Kreston UK Academies Benchmark Report 2025

February 18, 2025

Financial strain on academy trusts reaches critical level

The latest Kreston UK Academies Benchmark Report 2025 reveals a worsening financial outlook for academy trusts, with cost pressures continuing to outpace income for a second consecutive year.

The percentage of trusts reporting in-year financial deficits has tripled since 2021, rising from under 20% in 2020/21 to nearly 60% in 2023/24. This means around three in five academy trusts—responsible for more than 10,000 schools across England—are struggling to balance their budgets.

One of the biggest financial challenges facing trusts is the rising cost of teaching and support staff, cited by 81% of respondents. A key issue is that government funding for teachers’ pay has failed to keep pace with increasing costs. Demand for special educational needs and disabilities (SEND) provision is also adding to the financial strain, with significant budget deficits making it harder to provide essential support.

Smaller trusts are particularly vulnerable. In single academy trusts, staff costs have exceeded 75% of revenue income for the first time since 2022, impacting both primary and secondary schools.

Kevin Connor, head of academies at Bishop Fleming, warns that many trusts are heading towards a financial cliff edge. “Rising costs, including national insurance, teacher pay increases, and minimum wage adjustments, are not being fully covered by government funding. The number of pupils with Education, Health and Care Plans (EHCPs) has grown, but many trusts have had to absorb these costs themselves. Without urgent action, this could become an unsustainable financial burden on the sector.”

Diminishing reserves

Financial reserves, which act as a safety net for trusts, are rapidly depleting. More trusts have been forced to dip into their reserves, with 31% now holding less than 5% of income in reserves—a threshold considered a sign of financial vulnerability by the Education and Skills Funding Agency. This figure has increased from 17% in 2022.

While multi-academy trusts (MATs) have, on average, maintained surpluses, these have declined sharply. Smaller trusts saw average surpluses fall from £203,000 in 2022 to just £1,000 in 2023/24. Larger MATs reported an average surplus of £99,000, compared to £1.56 million the previous year. The report reveals an overall net deficit of £8 million in free reserves across trusts for 2023/24.

David Butler, executive author of the report and partner at Bishop Fleming, says this trend is concerning. “Trust reserves are heading in the wrong direction. With cost pressures continuing to mount, there’s a real risk that smaller trusts could run out of money entirely.”

Nick Cross, CEO of King’s Group Academies, adds, “Reserves should be used for unexpected emergencies or investment in improving education. But too many trusts are having to rely on them just to keep schools running, which is not sustainable.”

Growth plans put on hold

Financial constraints are also limiting the expansion of trusts. The removal of the Trust Capacity Fund, which provided financial support for trusts taking on additional schools, has slowed growth, with more than half of trusts expecting to scale back expansion in 2024/25.

Size plays a key role in financial resilience, with over 60% of large MATs confident in their financial stability, compared to less than 50% of smaller trusts.

David Butler notes, “Rising costs and political uncertainty have put the brakes on growth in the sector. Larger trusts tend to be in a stronger financial position due to economies of scale. Many trusts are now weighing the financial risks before deciding whether to expand.”

Hannah Dell, chief operating officer at Gloucestershire Learning Alliance, says financial challenges are making it harder for trusts to take on new schools. “Many schools looking to join a trust are already facing deficits. We’ve had to reassess our growth strategy to ensure new schools are financially viable before they join us.”

Lack of investment impacting school facilities

Funding constraints are also making it harder for trusts to invest in school buildings and infrastructure. To maximise funding from the Condition Improvement Fund (CIF), trusts must contribute 30% of project costs—something that is increasingly difficult with shrinking reserves.

Many trusts are now diverting funds from already limited reserves to cover essential maintenance and repairs. This issue is particularly acute for single academy trusts, where capital income has fallen by 90% to less than £50 per pupil since 2022.

Kevin Connor highlights the challenge this presents. “There’s simply no financial flexibility to invest in major capital projects such as refurbishing classrooms or upgrading facilities.”

Signs of resilience

Despite the financial strain, the report highlights some areas of resilience within the sector. Some trusts have successfully increased investment income by securing more favourable banking interest rates, with a few generating over £1 million in additional revenue in 2023/24.

Energy costs have also become less of a concern, with only 12% of trusts listing heating and electricity as a top financial pressure. This is due to falling energy prices and ongoing efforts to reduce carbon footprints.

Other key findings from the report include:

• Per-pupil costs increased by around 8% in 2023/24, down from 16% in 2022/23, indicating that inflation in the academy trust sector remains higher than in the wider economy.
• The average size of a multi-academy trust has grown, with the number of schools per MAT increasing by 11.4% year-on-year to just under 12.
• Governance structures are strengthening, with all MATs overseeing more than 7,500 pupils now employing governance professionals or equivalent roles, up from 94% in 2022/23.
• CEO salaries across medium and large MATs increased by 6% in 2024 after stagnating at around 2% in the previous year.
• Progress towards net zero continues, with carbon emissions per pupil reducing by an average of 13% in 2024 compared to the previous year. Further reductions could be achieved with additional financial support.

The Kreston UK Academies Benchmark Report is an annual financial survey of 260 academy trusts, representing almost 2,300 schools across England.

To download the full Kreston Academies Benchmark Report 2025, click here.