Page last updated at 19:15 GMT, Sunday, 5 October 2008 20:15 UK

Schools count cost of credit crunch

By Clare Matheson
Business reporter, BBC News

exam generic
More children than ever are sitting grammar school entrance exams
In September each year a host of grammar schools opens their doors for prospective pupils and their parents, in what amounts to a giant annual sales pitch.

Though grammar schools are attractive to ever more parents, they are also having to work hard to tempt the highest achieving pupils to apply, in order to maintain high standards and their place in the league tables.

But the school's popularity may not just be down to grades and cost. It could be a result of the credit crunch.

It seems some parents are ditching private education in favour of grammars, particularly in the wake of a 40% jump in fees over the past five years.

"The credit crunch is definitely, definitely, having an effect," says Sue Fieldman, regional editor of the Good Schools Guide. "People are not prepared to commit to school fees for 10 years."

According to Ms Fieldman, grammars offer the "best of both worlds" - a top class education that's free. "That's a huge allure to everyone," Ms Fieldman adds.

"People are taking stock. People are going in for the state school exam that wouldn't have done before."

Spending considerations

Pat Langham, headmistress at Wakefield Girls High School, says independent schools are already beginning to feel the pinch in the current economic climate.

"It's inevitable that parents will reconsider all aspects of their spending," she says.

"Yes, we are seeing the effects. Parents are considering very carefully the demands on their finances and then it is a question of priority."

There's a high proportion of parents committing a high proportion of their income to fees - those putting about 40% aside are the most vulnerable
Dick Davison, MTM Consulting

According to the Good Schools Guide, demand for places at the country's most popular grammar schools has surged tenfold with a record number of children sitting entrance exams.

Wallington County Grammar School in Surrey was one of the most recent establishments to hold its entrance exams. Around 1,500 children signed up for 120 places, according to Admissions Manager Tina Marden.

"We had to have the police down to control parking," she says.

Ms Marden adds that parents were looking to find a better education on a budget for their children in the current economic climate, along with a "general increase" in the number of children sitting the entrance exams recent years.

But the question of cost is also affecting private schools in the area, she says. A phenomenon she's only experienced recently after 20 years with Wallington.

"I know independent schools in the area were doing deals right into the summer holidays - offering scholarships and reductions - to keep pupils on," Ms Marden adds.

Tutor benefits

While newspapers are full of doom about the current financial crisis, it appears the turmoil is benefiting some groups.

La Sagesse Roman Catholic School
Rising costs and falling numbers forced the closure of La Sagesse

Private tutors are now in high demand as parents pay out for short-term tuition, often in an attempt to boost their child's chance of getting into a grammar.

In fact demand for tutors has soared so much that the Good Schools Guide now includes a chapter on the subject.

"Tutors round the country are inundated with requests for tutoring for the grammar schools," says Ms Fieldman.

But the Independent Schools Council says it's still too early to tell whether the financial crisis is having an impact.

"Until we see the results of the ISC annual census in April 2009, it is too soon for ISC to comment on whether or not our pupil numbers have been, or will be, affected by the current economic situation," says chief executive David Lyscom.

Long term

Instead the ISC believes the current economic downturn will take its time to affect the education sector as parents prefer not to upset their child's education.

Dick Davison, Senior Consultant at education consultancy MTM Consulting, takes a similar view.

Dorchester Preparatory School, Dorset - financial problems
Westbrook House, Kent - financial losses, drop in pupil numbers
Wispers School, Surrey - "ever increasing costs"
Sandhurst School, Worthing - money problems, falling numbers
La Sagesse, Newcastle - rising rent, falling numbers

With parents putting a considerable amount of funding into their offspring's education, they like to leave it as long as possible before deciding to interfere, he adds.

But while many private schools said they had their strongest recruitment this year he did come across a minority that had "late withdrawals, largely for financial reasons".

A recent survey of 1,000 parents by MTM appears to uphold the claims; with two thirds "confident" they would be able to continue to pay as long as their children were of school age.

Of the remaining third most tended to be people relying on other financial sources - such as bursaries, grandparents, savings and borrowing.

"There's a high proportion of parents committing a high proportion of their income to fees - those putting about 40% aside are the most vulnerable," he said.

Costs squeeze

But while the experts concede the current credit crisis will take a while to affect parent spending, it is starting to eat into school overheads.

"The credit crunch is having an effect on schools' cost bases, for example food and energy," said Mr Lyscom of the ISC.

But he added: "We are confident that schools have capable management teams who will successfully see their way through these challenges."

That said, rising costs have claimed a number of casualties - particularly against a backdrop of a fall in private school pupil numbers - a development that can prove to be catastrophic.

Wentworth College in Bournemouth called in the receivers in August, with governors blaming the "current economic climate" for the decision. It has since been saved by joining United Church Schools Trust which operates 11 independent schools across the UK.

Wentworth College
Wentworth College employed about 50 staff and had 200 pupils
Westbrook House Preparatory in Kent closed blaming a shortage of pupils and financial losses, while La Sagesse in Newcastle closed its doors as rent trebled and pupil numbers fell.

However, the current closures may just be the tip of the iceberg warns MTM's Mr Davison.

Historical evidence suggests recessions start to bite at private schools once the economy is in recovery, he explains.

In future, consolidation is likely to be the key with groups and federations of schools getting together to save money. For example, Croham Hurst day school in South Croydon merged with its neighbour Old Palace of John Whitgift school in the summer.

Some big commercial groups are also creating chains of schools, such as Cognita - chaired by former Ofsted chief inspector Chris Woodhead - which has 30 to 40 schools.

With analysts warning schools could face a 5% drop in pupil numbers as parents tighten the purse strings, it may be time for independent schools to do their homework and get their books in order.

Additional reporting Angela Harrison, education reporter, BBC News.

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