Credit Crunch – Protect Yourself - August 08
At the end of March the Independent Schools Council reported that fees had increased by 6.2% in the preceding 12 months to an average of £11,253.00 a year. Day Schools were costing an average £9,069.00. Boarding Schools were costing £22,059.00.
The City of London School for Boys increased fees by just 2% in anticipation of hard times. David Lewin, the head, was quoted in the Sunday Times on 4 May 2008 as saying:
“I have encountered professionals who are saying that they can’t afford independent schools anymore and opted for the local comprehensive instead. We expect the stresses will emerge at the end of this year. It is important that parents choose their school carefully and are aware of past fee increases, so that they can plan for the future”.
The appointment of Administrators to Wentworth College in Boscombe yesterday by Lloyds TSB only served to underline the precarious position in which many independent schools now find themselves.
Wentworth was a 180 pupil secondary school charging £10,500 a year for day pupils and £17,000 a year for borders. It had 50 staff.
Its governors had sought to address a declining school population by going co-educational from September. It borrowed substantial monies from its bank to build support facilities for boys but, having attracted insufficient numbers, the bank apparently made a formal demand for the loan.
Wentworth, a school more than 100 years old based in a mansion in a prime location in an affluent part of Dorset, was described by Ofsted as “outstanding”.
The news of Wentworth’s problems, coupled with confirmation from British Gas yesterday of not only record profits but also a 30% increase in its prices, the collapse of the domestic property market and food price inflation are clear indicators that the middle class parents upon whom independent schools have traditionally relied are fast becoming unable to keep up with their commitments.
The President of the Girls School Association, Vicky Tuck, the principal of Cheltenham Ladies’ College was quoted in The Times yesterday as saying:
“We are not exempt from the winds of change. Schools are run as a business and the sums have to add up. One of the things parents expect is relatively small class sizes and it is hard to reduce costs quickly while keeping pupil numbers”.
Only the strongest will survive. Independent schools have to now concentrate even more than usual on cash flow, the lifeblood of any business.
In our opinion
We suspect that this is just the start of things to come. With overheads increasing it is likely that the schools will need to increase the school fees above the rate of inflation. The rising fees, coupled with the rise in mortgages, energy and fuel costs are likely to have a dramatic impact on some parents. Whether this impact results in the parents withdrawing their children from school or, possibly, the parents keeping their children at school but falling into arrears with the school fees.
Take action
In these challenging times it is more important than ever to ensure that schools have adequate credit controls in place. Schools need to make contact with parents should they fail to adhere to terms of payment. It is important to move early so as to maximise the chances of recovering the school fees.
Any school facing financial problems should seek advice from their professional advisers and their bank at the earliest opportunity. Taking a proactive stance will give you more options and your bank will more likely be willing to assist if you talk to them at an early stage.
How Rickerbys can help
We are well placed to advise schools on all matters concerning outstanding fees, how best to realise the fees and, where appropriate, to provide insolvency advice to the schools.
We appreciate that pursuing a debt for school fees can be a fine line to tread, particularly when a pupil is at a critical point in their education, or raising complaints about the standard of service. Our experience working in the sector combined with our in depth knowledge of the legal process allows us to discuss the different options and adapt our approach to provide schools with a tailored debt recovery service.
Please click on this link  to view our ‘Debt Recovery for Schools’ brochure for further details of our services.
In addition, we have many years expertise in acting for schools in tightening up their credit control systems.
Our two insolvency practitioner partners have specialised in insolvency matters for over 20 years. They lead a team of eight partners and solicitors with practical insolvency experience in business restructuring arising out of insolvency.
Our insolvency team brings a practical approach with the knowledge and experience needed to use the insolvency legislation to our client’s best commercial advantage.
For further information or to discuss any of the issues discussed in the ebulletin, please contact:
Alice Reeve
Partner and Head of Education
T 01242 246431
E mailto:alice.reeve@rickerbys.com
Colin Gibson
Partner and Insolvency Practitioner and Head of Debt Recovery
T 01242 246453
E colin.gibson@rickerbys.com
Derek Jones
Partner and Insolvency Practitioner
T 01242 246422
E derek.jones@rickerbys.com
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