The educational landscape in England is seeing its greatest period of change in a generation, which is having a profound effect on the relationship between schools and local authorities.
The BDO local government team is passionate about supporting councils to embrace and adapt to this new landscape. In order to provide cutting edge intelligence on the market for discretionary services for schools, our team has spent the last six months surveying and interviewing councils and multi-academy trusts across the UK to establish the current state of that relationship.
We asked: How are authorities funding these types of services? Why might authorities continue to provide them? And what plans do councils have for these services in the future? Our report reveals that:
- General Fund subsidy is widespread but there is potential across all discretionary services to trade sustainably. Many councils continue to use the General Fund to support discretionary services even through each service is delivered at zero-cost in at least 25% of the authorities who participated in our study.
- Educational outcomes are important, but so is financial sustainability. The impact of discretionary services on educational outcomes is the main reason why local authorities continue to fund them, yet the ability of such services to generate income is also a ‘high priority’ for 80% of respondents.
- Authorities feel challenged but optimistic. 52% of participating authorities believe that there is competition from a range of discretionary service providers in their area, but 80% feel confident they would be able to compete over the next three years.
- However, risks such as new market entrants and a reduction in General Fund subsidy mean that authorities are beginning to feel the pressure. 40% of respondents felt their sold services to schools are no longer financially sustainable and 80% are looking to reduce subsidy levels.
- Therefore authorities are beginning to adapt and respond. 74% of respondents outlined clear plans to modify the services they offer or the structure used to deliver those services. The potential for cost recovery will be the key determinant of which services continue to be offered, whilst the establishment of a Local Authority Trading Company is emerging as an increasingly popular model for the delivery of services.
- The market will be volatile over the coming years, with the emergence of lots of new providers. This will increase competition, and we should expect some providers to fail. Over time this will likely see the consolidation of the market into fewer, larger providers, but some small local providers will remain.