struggling, appeared to widen further throughout the year, and we continued to see long-established schools having to make difficult closure decisions.
“Schools with strong investment remained well-placed to attract new students.”
Where school mergers or takeovers were not possible due to financial sustainability challenges, there was no shortage of buyers for those schools when being sold with vacant possession, with the greatest demand coming from SEND education providers and other types of buyers having regard to alternative uses.
Schools that have historically been the subject of strong investment remained well-placed to attract new students despite a national cost-of-living crisis, fuelled by high inflation and interest rates. Schools attracting international students also saw a continued recovery of international student numbers, which further aided their post-covid recovery.
Pricing
In 2023, an overall combination of economic shifts, funding challenges, cost pressures, margin erosion and the increased cost of capital all contributed to a market reset in 2023, resulting in a 3.3 per cent decrease in pricing across childcare and education businesses, which follows some aggressive positive index movements in prior years.
Market sentiment
As part of our annual sentiment survey, we surveyed childcare and education professionals across the country to gather their views on the year ahead. Encouragingly, 44 per cent of people said that they are positive about the year ahead – an 11 per cent rise on survey figures reported in the previous year – while just 14 per cent feel negative. When asked about their sale and acquisition plans in 2024, 71 per cent said they are planning to buy and/or sell this year.
The finance landscape
In 2023, Christie Finance witnessed a 26 per cent rise in the number of childcare and education finance instructions, with a significant increase in leasehold operators seeking funding to purchase the freehold premises, ultimately increasing the value of the business that can be utilised as a springboard to aid future expansion.
Predictions for the year ahead
In 2024, we expect:
- Demand will remain for larger independent schools – those with the capacity for over 1,000 students – and ones that evidence strong trading performances
- Further provincial schools will close, notably schools with smaller capacities in less affluent areas
- Mainstream independent schools may see a slight stagnation of market activity in the lead-up to the general election as buyers proceed with caution amid a degree of uncertainty created by the Labour Party’s VAT on school fees pledge
- The upcoming general election against the landscape of Labour’s pledges associated with tax reform, and most notably VAT, is likely to create a degree of uncertainty in the short to medium term which could result in a cautious marketplace.
For more on the independent education market in the UK, read Christie & Co’s Business Outlook 2024 report.