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Recession
Larner Bernard
Many pundits argue that the current UK recession will continues to decline – with defl ation being a real threat be deeper and last for longer than the last economic to the economy. Unemployment has been focused in the downturn in the early 1990s. Th is has fuelled a media fi nancial, retail and manufacturing sectors.
frenzy of negative articles on the recession’s likely impact on the independent education sector. Of course, given Unemployment
the diffi cult economic conditions, one would expect some Th e chart below1 and key give an indication of how ISC schools to have fewer pupils. Other schools might decide schools’ parents may be aff ected by the current spate of to become co-educational and/or merge with another redundancies. Note that the redundancy data is based on school. In this article, Larner Bernard explores how the fi rst 9 months of 2008 and the Independent Schools schools coped with the last recession in the early 1990s Council information & advice service (ISCias)2 callers and what lessons, if any, can be learnt this time around data is for the period September 2008 to January 20093. from that response. Th ere are a number of economic factors which diff er in the current recession and therefore Chart 1: Redundancies by Employment Sectors not all lessons are transferable. Some head teachers who compared to ISCias parent callers by employment sector were around during the last recession also give testament to this view and are heard from later on in this article.
Key economic factors 2009 vs 1991
A recession is defi ned as the contraction of the economy as measured by Gross Domestic Product (GDP) for two ias callers b 10%
consecutive quarters. Th e economy contracted by nearly 2% in 1991 and a further 1% in 1992. In terms of key economic indicators, the main diff erence between the two recessions is that infl ation is a lot lower at this stage of the % Share of UK redundancies by employment sector
current recession. Property prices declined by around 20% Agriculture, fi shing, energy & water during the 1990s recession (down 15% so far this time), but the picture in diff erent regions was more mixed. Education, health & public administration Another key diff erence this time around is that sterling has fallen against other currencies, making UK goods and services cheaper to foreigners. Th is may be good news for those independent schools which rely on overseas pupils, irrespective of the fact that there is a world recession.
Offi ce of National Statistics: First Release, Labour Market During the current recession, for those in work, disposable 2 The ISCias team provides a 9-5 parental advisory service on the number 0845 SCHOOLS (7246657) and by email incomes are likely to hold up as mortgage costs (for those on tracker mortgages) have declined, energy costs have Post codes of ISCias callers analysed using Experian fallen, VAT has been cut to 15% and infl ation generally software to determine likely employment sectors Recession
Th e underlying assumption is that ISCias parent Overall Picture for ISC Schools during the 1990s
callers’ employment sectors are broadly refl ective of the recession
employment sectors of ISC parents as a whole. Generally, pupil numbers held steady in the immediate With this assumption in mind, one would need to be aftermath of the recession. Th e total number of ISC concerned about those sectors which employ a high pupils rose by 2,245 in 1991 and then declined by a total percentage of ISCias callers and also make up a high of 11,458 in the fi ve years to 1996. However, by 1998 percentage of redundancies to date. Th e sectors which fall total numbers had increased by 13,779 exceeding the into this category are Finance and Business Services and Distribution, Hotels and Restaurants.
As can be seen in Chart 2 below, the average number of On the other hand, Education, health and public pupils per school did dip slightly following the recession administration employ the highest percentage of ISCias callers (25%) and this sector has not suff ered from a high level of redundancies. Government statistics indicate Th ere are a number of reasons why pupil numbers were
that there have been no redundancies in the Agriculture, quite robust:-
Fishing, Energy & Water sectors which represents about • Parents were keen not to remove children from schools
around the time of public exams such as GCSEs and GCE A levels.
