20 education & business
Learning new ways of operating
The education sector is undergoing the biggest shake up for a generation. Funding mechanisms are changing and long-established schools and colleges have to adapt to new ways of operating
Considerable savings have to be made. Wage bills, which account for around two- thirds of costs, are being contained by the public sector pay freeze, but institutions are also being forced to look for new revenue streams, share procurement programmes and back-office functions to lower costs.
Collaboration is now vital in this changing landscape and this can take the form of shared services, outsourcing and partnerships to full-scale mergers or takeovers.
There will undoubtedly be winners and losers as the reforms take effect and those taking action now will be best-placed to overcome the challenges in this huge sector.
For example, further education (FE) employs around 263,000 people and educates or trains three million students a year. Demand has accelerated in recent years – last year 83% of 16-18 year olds were in some form of further education.
Some £650 million in government funding is being spent on 54,000 additional FE places in 2009-10 and 2010-11 – yet this has been insufficient to satisfy demand and class sizes are increasing rapidly and prospective students are being turned away.
Colleges run very tight margins, typically spending 99% of their funding, so there is little room for manoeuvre and mergers are increasingly becoming the only way to survive.
Alan Bark, Barclays relationship director specialising in FE, said: “We expect to see more mergers, which will result in more super-colleges. A critical mass will emerge, making the future of small FE colleges more difficult. The nimble, well-funded and diversified FE colleges will come out on top.”
Barclays is the leading bank in the FE sector and primary banker to 38% of FE colleges nationally. It has committed lending in excess of £1 billion to the sector.
The challenges facing higher education (HE) are just as daunting. HE employs around 355,000 academic staff with nearly half a million UK students at universities.
Overseas student numbers have also soared in recent years and now account for
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a further 300,000-plus students. The largest increase has been from China, which now provides the majority. International students contribute £5b a year in tuition fees and off-campus spending.
In fact, income from overseas students has increased twice as fast as overall fee income since 2000.
The HE sector has received £7.2b in government grants for 2010-11 – the majority (£4.7b) for teaching with £1.6b allocated for research. However, following the Comprehensive Spending Review teaching grants are to be reduced to just £700m over the next four years with more money coming into the sector from increases in tuition fees.
Schools are also facing significant cost pressures. Spending on maintained schools is to slow to just 0.1% per year in real terms over the next three years, a significant slowdown following the rapid pace of growth over the past decade.
Independent schools, which educate 7% of UK children, are also being forced to change. While pupil numbers have been broadly stable during the downturn, private schools are under pressure to widen access and increase bursaries.
The boundaries between private and public provision are becoming increasingly blurred as academies continue to open and the first of the government’s Free Schools opens.
In such a fast-moving scenario, it is vital that institutions deal with funders who understand and are committed to the sector.
“Our interest is in the long-term health of the education sector,” said Helena McGrath, relationship director specialising in HE. “This was clearly illustrated during the recent financial crisis. Barclays Corporate actively lent to the education sector throughout the credit crisis and our approval rates remained consistent, demonstrating our belief in supporting clients through the difficult times as well as the good.”
This was underlined when Barclays Corporate won the Lender of the Year award at the Education Investor Awards 2010.
“We regard this award as recognition not THE BUSINESS MAGAZINE – THAMES VALLEY – MAY 2011 Alan Bark, relationship director, further education
only of the innovation and excellence we have demonstrated over the past 12 months but also the sustained, consistent way we have built up our presence within the industry,” added McGrath.
“Barclays was the first bank to introduce specialist industry teams dedicated to, and who have an in depth knowledge of, the sector across independent schools, higher and further education. We understand the factors which impact our clients.”
Barclays also sponsors the British Universities Finance Directors Group (BUFDG) conference, which was held recently at Warwick University.
Barclays Corporate has an experienced team of educational specialists within the southern region who can assist with your business needs.
Sources: SFA: 2008/09 data, Budget 2009 and AOC Details:
Higher Education Helena McGrath 07766-360467
Further Education Alan Bark 07775-540131
Independent schools Oxford - Alan Bark 07775-540131
Reading/Basingstoke - Gill Cook 07917-503716 Heathrow - Nick Leonard
Solent - Steve Gritt Guildford - Melanie Collins 07775-548595 07775-542103 07775-544490
Bromley - Jon Emery 07775-548823 All numbers are mobiles
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