Consolidation in the UK independent education sector

VAT on school fees continues to reshape the independent sector, accelerating strategic consolidation and widening the gap between schools that can absorb the additional cost and those that can’t.

Domestic and international families are feeling the impact and most independent schools are considering major strategic decisions, including charitable collaborations, mergers, sales, acquisitions and, in some cases, closures.

Why was VAT introduced on independent school fees?

VAT on independent school fees reflects a government policy to broaden the tax base and align private education with other educational services. This change has introduced a structural cost into fee setting and cash flow, putting tax at the centre of strategic planning for independent schools.

For many schools, the question is no longer whether costs can be passed on, but how to rebalance provision, bursary support and scale to remain competitive and sustainable.

How quickly will VAT changes take effect?

The accelerated move to include VAT has forced independent schools to act quickly on budgeting, parental communications and contract reviews. Schools have been preparing fee schedules, amending their forecasts and, in some cases, delaying much-needed capital works as a result.

VAT has intensified short‑term liquidity pressures, particularly for schools already operating on the breadline and managing high payroll and pension costs.

What challenges does VAT create for independent schools and families?

VAT compounds existing challenges for independent schools: rising business rates, national insurance contributions, the national minimum wage and utility costs. Families face higher living costs, inflation and fewer fee discounts and bursaries, making parents more price sensitive.

A significant pressure point for some schools relates to pension schemes, with employer contributions to the Teachers’ Pension Scheme rising from 16.4% to 23.68% in September 2019 and again to 28.6% in April 2024, with further member contribution adjustments in April 2025.

Schools with narrower age ranges, single‑sex intake or heavy reliance on non‑academic income streams tend to have less flexibility. In 2019, 12.9% of pupils were boarders and paid, on average, almost double the fees of day pupils – exposing boarding‑heavy schools to greater price sensitivity.

Consolidation of the independent sector

Consolidation is no longer theoretical – it’s at the forefront of board discussions and will remain a hot topic for many years. Boards are seeking economies of scale, diversified pupil pipelines and shared central services as part of a group or cluster of schools.

Mergers and group ownership models offer purchasing power, curriculum diversity and professionalised back‑office operations that smaller stand‑alone schools, often preparatory, struggle to replicate.

There are pros and cons for each potential strategic decision. For some schools, a merger can preserve their ethos and local presence; for others, a sale to a for-profit group can provide capital investment and long‑term stability.

Are mergers, acquisitions and closures on the rise?

Boards are testing the market earlier, often on accelerated timetables, to gauge appetite for potential mergers or acquisitions before cash constraints narrow their options. Professional advisers are increasingly involved with exploring potential options for schools on a confidential basis, not evident from public information.

Where bridging finance isn’t available or a buyer or merging partner can’t be found in time, an orderly closure may be unavoidable – highlighting the need for early, proactive action.

How do economies of scale help independent schools survive?

Scale delivers savings and resilience in three ways: procurement, people and platforms. Larger school groups often negotiate better terms with suppliers, optimise staffing against timetable demand and spread investment in digital learning and safeguarding systems across more pupils.

Scale also supports bursary strategies that cushion fee rises for the most price‑sensitive families, helping to stabilise enrolment through policy changes like VAT. Rising employer pension contributions make shared services and purchasing power even more valuable.

What does VAT mean for international families?

International families remain critical to sustainability. Visa policy, exchange rates and perceived value influence decisions and VAT has an additional impact on these factors – sometimes prompting families to consider overseas campuses of UK brands.

The outbound strategy is notable: more UK schools are developing or expanding overseas schools to diversify revenue, protect brand and meet families where they are, reducing exposure to domestic cost pressures. We’ve seen this first-hand and are increasingly advising schools on their international strategy.

Domestic families are also re-evaluating their positions, with some locking in places early, others switching between day and boarding or considering state school alternatives. Independent schools will continue to refine bursaries and payment plans to maintain accessibility where possible.

What does the data show about demand?

Sector surveys, including ISBA polling, track how fees and enrolment respond to VAT. Schools and their advisers are tracking how far school fees have moved relative to the VAT uplift and whether discounts, bursaries or staged increases have softened the impact.

As a baseline, the ISC Census 2019 recorded 55,280 international pupils, around half with parents abroad – a marker of exposure to cross‑border demand. Shifts in day versus boarding and domestic versus international mix are key indicators of responsiveness to school fee fluctuations and long‑term demand.

What is the outlook for independent schools?

VAT has shaken up the independent sector. Independent schools that demonstrate value for money, manage cost and access scale – organically or through combination – will adapt and thrive.

Those without a viable financial plan will face limited options. The most resilient models will pair disciplined financial management with strategic partnerships: sharing services, exploring mergers or collaborations early and, where appropriate, joining group structures or international networks.

For families, change is inevitable. Fee structures, bursary policies and school sites will evolve, yet the long‑term goal remains the same: a diverse, high‑quality independent school sector, reshaped but resilient, with clearer pathways for sustainability on both domestic and international fronts.