Rising staff costs and a growing demand for special educational needs provision is driving more academy trusts into deficit, a report has suggested.
Nearly three in five (58%) trusts were running an in-year deficit in 2024, according to an analysis of the financial data of more than 260 academy trusts in England which represent nearly 2,300 schools.
The report by Kreston UK, a network of accounting firms, said the percentage of academy trusts making in-year financial deficits has tripled since 2021 when it was just 19%.
Academy leaders said the top financial challenges they face are rising staff costs, increasing demand for special educational needs and disabilities (Send) provision, and falling pupil rolls.
The majority of academy trusts (81%) indicated that teaching and support staff costs are their biggest financial challenge, according to the report.
The report concluded that the financial performance is “getting worse” and a squeeze of finances is undermining academy trusts’ ability “to be sustainable”.
It added: “As the results continue to slide, it can also be seen that the free reserves of the sector are deteriorating – and this shift is happening quickly.”
David Butler, executive author of the report and a partner at accountancy firm Bishop Fleming, said: “Trust reserves are sliding in the wrong direction.
“With cost rises and financial pressures expected to continue, there’s a very real danger smaller trusts could run out of money completely.”
Benedicte Yue, chief financial officer of the River Learning Trust, said: “Many trusts have barely broken even and, with more children needing specialist support, Send funding simply doesn’t go far enough.
“The reality is urgent reform is needed to ensure that the money is distributed in a more effective and equitable way, allowing children and young people with Send to flourish.”
Kevin Connor, head of academies at Bishop Fleming, said: “Trusts are heading towards a financial cliff edge as they grapple with costs such as national insurance, the teachers’ pay rise and minimum wage increases which have not been fully covered by government funding.”
Leora Cruddas, chief executive of the Confederation of School Trusts (CST), said: “School trusts have seen a real tightening of their budgets in recent years and the gap between the funding received and real costs on the ground is unsustainable.
“We are calling on the Government to use the upcoming spending review to reset how schools are funded, ensuring day-to-day spending properly reflects costs, and that we invest in school buildings, to put right the estimated £13.8 billion backlog in repairs.
“Pupils and teachers are working hard to improve standards, and we need Government to meet them by providing the resources to do the job properly.”
A Department for Education (DfE) spokesperson said: “The Budget delivered on the Government’s commitment to put education back at the forefront of national life, protecting key education priorities including core funding for schools.
“We recognise the challenges schools are facing, but despite the challenging economic context, we are putting a further £2.3bn into schools’ budgets, with £1 billion for children and young people with high needs.
“We value the vital role academy trusts play in our school system and will work with them to drive high and rising standards for all children.”