Independent Schools: Building Financial Resilience

Ahead of our Independent Schools Conference taking place in March next year, David Woodgate, CEO, Independent Schools’ Bursars Association (ISBA) shares his thoughts on how independent schools can innovate and respond strategically to build financial resilience.

Independent schools are now operating in the most hostile financial environment the sector has faced in decades. Costs are rising sharply, tax and pension changes are biting hard, pupil numbers are under pressure, and confidence among parents is uncertain. This “multiple whammy” is no longer a theoretical risk — it is a lived reality that will shape the future of every school.

Schools that respond with pace, discipline and strategic clarity will survive and strengthen. Those that do not will face contraction, forced restructuring, or closure. For governing boards, robust financial planning and uncompromising oversight are now mission critical.

The Multiple Whammy: A Perfect Storm That Demands Leadership

The first and most immediate pressure is cost inflation. Rising energy, catering, maintenance, and staffing costs continue to erode surpluses. TPS contributions are already at 28.68% and expected to rise again in 2027 — ISBA recommends modelling at 32%. National Insurance increases from April 2025 add further strain. Payroll is now the single largest and fastest-growing cost line for most schools.

Second, the introduction of VAT on school fees has reshaped the financial landscape. Despite sector-wide preparation, the impact is stark: nearly 17,000 pupils lost in the year to September 2025, and further attrition is likely. Every school has been forced to reforecast. Some have already closed. This is a structural shift, not a temporary disruption.

Third, the abolition of Mandatory Business Rates Relief (MBRR) from April 2025 has removed six-figure annual support from many schools’ budgets exacerbated by updated valuations.

Overlaying this are deeper market forces. Fewer births mean fewer pupils. The aftershocks of the cost-of-living crisis make parents highly fee-sensitive. Geopolitical and economic volatility continue to undermine confidence. Increasing sustainability and compliance requirements add further cost.

Boards must recognise this for what it is: a long-term structural shift in the operating environment. Financial resilience is no longer optional — it is existential.

But out of adversity comes opportunity! Schools are rethinking their financial and operating models and are considering innovative approaches to new income streams and are no longer opposed to considering mergers and acquisitions as part of a strategic response.

Reducing the Impact of VAT and Business Rates: Board Priorities

• Demand rigorous financial modelling — and challenge it.

Three- to five-year forecasts must now incorporate VAT, lost rates relief, and rising payroll and pension commitments. Boards should insist on scenario modelling that tests fee sensitivity, pupil movement, bursary demand, and the impact of non-fee income. Monthly KPI monitoring must be standard, with immediate corrective action when indicators deteriorate. Too many schools still do not monitor the trends in KPIs and rigorously oversee pupil numbers.

• Drive efficiencies through structure and collaboration.

Boards should require a review of organisational and governance structures to ensure VAT efficiency and cost effectiveness. Shared-service partnerships for procurement, IT, HR, and estates are no longer optional efficiencies — they are potential levers for sustainability.

• Treat rates, property, and estate use as strategic assets — not administrative burdens.

Do not accept rates bills without specialist review. Appeals and audits often unlock significant savings. Underutilised buildings should be repurposed, commercially exploited, or disposed of. Estates must earn their keep.

• Consider mergers and strategic alliances early, not when in crisis.

Mergers, group structures, and acquisitions — charitable or for-profit — are becoming mainstream routes to financial strength. Boards should evaluate these options proactively and without sentiment. Delay reduces negotiating power and narrows options.

Diversifying and Growing Non-Fee Income: A Strategic Imperative

Fee dependence is now a critical vulnerability. Boards must champion diversification with clear targets and robust oversight.

• Commercialise facilities with professional discipline.

Sports complexes, theatres, boarding houses, and conferencing spaces are valuable assets. When run commercially, they deliver reliable revenue and build community presence.

• Expand educational enterprises and international partnerships.

Licensing agreements, global collaborations, and digital programmes can strengthen brand and diversify income. These require proper governance, market insight, and risk assessment — but done well, they provide strategic headroom.

• Strengthen ancillary services.

Transport, wraparound care, catering, and enrichment programmes generate incremental income and improve parent value perception. This is a competitive advantage, not an add-on.

• Professionalise alumni and community engagement.

An active alumni base is a long-term strategic asset. Events, mentoring programmes, and lifelong learning initiatives build loyalty, reputation, and philanthropic opportunity.

Fundraising and Development: Boards Must Set the Tone

Fundraising is no longer optional. In a constrained financial climate, it is a vital pillar of resilience.

• Anchor fundraising in clear purpose.

Boards must ensure that the school articulates an unambiguous case for support: why giving matters, and what impact it achieves.

• Invest in professional development operations.

Effective fundraising requires experienced staff, modern CRM systems, donor analytics, and disciplined stewardship. Under-resourcing development is a false economy.

• Make bursaries the flagship priority.

Bursaries drive access, support enrolment, and resonate strongly with donors. They remain the single most compelling philanthropic case for most schools.

• Build endowments and legacy programmes.

These underpin long-term stability. Boards must take ownership of endowment strategy and champion legacy giving across the school community.

Looking Ahead: What Governing Boards Must Do Now, working with Heads, Bursars and SLTs

The schools that succeed will be those whose boards act decisively and strategically. That means:

• Interrogating financial assumptions — not accepting them.
• Planning three to five years ahead — not one.
• Driving collaboration and efficiency — not defending the status quo.
• Building diversified income — not relying on fees.
• Communicating honestly and consistently — not reactively.

Financial resilience is now the central governance responsibility. In an era of profound change, trustees must ensure their schools remain not only solvent, but strong, confident, and mission driven. The future of independent education depends on the quality of decisions made today.

Attend our Independent Schools Conference in central London on 11 March 2026 to hear more from David and our expert line up of speakers on all of the current challenges and opportunities for the sector. From workforce strategies, innovations in school marketing, how to develop mutually beneficial partnerships to curriculum and assessment design, join us to network with senior teams from independent schools and find out how your colleagues are adapting and innovating to change.

View the full agenda and book your place today