Dozens of academy trusts have bolstered their reserves by up to 900 per cent, as leaders tighten their belts ahead of the coming financial storm.
But some continue to be saddled with hefty deficits as they count the cost of sudden government funding cancellations, and in one case, a major cyber attack.
Schools Week investigates…
Deficit to surplus
We analysed the latest accounts for 51 trusts ranging in size from one to 62 schools. The chains in the sample run, on average, 16 schools each.
Thirty-seven of the trusts registered improved reserves by the end of 2024-25, up from 20 the year before.
Trusts improve their reserves by running in-year surpluses. Those with deficits have to dip into reserves to pay for them.
Diocese of Norwich Education and Academies Trust (DNEAT) went from posting a deficit of £178,000 in 2023-24 to a surplus of £1.4 million by the end of August – a 900 per cent gain.
Oliver Burwood, its chief executive, said the MAT – which runs 40 primaries and one secondary – “overachieved on its budget this year”.
He acknowledged the trust had been “overoptimistic in terms of income” predictions in previous years before shifting to a “cautious” approach.
“We’ve been on the wrong end of discussions with the DfE around our finances… you don’t want to be in that position where you’re going to one of your regulators and saying, ‘We’re not in a surplus position’,” he said.
First time in years
REAch2 Academy Trust – which runs 62 primaries across England – added to its reserves for the “first time in several years”.
CEO Cathie Paine said the rebuild was aided by a restructure in 2023-24 that delivered “a more streamlined and efficient operating model”. Her MAT’s reserves leapt 108 per cent, from £2.3 million to £4.8 million.
The trust also bolstered “the financial capability” of its heads “through strengthened training and support”, which gave them “greater visibility of budgets”.
Despite this, both DNEAT and REAch2 remain below target reserves. Paine said her organisation was “on track” to reach its goal of 5 per cent of income “over the next couple of years”, while Burwood noted he was “nowhere near” the same level.
‘Fragile’
Research by the Kreston group, a network of accountancy firms, found the proportion of trusts racking up in-year deficits more than trebled in three years to 58 per cent in 2023-24. Its study for the latest accounting year is due to be published next month.
The Department for Education recommends trusts hold reserves of at least 5 per cent of total income “for contingency to protect cashflow”. Twenty per cent above or below that level is considered too much.
Kreston also warned last year that trusts’ financial buffers were collapsing, with 31 per cent falling below the threshold, up from 17 per cent two years earlier.
But accountancy firm Bishop Fleming’s head of academies Kevin Connor, a report author, said this week that he had “seen a more positive financial performance on the whole this year”.
Trusts have also achieved surpluses “irrespective of their size, which has not been the case for a number of years”.
Connor said this “has been achieved through a combination of continued efforts to centralise and manage costs, but also from in-year funding” provided via the core schools budget grant, issued by government to help cover previous teacher pay rises.
But Benedicte Yue, a trust chief finance officer, described this as a “fragile stabilisation rather than a windfall”. This is because “funding levels are just back where they were 15 years ago in real terms while demands on schools have increased significantly”.
Strategic teams
This could also reflect growing caution among leaders as they brace themselves for further squeezes to budgets, Red Kite Learning Trust boss Richard Sheriff argued.
Schools are expected to have to find more savings to deliver teacher pay rises over the next three years, which the government has suggested should total 6.5 per cent.
Meanwhile, per-pupil funding will rise by around 1 per cent in real terms each year until 2028.
“The last three years have been absolutely horrible financially for schools and last year was the first time we started to get some greater warning of what’s going to be happening,” Sheriff explained.
“[Trusts] are building in the resilience they will need financially to cope with these years ahead.”
Sheriff’s trust – which runs 16 academies in Yorkshire – witnessed a 30 per cent rise in reserves in 2024-25, from £3.6 million to £4.6 million.
Among other measures, Red Kite launched a “strategic delivery team” of heads and business managers to help tighten belts. One of its decisions was to procure supply and cover teachers centrally, which is expected to save £200,000.
What about LA schools?
Analysis reveals council maintained schools are faring worse than academies.
Government figures show 18 per cent of local authority-maintained schools (1,884) were in deficit last year, up 2.5 percentage points on 2023-24.
Just over half (5,354) registered in-year losses of up to £2.8 million. Sixty-six were over £1 million in the red overall.
Julia Harnden, of the Association of School and College Leaders, said this was “symptomatic of an education system that is hugely underfunded, with schools continually being asked to find further savings”.
New IFS research, published this week, found that after “accounting for planned spending on SEND”, mainstream school funding per pupil “only grew by 5 per cent in real terms between 2019–20 and 2025–26”.
This means it is “about the same level it was” 10 years ago.
… but some trusts still suffering
However, some trusts remain in financial difficulty.
Fourteen of the 51 trusts in our analysis registered in-year deficits, compared to 31 the year before.
The largest percentage fall in reserves in 2024-25 was seen at the Arthur Terry Learning Partnership, which plunged further into deficit.
It was previously revealed the trust had racked up seven-figure losses after purchasing iPads as part of an initiative to provide 11,000 devices for all pupils and staff. Now it’s £8.4 million in the red.
An Arthur Terry spokesperson stressed the “primary reason” for its debt was “significant over-staffing”. Returning to a “financially sustainable position, therefore, means taking some difficult decisions”.
It was followed by the Kingsway Community Trust and the Ron Dearing UTC, which both registered 62 per cent drops. Kingsway, which runs three schools in Manchester, saw reserves dip to just over £286,000.
It accounts said it was “confident that a programme of cost-cutting measures can be implemented over the coming 12 months to ensure … [It] can continue to operate”.
Meanwhile, Ron Dearing in Hull said its reserves were hit by a £75,000 “reduction in growth funding”.
The “decision was communicated mid-way through the academic year by the DfE, leading to the deficit increasing rather than decreasing as previously forecasted”.
Connor added there were “significant gaps in the surpluses achieved by single-academy trusts and small MATs” compared to those of larger chains.
Yue also said the ability of those holding reserves to generate investment income had contributed to this “increased variation” in finances.
Three trusts in red
Arthur Terry and Ron Dearing were two of only three trusts in the sample that were in an overall deficit.
The other was the Mayfield Grammar School in Gravesend. While its reserves rose by £23,000, it remained in a deficit of £345,000.
Its issues stem, in part, from a “major cyber-attack” in 2023.
It required “substantial expenditure to restore all IT networks, coupled with a negative impact on self-generated income and a substantial increase in staffing, supply, and overtime costs to recover and rebuild all systems”.
In accounts, the trust noted it was “regrettable that there is no central government funding to assist schools when such events occur …when all DfE cyber-attack protocols were in place”.
The financial storm
A Confederation of School Trusts study found around 60 per cent of trusts expected to draw from reserves to tackle immediate increases in costs in 2025-26.
They are also “looking at cuts to classroom staff to balance the books in the longer term”, CST CEO Leora Cruddas said.
Yue noted the “post-election honeymoon is over”, with the sector “now entering a period of intense fiscal tightening”.
Harnden said the struggles of some trusts were “indicative of the continuing reality of severe pressures on school funding”.
“What we can say with certainty is that the funding situation is not easing and seems likely to get worse over the next few years, leaving trusts with more tough decisions to make,” she added.
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