The current coronavirus pandemic appears to be accelerating and is undermining many organisations’ key trading assumptions. With educational establishments closing to reduce the spread of the virus and key exams cancelled there is significant uncertainty for the sector.
We have looked to summarise the practical steps those in the education and skills sector should be looking to take to mitigate the issues and the measures currently outlined by the Government to support organisations at this time.
Rethink the education delivery model
Many organisations within the education sector are implementing contingency plans to facilitate remote learning using existing IT infrastructure. Most universities and similar organisations have such mechanisms in place, but pressure on the IT infrastructure many need to be actively managed to ensure its stability during this period.
Many colleges, Independent Training Providers, Academies, Universities and other training businesses will never have been presented with a set of events in which day to day cash management is required. In the current environment preparing a daily receipts and payments cashflow combined with a medium-term integrated forecast is a sensible step. It will allow you to manage cash to mitigate any issues and ensure no short-term funding issues.
Where organisations are aiming to remain operational, review and critically appraise your supply chain. Identify who may be most at risk, the potential impact on your business through stress testing, and how you could lessen the impact. Such areas may include outsourced operations (e.g. catering) and childcare provision.
Organisations that are highly dependent on non-profiled income such as research grants should consider the short to medium term impact on key funding steams. Similarly consideration should be given as to the potential impact of the situation on student intake for the 20/21 academic year and what actions may be required to mitigate any adverse consequences.
Stress test your forecasts for a variety of worst-case scenarios, identify what tools you have to manage cashflow and the key timelines.
The Government has clearly stated it will take all steps to address the issues to businesses of coronavirus. They have put in place several practical steps to ensure UK banks and HMRC are supportive in the current environment.
The DfE and OfS have stated that it wishes to support organisations during this period to protect students and the sector generally. Whilst these organisations have clarified certain aspects of ongoing provision of funding the full nature and extent of financial support is not yet clear.
It is important all stakeholders are engaged with appropriately so that organisations avail themselves of the available resources, reliefs and repayment holidays.
Zero rate of VAT for charity sector digital publications
The Government has announced that the application of the zero rate of VAT to supplies of 'digital publications' will be brought forward to 1 May. With specific focus on the charities sector the change in VAT liability will have a positive impact in particular for:
- Research charities
Find out more here.
Engaging with parents
With so many families facing financial uncertainty over the coming months there is growing expectation for schools to temporarily pass on any cost savings to parents. Parents will have recognised the cost savings being made by independent schools, particularly those with children that are boarding, but also all pupils and their marginal costs of transport, lunch and extra-curricular activities. Schools will also be reducing non-essential spend, such as new capital projects, which will have to be put on hold.
Parent contracts will be an important consideration for schools considering this measure. Schools should consider whether variations can be made to accommodate temporary changes in education provision. Financial reductions that can be passed on, in the form of direct cost savings or tuition fees, are likely to generate goodwill and protect the longer-term commitment from parents. However, schools should be clear that any such reductions are temporary and not permanent changes to fee arrangements.
Summer is a time when independent schools may let out their facilities to generate commercial income. Schools should review these arrangements, especially the finer detail, and their contractual obligations to third parties.
Many schools will also have significant contracts with third party suppliers such as outsourced catering providers. These should be reviewed to consider the school’s obligations and minimising financial exposure.
Government’s support to stabilising university admissions
UCAS has announced that its new clearing system (Clearing Plus) will be ready for Summer 2020 with the facility to align students with universities or providers linked to their achievements and course interests. It sounds like this is a form of data analytics and AI in practice, in that it is proposed that the system will consider the students’ calculated grades and if these exceed their predicted grades, options for other courses will be generated.
The Office for Students is going to consult with the HE on a temporary registration condition in order to safeguard against the possibility of aggressive competition amongst universities; with the intention of tightening control (potentially) with providers who 'take actions that are harmful to the sector and students'.
Student cap by any other name
This has been long awaited in our HEI clients, for 2020/21 admissions, universities will be able to recruit full-time, domestic students up to five per cent above their forecasts for the next academic year.
Supporting admission growth
Department for Education is having the final say on allocating an additional 10,000 places (5,000 stated for nursing, midwifery or related health courses). The number will be controlled through the student finance system.
Monies set aside to procurement land and buildings
The Government has budgeted £100m to consider buying university land and buildings for new or expanding schools and colleges.