With the latest set of monthly corporate insolvency data being published by the Insolvency Service – we can now finally analyse in full how the full twelve months of 2023 impacted various industrial sectors in the UK and compare it to the previous four years. 

You can read more about how the retail, construction and hospitality industries fared here.

The latest in the series focuses on the hospitality industry which includes both the food and beverage service sector and accommodation – which are both classified separately.  

Education sector insolvencies 2019-2023


All figures from The insolvency Service

The pre-Covid year of 2019 saw the largest number of educational insolvencies, surprisingly it is the two post-Covid years of 2022 and 2023 that have seen the least although the trend was rising. 

The months ahead look like being increasingly turbulent for the UK’s universities, schools and other educational institutions. 

Several UK universities are facing stiffer financial challenges now due to a significant decline in international student enrollments specifically from countries such as Nigeria and India. 

Many are actively contemplating cost-saving measures including redundancies and scrapping courses in order to save money. 

This is primarily due to government legislation aimed at curbing what they saw as “rip-off” degrees and ensuring that student visas are used for education, not immigration purposes. 

According to recent research of senior leaders, one in ten universities is actively cutting the number of staff.

Tuition fee rates have effectively been capped at £9,250 for more than a decade with most colleges now losing money on domestic students. These losses were offset with international students who pay significantly more to study in the UK – subsidising UK students by almost as much as £2,000 per head. 

Over the last four years, this number has increased by 60% and in 2023 reached 560,000 which is approximately the size of the city of Sheffield. 

The number of applications from all overseas students has fallen by 37% in the same period. 

John Rushforth, executive secretary of the Committee of University Chairs, said: “I’ve been in higher education for 30 years and senior leaders are more worried than I’ve ever seen them.

“Bankruptcy is a realistic possibility for some institutions and universities are having to do really difficult things to stave that off. 

“Taking fewer British students is a last resort but if you’re making a loss on something people have to consider it. Everything has got to be looked at because the situation is so serious. 

“Universities have to think hard about what they want to protect and make choices about divesting themselves of things that are not core to the institution. There will be less choice for students. 

“A lot of institutions have introduced a lot of modules so that students can pick and choose. That’s expensive, so it may be that you go back to more generic courses. Fundamentally either you have to increase income, or you reduce quality or volume.”

Rachel Hewitt, chief executive of MillionPlus, the group for newer universities, said: “The existing tuition fee model coupled with high inflation has seen our members’ income fall year on year, meaning institutions have to make difficult choices and do more with less.

“It is impossible to imagine the government going out of its way to make Britain less inviting to investment in almost any other sector and yet every negative headline and policy reform that makes Britain less attractive to international students damages both the higher education sector and UK plc.”

Additionally Brexit cut the number of EU students in the UK in half and removed access to £800 million a year in grants for universities. 

It’s not just further education establishments that are facing existential financial challenges. 

An unprecedented number of state schools are at “a very serious risk that some will simply cease to be viable” based on current public spending plans. 

Geoff Barton, general secretary of the Association of School and College Leaders (ASCL) said: “Some schools, particularly small primary schools which are also hit by the impact of declining pupil numbers, may struggle to keep the doors open at all and could effectively become bankrupt.

“If this happens and some of these schools end up having to close, it really would be a very serious loss of the facilities upon which communities rely and something we haven’t seen happen before on any scale.

“All heads of chief executives can do if they haven’t got enough money is to make class sizes bigger, cut certain courses or make certain staff redundant. Those will initially be teaching assistants but they are the very people who work with the most vulnerable children so they will disproportionately be the ones most affected by this.”

This analysis is being supported by the Confederation of School Trusts (CST) which represents many of England’s state funded academy schools. Chief executive Leora Cruddas, said many schools were facing “extreme pressures on their budgets.”

She said: “We do not believe the current approach to school funding is sustainable, particularly for fixing school buildings.”

Their research found that less than half of school trust chief executives were confident about future funding and a fifth were concerned about their long-term finances. 

Several schools and universities look likely to break their banking covenants by the end of 2024 with many looking to restructure their borrowings to put them on a more sustainable footing. 

University managers and finance leaders face a financial iceberg made of several layers:-

  • Price/yield optimisation for overseas students
  • Identifying a realistic timetable to an ultimate covenant breach
  • Urgent talks with lenders and creditors agreeing to new financial terms
  • Identify legal liabilities including broader contract exposure that would be triggered by breaches
  • HMRC debts
  • Ongoing pension liabilities

With government policy and sector regulators reemphasising their “no bail out” stance, any support that is forthcoming is likely to be limited to temporary cash flow issues, not tackling the more fundamental lack of demand. 

If you run an educational establishment or business in the sector then you know better than anybody what a challenging present and future you’re facing. 

Which is why we offer a free initial consultation to help anyone who wants the best future for their business. There are always many variables to consider but our advisors will be happy to work through them with you to better understand what your end goals are and how to achieve them efficiently and effectively.

Get in touch with us at your earliest convenience and we can begin to help you work on the most important assignment you’ll probably undertake this year. Your own future.