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Impact for our business – UK Football Schools – from private school fee VAT introduction.

We caught up with James Price of UK Football Group one of the many occupiers at The EpiCentre to find out what the company does and to gain his opinion of the likely impact that the introduction of 20% VAT on private school fees will have on his business.

What do you do and how do you make your money?

We recruit students, we don’t charge the parents anything, we act as advisors to the parents and go through their bespoke requirements, in terms of football, education, pastoral care. We advise them on what schools we think are the best and every school we work with pays us a commission, that’s a finder’s fee for locating students who are a good match for their school. The schools get fantastic footballers who are a cultural fit for their school, and the parents get expert advice because it is not easy to decipher which are the best football schools.

We choose 11 schools that meet our criteria thorough doing visits to audit their football provision. We look at their coaching standards, the facilities, fixtures, how they operate, and for the parents we like to provide a range of school options on the football/academic spectrum.

The likely impact of the 20% VAT introduction will have on our business

The new Labour Administration is introducing VAT on private schools in January 2025 with a view to raising £1.5 billion that will be used to add another 6,500 teachers in the state sector.

The impact all depends on the type of private school you are talking about and in this respect, we see the independent sector divided into three tiers.

The lower fee independent schools

The biggest impact without a doubt will be in the lower fee independent schools especially the prep-schools.  Because a lot of these are small with 25% of them having less than 200 pupils and working on tight margins anyway, they won’t be able to subsidise fees leading to a loss in demand. and undoubtedly some of them will have close down.

Top tier private schools

There are the top public schools like Eton, Harrow and Winchester with boarding school fees topping £50,000 per year which accounts for about 10% of the independent school sector.

The UK Football Group has actually seen enquiries increase this year in the top tier. These schools are passing on the entire 20% increase to the parents and they haven’t had a lot of push back. In fact, the schools are making more money because being VAT registered, they will be allowed to reclaim VAT on their capital allowances, so they are using that to increase the total funds and revenues received.

The middle tier of independent schools

There’s a big bank in the middle and what they’re tending to do is increase fees by an average 12-14% so absorbing some of the VAT and in some cases up to 10% to help out parents for the first two terms so they can adjust.

 But there is no doubt, we are finding that the number of sports scholarships these school can offer are going to be greatly reduced or disappearing altogether which is an issue as many talented young footballers have entered the private school system in this way.

We expect that some pupils will have to drop out of these schools altogether or go into lower fee schools where there is not such a great emphasis on the provision of football training.

Impact of the introduction of VAT on school fees

The government estimated that the impact was going to be a 3-7% migration from the private school sector into the state system. Educational experts who have looked into this percentage think it is ridiculously low and is actually going to be anywhere from 10% at the bottom end and perhaps even up to 25%. Should this come about a number of the smaller schools will become unviable and will have to shut down.

In rural areas there are not a great many options for children so if an entire private school shuts down it is questionable whether state schools will be able to absorb the extra numbers. I am not sure the government estimates have taken that into account in any way, shape or form. A lot of the schools are pretty angry about it and understandably many parents are quite worried. I think it is going to have a far, far bigger impact than the government thinks.

What do you have in mind in mitigating  the VAT increase?

For our business, at the top end it means we will actually make more money because the fees are going up. With the schools in the middle we are going to have to try and widen our marketing and recruit more wealthy students from overseas.

With the lower budget schools we will be able to offer fewer opportunities because the  scholarships have gone, so we will need to work really hard to try and replace the fewer enquiries we are going to get.

We are expecting a drop off in demand and are already beginning to see that for the  football specialist schools, so  we are going to  have to pivot into recommending more private  schools in general.

We still like the idea of recruiting for schools with certain specialisms and feel that if the child is happy outside of academic work they tend to do better within academic work.

At the moment our marketing is very heavily focused on football and football schools, but we are going to have to open out our marketing to offer private schools in general with specialisms in different sports activities.

Schools are realising now that if you can run a specialist sports academy it can make them more attractive. For example, Culford School in Suffolk has a fantastic tennis coaching programme that is linked to the Lawn Tennis Association’s national set-up.   It is attracting fantastic tennis players from all round the world who will get 15-20hrs of high-quality training each week, in beautiful indoor and outdoor facilities with expert coaching that is everything that a young tennis player with professional aspirations would need.

Other schools are setting up golf academies with professional golfers doing the tuition, providing indoor driving ranges, and links to amazing golf courses,  Rossall in the north of England who have an excellent golf academy, or Repton  School that is very good at cricket and tennis and Oakham that has a strong reputation for rugby and is linking in with the Leicester Tigers that play in Premiership Rugby, England’s top division of rugby.

A lot of these schools are forging links partnerships with professional sports teams and clubs or national associations, which is something schools are going to have to do as it is becoming increasingly competitive.

It is definitely a model that a lot of schools are going down and gives them a unique selling point within the market. We are encouraging schools to do that as it is a good way of going.

Thoughts on the politics.

It’s an extraordinary decision. The whole idea is it is supposed to be a revenue raising exercise. Initially the IFS did a report for the Labour Party saying that they estimated £1.7bn would be raised, then it was revised down to £1.3bn which is supposed to be funding 6,500 teachers in the state sector, which sounds reasonable.

However, this assumes a 3.7% migration from private schools into the state sector with  the private sector effectively subsidising the state by £7.5-£9K per child per year. But if  that 3.7% migration figure is wrong and it goes to between 10% and15% it won’t be a net revenue raiser for the government, it will be neutral and if it goes above 15% it will be a net loss to the government.

Another consideration is that there are 556,000 private sector pupils in the country with 111,000 having Special Educational Needs (SEN), and even though there is talk of VAT relief for certain elements of SEN one has to look at the ethics of moving children with SEN midway through the school year in January if their parents can’t afford it, and trying to get them settled in a totally new environment, often from a small independent prep-school to a big state school which is already stretched. In terms of looking after these SEN pupils it is going to be very difficult. If they are used to a ratio of 12 pupils per teacher and they go into a ratio of 1:30 it is going to be a great challenge for them.

If the idea is to create diversity in the independent sector it is going to do the opposite by creating a much more elitist independent school sector where those on the margins from normal backgrounds aren’t going to be able to afford it whereas those who can afford £50-60K a year and who can afford to send their children to the best private schools are not going to be impacted. The scholarships are going to go or greatly reduced which is a great shame as they did offer up to 10% of their money for special awards.

Conclusion

The introduction of VAT on school fees is a massive change to an established system that will inevitably not have the intended consequences or expected impacts. It will likely allow those that can adapt and change to flourish, while some medium to smaller schools currently supporting children and families might well now struggle – only time will tell if it was worth acting on the promise.

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