Clearly each region in the UK will be diff erent, depending • For some owners house prices remained strong,
on the local economy, so the above is just a generalisation therefore parents who experienced a fall in income were for the UK as a whole. Nevertheless it gives some comfort able to use the equity in their homes to pay school fees that our schools may not be as adversely aff ected as might • A number of schools increased the proportion of pupils
Chart 2: Average number of pupils per school by year Recession
New Overseas Pupils 1990-2008
Chart 3: Composition and overall total number of new pupils from overseas. 1990-2008 otal New Overseas Pupils
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Chart 3 shows how the composition and overall total
economic woes in the wider economy. One major reason number of new pupils from overseas evolved. for this is that projects which had already started had to The recruitment of overseas pupils increased substantially from 1991 onwards – with pupils from Asia and the Far East leading the growth. The number of pupils from Table 1: Number of pupils Assisted by School Europe, to a lesser extent, also showed strong growth. Between 1990 and 1994 the total number of overseas pupils increased by 13% - with students from Asia and the Far East increasing by 30% whilst pupil numbers from Europe increased by 17%. The number of students from the Americas fell back in 1991 but then increased from Another question to consider is whether schools helped to retain pupils by offering more in the way of bursaries? The data certainly bears this out. In 1991 there was a rise in During the last recession schools did not cut back on excess of 10% in the number of pupils receiving help from their capital expenditure programme immediately. In schools – this compares with increases of single figures in 1990 there was a steep rise in capital spending which then levelled out for a couple of years before declining steeply for two years from 1992. So, as with pupil numbers Schools could have responded to the tighter economic during the last recession, there was also some inertia in conditions by allowing the pupil/teacher ratio to rise; capital expenditure figures before they showed signs of the however, this most certainly was not the case. The ratio, Recession
Chart 4: Average number of pupils per school by year calculated using weighted methodology, which corrects for Head teachers’ and bursars’ views, on how their schools smaller class sizes in the 6th form, shows no arrest in the coped during the last recession, were attained.
falling trend during the last recession. Chart 4, however, shows that the pupil/teacher ratio declined from 1990 One of the main points emphasised by bursars is that if through to 1994 and then remained constant through to parents contact them early enough, normally something can be done to help. Their experience, however, is that many middle- and upper-class parents have not experienced Horwath Clarke Whitehill in the 2008 Financial unemployment or financial difficulties before and are Benchmarking Survey4 commented that they found it sometimes reluctant to ask for help until it is too late.
anomalous that the pupil/teacher ratio could decline at a time when pupil numbers are falling. To explain this Another Head Teacher emphasised that in order for conundrum, they argue that most schools see a decline schools to survive during the last recession, they had to in pupil numbers as only a temporary phenomenon and become more customer-focused. Expenditure had to be therefore would retain teachers for improved times ahead. controlled tightly and schools that were fairly selective A school making redundancies would potentially worry parents about the stability of the school. A number of bursars pointed out that during the last Strategies adopted – some personal views from
recession, because house prices general y held up in some Head Teachers/Bursars
regions, they were able to attach a charge to the parent’s The above data shows that schools generally dealt with the property as a last resort. This method in particular was used period by increasing the recruitment of overseas students, if the student was about to take public examinations. As the reducing capital expenditure once current commitments decline in property prices is more widespread geographical y had expired, increasing financial assistance to pupils and than before, these opportunities are now more limited.
maintaining the pupil/teacher ratio.
Recession
Conclusion
The response of schools to the recession in terms of Undoubtedly there will be some gloomy news during this percentage fee increases was to limit rises to single figures period for ISC schools but there are also some reasons to within two years of the recession and increases remained be cheerful. The weak exchange rate makes our schools more affordable for overseas students. Inflation is low, with a risk of deflation, which will reduce cost pressures Table 2: Fee increase percentages by year on our schools as will the lower VAT rate of 15%. Furthermore the analysis on ISCias parent callers indicates a degree of cushioning for ISC parents in the current round of redundancies. The main lessons to be learnt from the 1990s recession are to limit fee increases, recruit overseas pupils where appropriate and to increase fee Average pupil numbers per school increased from 1990 assistance for pupils of hard pressed parents. Schools will through to 1992 and then remained steady for one year have to be creative, keep a tight rein on costs and focus before declining during the two years to 1994. This on their customers. HMC research published January means that on average, many schools actually experienced 20095 indicates that parents are still keen to secure an increased income during the early years of the 1990s independent education for their children as overall interest in open days and the numbers of pupils registering for common entry and similar tests were very encouraging. These arguments should give some comfort during this difficult time.
Larner Bernard is ISC’s Head of Research and Intelligence.
HMC Recruitment Confidence Survey – January 2009

Source: http://www.isc.co.uk/Resources/Independent%20Schools%20Council/Research%20Archive/Bulletin%20Articles/2009_05_Bulletin_TheRecessionIndependentSchoolsFightBack_LB.pdf