This is where you will find commentary on our own research and that produced by other organisations. Often we add articles aimed at raising questions about the market for products and services
There is certainly no shortage of commentary about our schools; however, which of this information really impacts on your business? Our insights are uniquely geared towards better understanding what, when and how schools make purchases of your products and services.
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The Good, the Bad and the Ugly?
An opinion piece
There is always something happening or about to happen at a macro level in our schools – be it funding changes, curriculum revisions or policy changes. All play havoc with determining how headteachers will spend their money. Then add to this all the micro level aspects that conspire to make every school develop a unique set of decisions that impact on how much money is left for resources and what is ultimately purchased.
The aim of quantitative research on school spending is to try and iron-out the individuality and come to some consensus on trends. I rarely talk about a typical school and even have concerns over averages. There is not a typical school. Even so, we must understand movements in the market. To that end we believe our data is some of the best out there as we ensure we generate insights from a representative panel of schools.
So, what are the trends and more importantly the forecast on spending that will help education suppliers prepare for the new academic year? The first thing we need to discuss and what many of you will have now experienced, is that our previous forecasts for 2016 and 2017 of contraction in resource spending has come to pass. A reduction of -5% in 2016 and -4% in 2017 wiped out all the gains generated since 2013. Not a good result given expansion in pupil numbers.
The good news is that 2018 recorded a level of growth that neutralised the 2017 contraction. However, this means that in cash terms (let alone real terms), spending on resources remains restricted.
You may remember the additional injection of £400 million for capital expenditure, which was made available to schools in April this year. Our original assessment was that less than 10% of this money would make it to resource spending in 2019. Many believed this to be far too low. It turns out we may have been too optimistic!
Our original projection for 2019 was for spending to rise by a further +3%. In part this was due to the expectation of more spending on capital items, such as ICT and furniture. However, recent data has suggested that spending is much more likely to be flat in 2019. Without the extra £400 million injection it is now clear that we would be identifying contraction in resource spending for 2019.
But what if we look a little further ahead to 2020, does this look better? Potentially yes, but only across the primary sector. It looks possible that spending across the secondary sector will fall. Of course, we are in a state of macro-level flux – as always.
The Government has announced pay increases for teachers, but most of this money will need to come from existing school budgets (only 0.75% is funded, with the remaining 2% coming from budgets). That’s the bad. The good is that signals have been sent by the new Prime Minister that schools and the police will be the spending priority of his government.
And now the ugly. Uncertainty. Nothing is yet agreed. Schools will continue to play it very safe with spending. And given that so many schools are in deficit, any increases are unlikely to have their fall impact. We have already seen that with the ‘missing’ £400 million. So, our view is that there is no sure sign at present that there can be any improvement in spending as we move into 2020. Then maybe, that is certainty. Spending on resources has and will continue to be suppressed.
However, I need to leave you with some optimism. While we speak about the broad aspects of spending on resources, we must not forget that some categories of spending are doing well and, in some cases, very well. System software, such as administrative systems that help support school functions or make teaching more efficient and effective, have bene doing well and are likely to continue to do so. Basic items, such as stationery are holding up. Capital spending items, such as laptop computers and desks are set to continue expansion, even if this activity is being supported by a ‘special’ injection of funding.
BESA AGM market update
Your market update
At last week’s BESA AGM I presented the audience with a short heads-up on resource spending for this year and next, along with some views on how the additional £400 million announced by the Chancellor may be spent.
Firstly, a little more about the additional funding. The money is intended for capital improvements and not salaries, which comes from recurrent funding. The department is also saying the funds should not be for major projects, but there is no formal restriction. However, in reality, many schools (especially primary) are likely to mix the funds into one pot. Schools will not know how much funding they will get when the DfE publishes a calculator in December and then the actual allocations will only be allocated in the new year. In addition, some allocations will go through local authorities, or MATs, so many individual schools may not see all the money.
As with normal capital allocations funding can be made in the following two financial years, so not all the money will be spent in 2018/19. This is especially the case with authority schools operating on the usual April financial year. In their case, the window to utilise the funds is short, with receipt in January and being spent by the end of March 2019.
All the above makes it difficult to assess the impact of the additional funds on BESA members. With this in mind I took the opportunity to discuss the funding with 70-80 schools prior to the AGM. The aim was to assess initial views and help define some questions to ask in our annual update of BESA’s ‘Resources in English Schools’ research. In this survey, running from this week up until the end of term, we’ll get to update the spending assessments with over 700 schools. Therefore, our report to BESA in January 2019 will provide more concrete assessments of the marketplace.
Even so, members were keen for us to present a view on spending. I did just that and used the attached slide as a guide. It may not mean much on its own, so for those of you unable to attend the AGM, or like me, had a long wet House of Lords reception, here is my assessment.
Using data collected from BESA members and around 360 head teachers and school business managers each quarter for the BESA Barometer, I have been able to present a view on spending for 2018. Both primary and secondary schools are recording increases in spending this year. While the uplift is very welcome, we need to remember that the previous two years identified resource spending declining by a cumulative nine percent. In addition, as represented on the far left column of the attached slide, spending over the last ten years is below what is was in cash terms – particularly in the case of secondary schools.
After the anticipated uplift in spending over 2018, the initial assessment for 2019 was for spending to be little changed across secondary schools, and possibly lower for the primary sector – an average reduction of £700 had been forecast. Now that we need to add in the additional funding the Chancellor announced, the outlook will look a little different.
As described in the initial paragraphs, the use of the new money for resource purchases is currently unassessed in detail. However, when looking at the estimated £338 million that will be available for English maintained primary and secondary schools (i.e. excluding Welsh schools and early years establishments), we anticipate only £37 million being allocated to resource spending in 2019. That is, by end of March for authority schools and end of August for academies. Given the additional time academies have, it can be surmised that academies will spend more in the current budget year. Even so, £37 million is only 11% of the total allocation. Why so little given the Chancellor’s statement that the money is to be spent on items such as whiteboards in the current year?
I have already noted that the money will only feed through to schools in January and that it does not need to be used immediately. Feedback from school leaders indicates three core ways the funds are likely to be used – on top of those that are currently unsure of what might transpire.
Firstly, some schools just see the allocation being lost in general budget allocations, especially as the allocation makes up less than 1% of delegated budgets. Others state that the allocation will go towards reducing deficits, or in some cases being added to existing capital savings for further defined projects (based on the funds being used within two years).
The remaining schools do expect money to be allocated to capital expenditure in the current budget year. The types of use are being researched now, but early indications suggest a spread amongst the following:
Computers, networking and peripherals (inc. displays)
System software (e.g. MIS, learning or assessment platforms, parental engagement, safeguarding)
Books, other printed resources and digital content
Classroom and sports equipment
In reviewing the data and school feedback the expectation is for spending in 2019 to rise by 1.2% across the primary sector (instead of a previously forecast of a reduction of -1.7%). Essentially, the average primary school was forecast to lose £700 in resource spending, which is being offset by £1,200 of the £10,000 average allocation being spent in 2019 (by March or August).
Secondary schools were forecast to see a very small rise in 2019 but at £200, would have made very little difference. The additional £4,700 expected to be spent in what is left of schools’ current budget year, will help lift spending by nearly three percent.
The rest of the slide covered views on procurement from the upcoming BESA procurement research report. Given that I will be finalising that report this week, I will leave comment for another day.