Static funding, rising costs and ongoing uncertainty over future income is putting increasing financial pressure on academy trusts, a major new report has warned.

The eighth Kreston Academies Benchmark report, the largest independent survey of the financial health of the academy sector, shows that half of academy trusts had an in-year deficit in 2017-18.

It warned that with the current rate of deficits the academies sector has five or six years worth of reserves left.

The level of deficits in academies has fallen compared with 2017, according to today’s report.

However, it warns that although “significant progress has been made in reducing the size of deficits overall, and that the deficits per school have fallen, further spending reductions will be hard to achieve”.

It adds: “Future funding uncertainty could start to hit the way in which education is provided.”

The report also warns about the uncertainty of meeting the cost of teacher pay rises beyond 2020.

Pam Tuckett, chair of the Kreston Academies Group, said: “Against a backdrop of financial uncertainty and reducing budgets, it is difficult for academies to guarantee like-for-like education models in the long term.

“Our clients across England are telling us that the ‘easy savings’ have already been made. We are already seeing reductions in learning support assistants, and staff contact ratios will be increased to save costs.

“This means teachers spend longer in the classroom so, in theory, schools wouldn’t need as many teachers.

“There have been several years of cost cutting and the trusts that we work with are telling us that there are no more areas where they can save significant costs without impacting on the way in which education is provided.”

The Kreston report is based on a survey sample of 370 academy trusts nationwide, made up of 1,000 individual schools.

It says that the average primary school deficit fell to £17,544 in 2018, from £155,765 in 2017.

And the average secondary school deficit fell to £145,889 in 2018, from £252,982 in 2017.

It highlights the work academies have made in delivering savings but warns that further spending reductions will be hard to achieve, and that trusts cannot rely on their reserves forever.

They will run out in five to six years without any changes, it says.

Ms Tuckett added: “Tough decisions have been taken to balance staffing levels and there has also been a clear focus on cost management. However, it is unsustainable for the sector to record in-year deficits year after year. Eventually, the reserves will run out.

“This year’s report is a testament to the hard work of academies nationwide, in reviewing spending to bring down deficits but a warning for the future financial health of the sector.”

A Department for Education spokesperson said: “We trust academies to manage their own budgets and the vast majority are operating with a cumulative surplus, with only a small percentage having a deficit.

The latest (2016/17) published figures for England show 2,800 academy trusts (94 per cent) reporting a cumulative surplus or breaking even.

“We expect academy trusts to manage their finances appropriately and in accordance with their funding agreement and the Academies Financial Handbook.”