by Joe Faulkner, Senior Schools Consultant
With a note in the TES today reporting that Cognita has put its UK projects on hold - for the time being – in response to the recession (“We expect the market to start picking up in again in 2011″ says Charles Robinson, their director of strategic development), the following excerpt from the acclaimed mtmconsulting Independent Education Sector Report 2010 is particularly pertinent, exploring the rise and positioning of commercial independent education chains.
The reason behind the original growth of the commercial school groups was the entry of venture capital firms into this market. These include Englefield Capital (who backed Cognita) and Soveriegn Capital (Alpha Plus backers until 2007). However, growth in the UK has not been as great as predicted – whilst the number of schools in commercial chains doubled from 37 in 2002 to 74 in 2007, it climbed to 82 over the next two years. Commercial chains now account for just 2.5 of independent school pupils.
One reason why growth has not been as rapid in the UK is because opportunities overseas have proved more attractive (e.g. for Cognita). Another reason is because the preferred option of some payers to build new schools has proved almost impossible (e.g. for GEMS). Land prices are obviously high (particularly in cities), it is difficult to acquire planning permission in residential areas and there are many bureaucratic barriers to re-using empty schools. “It’s more difficult than it has ever been to set up a new private school. Councils have no interest in supporting independent schools and are adept at putting up all sorts of obstacles about increased traffic, the effect on views and changes of (building) use”, said Tim Emmett of CfBT.
The story, however, does not end there for commercial chains, we believe there is likely to be continued growth in the future, with three major advantages that may prove irresistable in the long-term:
- Lower cost base. It is generally agreed that the key advantage held by the commercial groups is their lower cost base. This results from the stricter financial discipline of a commercial organisation, school management and integration and the economies of scale of a group. Strong branding and investment in marketing of schools were seen as particular strengths.
- Lower fees. Scale also means that these schools can charge lower fees, despite the need to earn a profit. In particular this would enable them to expand the independent sector by attracting less wealthy parents, particularly first time buyers who are dissatisfied with the state sector.
- Fresh outlook. There is also an argument that commercial groups benefit from having no historical baggage, including the obligations that go with charitable status. As one headmaster of a non-commercial school pointed out to us, “those that develop their offering to incorporate new technology and continually enrich children’s learning at competitive prices will succeed”.
While some parents may not find the offering of commercial schools fully appealing, not least because of a perceived shift in ethos once profit-making becomes a core raison d’etre, we believe commercial chains will play a continuing role in independent education in the UK. It is also foreseeable that there may be opportunities for such groups to work alongside new state schools in the future, such as those endorsed by shadow schools minister Michael Gove.
This extract was paraphrased from mtm’s Independent Education Sector Report 2010.
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