How can I assess financial stability of local independent schools?

[Ohnoducks]

We're considering starting our children at one of the Teesside independant schools (Red House, Teesside High or Yarm specifically) but can anyone advise how to tell their financial stability? I found a few news articles a few years ago about Yarm and Teesside looking to share some facilities but nothing since. We really don't want to choose one and then have to move short notice, one child would be year 4/5 and one year 8/9 depending on moving dates. I don't know what I'm really looking at looking at the published accounts to be honest or what is a red flag. Any advice welcomed.

When you plan to enter into a long term business relationship with a services supplier you ask to look at their accounts. If they refuse to share them, they don't get your business.

Ah, apologies - misread, you have actually seen their accounts.

You need to look for trends over the years. Is cash flow increasing or decreasing? Is debt increasing or decreasing? Are expense to revenue ratios increasing or decreasing? Are customer numbers (pupils) increasing or decreasing? For the cash numbers you will need to adjust for inflation between each year.

On the Charities Commission site look at income vs expenditure over time (you want to see that they are not spending more than they have coming in year-on-year).

For independent schools in the current climate you want to see that they are maintaining pupil numbers over time. Check most up to date numbers on the ISC website and then check historical numbers in the school's ISI inspection (it will be in the section titled "School information" or similar). There is natural fluctuation in numbers and I would expect to see a decrease in many schools over the last decade but you want to check that pupil numbers aren't falling off a cliff. Larger schools are almost always more secure.

Plus general stuff that shows that administration is done well that is a sign of a well-run organisation. Do the ISI inspections show all standards being met? Are accounts submitted on time? Is the website updated regularly? None of this is a guarantee but helps to give a better overview of the current state of the school.

Yarm is doing big building work to rehouse (and expand) its nursery provision. Having had experience with the school (and know people who are still there), I’d say it’s a safe bet.

This is the sort of area I specialised in for a good few years, working as a Credit Analyst, assessing the financial strength of different companies & organisations and what credit lines we'd offer. The accounts for each of the schools are publicly available via the charity commission website, so I've had a look at the figures (and importantly the notes afterwards).

It's worth noting that the latest accounts for each school are 2024, so we don't yet know the full extent of the VAT hit yet. However, the one that stands out is Teesside High, and not in a good way. Their auditors have provided a 'qualified' assessment to their 2024 accounts, meaning that they see a significant uncertainty over its long-term future. The school has not been able to keep up with its debt commitments, have broken its lending 'covenants' and have had to renegotiate - so they've been rather dependent on the goodwill of their banks to keep going. The school is providing an upbeat assessment, saying that they have a pathway out of the problems and expect to be out of the worst in 2026. The accounts were delayed in coming out, perhaps because there was so much uncertainty about the future and needed to have a pathway out before they could publish them.

They may be through the worst, time will tell, but from a financial viewpoint they are definitely the weakest of the 3 schools. The other 2 school accounts seem more 'normal' and more protected from the downturn....although of course there aren't any guarantees, especially in this economic environment.

Hope that's helpful.

Thank you that's incredibly helpful, I had no idea what qualified accounts were or that it was a flag of something more. I saw both Teesside High and Red House are both under 40% occupancy too which was concerning (but then again Yarm's numbers show them significantly over max numbers so I'm not sure how accurate these figures are). Do you have any idea when the 2025 accounts might be availble usually to be able to see more up to date figures?

Should be in the next 2 or 3 months - assuming things haven't changed since I was in this line, there's a 10 month window between end of financial year (which corresponds to the Academic year for these schools) and when they have to be filed - so May June time. These should be quite revealing for a lot of schools and how they're coping with the VAT situation. It's worth noting that Teesside High's 2024 figures were very delayed and only came out about Christmas, that may be because there was so much work to do to get to a viable financial position and didn't want to post accounts before they could report something positive - they'll probably get a small fine for that. If their 2025 accounts are delayed that would be a further concern, because of the negative inferences you could get from that.

Yarm has a more competitive entry for the secondary school, is a bigger school and generally ‘fancier’.
Red House is smaller with a really friendly feel (their student numbers are stable … if you look back they have been at around 350 for a decade or so and I honestly think they would struggle to get to the theoretical max of 510 in their current building size).
They are a very different vibe and I would suggest you visit both before making a decision.

Red House and Yarm look secure on accounts and are both good schools. Agree they have a different vibe. RH quainter and my preferred choice. Yarm glitzier and fair warning, the traffic on a morning is painful.

I would also agree they are completely different schools. The facilities at Yarm are great and If you are intending to bus to Yarm then that’s ok, but yes, the traffic on the high street can be a nightmare. It’s not going to improve with one housing estate coming online soon and another potentially in the pipeline.