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Academy trust reserves are expected to plummet over the next two years, with finances looking “bleak” despite a buoyant 2024-25, experts are warning.

Some 37 per cent of trusts reported in-year deficits in 2024-25, down from 60 per cent in 2023-24 - their strongest performance in three years.

And on average, most types of trust enjoyed a surplus in 2024-25 - the first time this has happened since 2021, representing an “impressive turnaround”, according to the Kreston UK Academies Benchmark Report 2026.

But the sector’s underlying financial position is fragile, the report warns.

Author Kevin Connor, head of academies at accountants Bishop Fleming, said: “Surpluses have been largely propped up by tighter budgeting and in-year funding that trusts were not expecting when they set their budgets, rather than by any easing of underlying financial pressures.

“Beneath the surface, challenges such as rising costs and continuing uncertainty are already weighing on confidence and limiting trusts’ ability to plan, invest and grow.”

One in four trusts held less than 5 per cent of income in reserves in 2024-25 - the level the Department for Education considers a sign of “financial vulnerability”. This proportion was down from 31 per cent the previous year.

In smaller trusts with fewer than 3,000 pupils, reserves averaged 11.5 per cent of income in 2024-25, down from 13 per cent the previous year. For larger trusts, reserves remained at similar levels (around 8 per cent).

But reserves are forecast to fall on average across almost all trust types.

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“This bleak outlook is particularly stark in secondary single-academy trusts (SATs), where reserves are expected to fall 43 per cent by 2026-27,” Kreston states.

In large multi-academy trusts - those with 7,500 or more pupils - reserves are predicted to fall by 11 per cent on average by 2026-27.

Only medium-sized trusts, defined as those with between 3,000 and 7,500 pupils, are expected to grow their reserves over the same period - by 15 per cent.

Leora Cruddas, chief executive of the Confederation of School Trusts, said: “Despite prudent financial management, trusts are increasingly worried about their reserve levels.

“Some will have little choice but to draw on them just to stand still as financial pressures increase.

“This is not a good position for the sector to be in and it highlights the urgent need for a reassessment of how education is funded.”

Reluctance to grow

The average MAT now comprises 14 schools, up from 11 in 2023-24, according to the report.

However, fewer MATs are now expecting to grow in the near future. In 2024-25, just 36 per cent of those surveyed by Kreston UK said they expected to expand over the next year - this was down from 61 per cent the previous year.

“Low confidence across the sector has dampened growth predictions and raised serious concerns about whether trusts have the funding and resources they would need to turn schools with complex challenges around,” Mr Connor said.

Benedicte Yue, chief financial officer at the River Learning Trust, said, however, that “growth isn’t a universal solution”.

“Any expansion requires a careful balance between the benefits of scale, cultural alignment and the risks of losing agility or becoming too remote from local communities,” she added.

Rising staff, SEND and estate costs

Almost all of the trusts surveyed (90 per cent) said the cost of teaching and support staff was their biggest financial concern, up from 81 per cent the previous year.

This has made budget planning increasingly difficult, according to the report, with staffing costs accounting for more than 75 per cent of income for all trust types.

“While the government continues to introduce targeted, small‑scale funding initiatives, there remains no firm commitment to increasing core revenue funding for schools,” the report states.

“This lack of certainty leaves trusts facing considerable difficulty in forecasting future income and forces them into short‑term decision‑making, limiting their ability to plan strategically.”

David Butler, executive author of the report and a partner at Bishop Fleming, said increased staffing costs, estate repairs and special educational needs and disabilities provision were placing pressure on budgets to “operate under conditions no private sector organisation would be expected to manage”.

“Greater clarity on expected funding in advance, such as a three-year forecast of government funding even on a per-pupil basis, would help,” he added.

Ms Yue said: “We need a fully resourced education system designed with all learners in mind and a funding model that proactively enables high-quality inclusive education for all.”

The DfE was approached for comment.

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