A struggling academy is facing closure because of “crippling” PFI repayments – with the council set to pick up the outstanding £21 million debt.

The government has agreed “in principle” to close The Kingsway Academy, in Wirral, following two-year discussions over its viability.

Northern Schools Trust, which took on the academy in 2014, said low pupil numbers and rising private finance initiative repayments, currently costing more than £600,000 per year, mean the school is “unviable and potentially not able to pay its bills”.

This is nothing to do with the quality of the education being provided

Extensive investigations by Schools Week previously revealed how schools were being pushed into financial ruin by soaring debts owed to the private firms that funded their buildings.

Schools make repayments through councils that signed up to the PFI deals to build or refurbish schools. Contracts normally run for around 25-years, and rise each year – whether or not schools lose funding because pupil numbers drop.

Nigel Ward, chief executive of the Northern Schools Trust, said: “This is nothing to do with the quality of the education being provided but to do with a shortage of pupils at the top end of the Wirral and the funding mechanism chosen by the Wirral Council to refurbish its schools many years ago.”

According to Edubase, the school has 443 pupils on roll, but a capacity of 1,500.

Schools Week understands the PFI contract still has around 15 years yet to run – with repayments of around £21 million due to be paid.

If the school closes, the council will have to pick up the tab, as it would own the building, the trust said.

The Liverpool Echo reported last year how Liverpool council was repaying £4.3 million PFI costs per year for a school, even though it had closed in 2014.

Wirral Council did not respond to a request for comment. The Department for Education told the Liverpool Echo the school would remain open until the end of the school year.

A department spokesperson said: “Should the school close, we will work with the trust and the local authority to identify alternative places for students to ensure their education is not disrupted.”

Ward said the decision follows a “considered process by a team of educationalist responsible for the sustainable success of the students and school” over two years, including potential mergers with other schools.

“The Northern Schools Trust has been party to the discussions regarding the strategic options, and presented possible outcomes, but ultimately have no role or say in the final decision.”

That will fall to the secretary of state.

Schools Week has previously revealed how takeovers of struggling schools had hit snags over PFI issues. Trusts willing to takeover schools identified as needing intervention have been put off over PFI repayments.

Former education secretary Nicky Morgan previously said government lawyers had tried, but failed, to unpick the “watertight” deals.

But Morgan pledged schools with hefty PFI contracts would get extra funding under the new fair funding formula. Further details on the final funding formula are expected to be released later this year.