Outlook for independent education sector remains stable, says latest Christie & Co report

Overview

Schools that have historically been the subject of strong investment remain well-placed to weather the storm of the cost of living crisis, with high inflation and interest rates, and there has been a continued recovery of international student numbers which is very positive for the sector.

However, for smaller schools struggling to maintain occupancy levels, Christie & Co saw financial distress in 2023, which, in some cases, resulted in closures, and the sector is braced for 20 per cent VAT to be imposed if the Labour Party wins at the next general election.

​Whilst the outlook for independent education remains broadly stable, subject to current political policies prevailing, a crucial factor in the success of independent schools is in the investment and maintenance of the properties to continue to make them attractive to pupils and prospective parents.

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 its annual sentiment survey, the company surveyed childcare & 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.

Market Predictions

In 2024, Christie & Co expects:

• Demand will remain for larger independent schools – those with 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
  
  Courteney Donaldson, Managing Director - Childcare & Education at Christie & Co, comments, “2023 proved to be an exceptionally busy year for our valuation and educational consultancy teams with their expertise and services being called upon by a wide range of banks, lenders, and investors seeking formal advice for refinancing and secured lending purposes.

“While the year saw a number of notable 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. 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.”

For the full Business Outlook 2024 report, visit: https://www.christie.com/news-resources/business-outlook/2024/

For further information on this press release, contact:
Phoebe Burrows, Corporate Communications Manager
P: 07540 063 598 or E: phoebe.burrows@christie.com