More than one in three multi-academy trusts expect their revenue reserves to drop below a Department for Education threshold by the end of 2026-27.
For MATs with mostly primary schools, more than two in five project that their revenue reserves will fall below 5 per cent of income in the next three years, according to budget data analysed by IMP Software.
A report published by IMP Software today at the start of the Confederation of School Trusts’ conference also warns that trusts were forecasting staffing reductions before the government’s pay grant announcement in the summer.
Leora Cruddas, chief executive of the CST, said the report contains many “worrying forecasts” that “we must not let become a reality”.
Will Jordan, co-founder of IMP Software, said the projections of falling reserves expose the “daunting financial challenge” that MATs are facing - particularly primary school trusts.
The projections on reserves were made before chancellor Rachel Reeves announced a £2.3 billion increase in core funding for schools for 2025-26 last week.
Here are the key findings of the report.
1. MATs expect reserves to drop
Some 30 per cent of trusts surveyed expected their reserves to dip below the 5 per cent threshold by the end of 2025-26.
The DfE - through the Education and Skills Funding Agency (ESFA) in the past - has contacted trusts when their reserves have fallen below 5 per cent of income because it may “indicate financial vulnerability”.
The latest analysis comes after Tes revealed that there was a 42 per cent year-on-year increase in MATs falling below the 5 per cent reserves threshold between 2021-22 and 2022-23.
Taking into account the government’s funding announcement in last week’s Budget, Luke Sibieta, research fellow at the Institute of Fiscal Studies (IFS), said that after £1 billion of the extra £2.3 billion goes on high needs, and £450 million on the rest of this year’s teacher pay award, the remaining £850 million will likely be “swallowed up by ongoing cost pressures”.
David Clayton, CEO of Endeavour Learning Trust in the North West, said: “The more information we get about that £2.3 billion, the less it feels like schools are going to feel any tangible benefits.
“It’s not clear whether there is anything built into it for an inflationary increase in per-pupil funding, so we will have to wait to see the detail.”
2. Trusts predicted cutting staff
The report also shows than an even higher proportion of the trusts analysed were predicting falling below the reserves threshold before the Core Schools Budget Grant to support the 5.5 per cent teacher pay award was announced by the government in July. Before this grant was announced, 61 per cent of trusts had expected to fall below the reserves threshold.
Before the July pay grant was announced, the report shows that MATs were projecting a reduction in full-time staff over the three years to cope with increased costs.
This was particularly evident in primary-majority trusts, which projected an average decline of more than 4 per cent in teachers and more than 5 per cent in teaching assistants.
“Even to stand still, trusts are having to reduce the number of staff they have, because, ultimately, the income is not keeping pace with the escalating costs,” said Mr Jordan.
Stephen Morales, CEO of the Institute of School Business Leadership, said trusts need assurance that the funding they receive will “fully cover the cost of delivering a quality education”.
And Mr Clayton said the “annual carousel” of trusts having to set budgets before they know exactly what costs such as staffing will be must be changed to “a much more forward-planned, longer-term cycle”.
3. Pressures more acute for primary trusts
In contrast with primary-majority trusts, less than 15 per cent of secondary-majority trusts expect their reserves to fall below 5 per cent of income in 2026-27.
Many primary schools included in the analysis expected their reserves to be non-existent by 2026-27.
Despite this, IMP found that both primary- and secondary-majority trusts were forecasting reductions in their staffing.
Primary- and secondary-majority MATs refer to those with at least 75 per cent of their pupils in that phase.
The report identifies no correlation between the size of a trust and its reserves projections.
Analysis for Tes last month showed that trusts with no primaries on average had five times the reserves of all-primary trusts in 2022-23.
Mr Jordan noted that the analysis identified percentage cuts to primary teaching staff more than double the projected drops in pupil numbers, while secondary schools were reducing staff despite student numbers increasing.
4. Less spare capacity better for budgets
The sector has repeatedly raised concerns about the impact of falling pupil rolls on school budgets.
This report says that trusts forecasting a surplus on average had a lower percentage of unfilled places than those forecasting a deficit.
Furthermore, IMP found that both primary- and secondary-majority trusts in the analysis had more optimistic pupil number forecasts than national DfE projections.
The authors suggest that this may in some cases lead to forecasts not having fully accounted for the fall in pupil numbers.
The data in the report is based on the budget forecasts of 267 MATs.
The DfE has been contacted for comment.
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