Before you sign: how to check an independent school’s finances

Parents choosing an independent school now need to read its accounts as carefully as its exam results. Yesterday, Leweston School near Sherborne told families it would not reopen after half term, giving six days’ notice to more than 550 pupils.

Leweston was 135 years old, had good results and, less than a year earlier, had announced a new owner promising investment. But its published accounts told a harder story, and that story was there for anyone to read. Most of the warning signs below can be checked in an evening, for free.

1. How big is the cash cushion?

A school’s cash in the bank, measured against what it spends in a month, is the single best guide to how long it can survive a bad term. Two or three months is thin; under one month means the school depends on next term’s fees arriving on time.

At its last year end, July 2025, Leweston held £905k in cash against annual spending of £10.6m: about one month. A neighbouring school with similar income held £3.6m; a larger neighbouring school held £16m.

What to look for: “Cash at bank and in hand” on the balance sheet, divided by total expenditure over 12. Be wary if cash is falling year on year while loans are rising.

2. Is consolidation reshaping the local market?

When neighbouring schools merge, they gain scale, shared costs and a broader offer, and the small independent next door has to compete with all of it. Look at the map, not just the school.

Around Sherborne, neighbouring schools merged into a single group that reported £49m of charitable income in the year to June 2025: roughly five times Leweston’s. Another neighbouring school had already closed, and a third gave up charitable status after falling rolls. Leweston, at under £10m of income, was the small player in a market that was consolidating around it.

What to look for: Recent mergers, closures or takeovers within 20 miles. A school is very unlikely to give away any confidential discussions but you can ask where the school sees itself in five years.

3. Are fee discounts suddenly rising?

Every school discounts fees through bursaries, scholarships, sibling and staff reductions. A sudden jump in that discount, especially one not explained by a bursary drive, often means the school is buying pupils to fill places it cannot fill at full price.

Among the Dorset schools we compared, discounts ran at 10% to 15% of gross fees. Leweston was at the top end, 14.2% in 2024, against 10% at one neighbouring school, although it then fell to 12% the following year.

What to look for: The fees note in the accounts, usually “gross fees, less bursaries, scholarships and allowances”. Work out the discount as a share of gross fees for the last three years. A rise of more than two or three points in a year deserves a question.

4. Are staff costs rising while pupil numbers fall?

Staff are a school’s biggest cost, 60% to 64% of income in the Dorset schools we compared. That share is not a problem in itself; the warning sign is staff costs and headcount growing while income or pupil numbers shrink. It suggests a school that has not adjusted to fewer families, or cannot.

In Leweston’s last year, income fell 1.6% while staff costs rose 3.3% to £6.3m. Staff costs went from 61% of income to 64%. A larger neighbouring school also spends 64% of income on staff, but on £31m of income and with £16m in the bank to absorb a bad year.

What to look for: The staff costs note gives wages, national insurance, pensions and average numbers employed. Compare the trend with fee income and with the school’s own pupil numbers.

5. Rising debt and a change of owner

Two further signs often travel together.

• Borrowing is rising to fund losses. Leweston’s loans grew from £4.1m to £4.6m, secured on its land and buildings, while it ran deficits in four of its last six years.
• The school has been sold or “partnered”. A new owner can bring investment, but it also changes who decides whether the school stays open.

What to look for: The loans note and the “post balance sheet events” note, where sales and restructurings appear.

How to check, in one evening

1. Find the accounts. Most independent schools are charities. Search the school’s name on the Charity Commission register and open “Accounts and annual returns”. Schools run as companies also file at Companies House, under “Filing history”.
2. Check the date. Accounts are filed up to ten months after the year end, so the latest may be well over a year old. Note any late filing.
3. Read the trustees’ report first. It covers pupil numbers, the effect of VAT, strategy and risks in plain English.
4. Then work out four numbers for the last two or three years: cash ÷ monthly spending; net result as a share of income; discounts as a share of gross fees; staff costs as a share of income.

The bottom line

No single number predicts a closure, and plenty of sound schools run a deficit in a hard year. The danger is the combination: little cash, rising debt, costs growing as income falls, and a bigger competitor down the road. Leweston showed all of these in its last public accounts.

VAT on fees has made every school’s margins thinner. Parents committing to years of fees deserve the same scrutiny of a school’s finances that a school applies to theirs.

Figures are from Leweston’s accounts for the year to 31 July 2025 and competitors’ filed accounts, via the Charity Commission register and OpenCharities. Closure details: Dorset Life, Hits Radio Dorset.