EducationInvestor July/August 2010 vol 2 • no 6
news and views on the business of learning
The September revolution Can Gove’s academy freedoms save England’s schools?
Forced shutdown Who mourns for Becta? Distance is still distant Universities a long way from remote learning Strength in numbers Pearson wades into the skills market
infrastructure
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ICT
• outsourcing • academies • schools • colleges • nurseries • universities • policy
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up front
Elementary, my dear Gove Education policy-making needs more evidence – and less ideology
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ew people think of themselves as medical experts. Few can run a railway. Few understand the complexity of postneo-classical endogenous growth theory. So when it comes to health, or transport, or the economy, we trust that our politicians will talk to the experts before settling on a policy. When it comes to education, though, everyone went to school – and everyone has an opinion. When a new minister arrives at Great Smith Street, they generally know what they want to do. They also generally know that anyone who opposes their chosen path is little more than a vested interest or an ideologue. Thus it was that when Ed Balls became schools secretary he was quite certain academies were destabilising the local school economy. They needed reining in, and more monitoring from Whitehall. His successor Michael Gove is equally sure that schools should teach proper history, with kings and queens and the Empire, rather than this rubbish about source analysis and Nazis. And what schools really need is freedom from the dead hand of local authorities (plus, of course, more monitoring from Whitehall). Nobody on either side of the political divide feels the need to provide anything as trivial as evidence for their policy preferences. This, the CfBT Education Trust recently concluded, is just a tiny bit silly. In a recent report, the consultancy argued that too much policy had been made on the basis that “something must be done”, rather than because ministers actually knew what that something should be. It proposed the establishment of an educational equivalent of the National Institute for Health and Clinical Excellence (Nice), the agency that provides the NHS with evidence on the cost and value of different treatments. And it called for the creation of a “chief education officer”, an unbiased expert who could provide a voice of reason when debate turns into an ideological shouting match. There’s a lot of sense to this. A chief education officer would perhaps be able to tell us whether exams really had become easier. An education Nice could examine the evidence to find out whether Swedish free schools improved or destabilised their competitor schools. Then we might have half a chance of knowing whether ministers were right, or just certain. Sadly, though, things seem to be moving in the exact opposite direction. Perhaps the most widely respected part of the Becta ICT agency, among both schools and suppliers, was its research function: the evidence it collected on the best ways to use technology in schools. This has been unceremoniously scrapped. The government has no objection to research, say officials; they just don’t see why they should fund it. Perhaps they’re right. Perhaps ministers really do know best, and have no need of further expertise. After all, we all went to school, didn’t we? n
In this issue
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he response, Gove said, was “overwhelming”. In just one week, more than 1,000 schools had registered their interest in becoming academies; a few weeks after that, the numbers were more than 1,600. If all these were to follow through, it would be nothing less than a revolution. Actually, though, those numbers aren’t quite as impressive as they at first appear. And all Gove’s talk of revolution disguises a worrying number of unanswered questions (page 24). Elsewhere, we look at the demise of Becta (page 28), and the growing interest in distance learning among universities (page 36). We take a EducationInvestor look at the training and skills sector, in the light of Pearson’s decision to buy up Investor Publishing Ltd Melorio (page 32). And we talk to Philip Bujak about his work as chief executive of 6th Floor, Greener House the Montessori St. Nicholas Charity (page 40). 66-68 Haymarket Plus all the usual news, views and analysis, starting on page 6. n PEFC/16-33-447 London, SW1Y 4RF EducationInvestor •July/August 2010
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front up
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contents 6th Floor, Greener House 66-68 Haymarket London SW1Y 4RF Vol. 2 No. 6 July/August 2010 Publisher Harry Hyman Managing director/Editor-in-chief Alex Beaumont 020 7451 7069 alex.beaumont@educationinvestor.co.uk Editor Jonn Elledge 020 7451 7065 jonn.elledge@investorpublishing.co.uk Production/website manager Jeremy Harvey jeremy.harvey@educationinvestor.co.uk Staff writer Sara Utecht 020 7451 7066 sara.utecht@investorpublishing.co.uk Editorial assistant Sacha Blackburn 020 7451 7067 sacha.blackburn@investorpublishing.co.uk Contributing editor Vernon Baxter 020 7104 2001 vernon.baxter@investorpublishing.co.uk Commercial manager Matt Purnell 020 7451 7058 matt.purnell@educationinvestor.co.uk Subscriptions manager Richard Freckleton 020 7451 7064 richard.freckleton@educationinvestor.co.uk EducationInvestor is published ten times a year by Investor Publishing Ltd, Griffin House, West Street, Woking GU21 6BS. The content of Educationnvestor is for your general information and use and is not intended to address your particular requirements. In particular the content does not constitute, nor does it purport or intend to constitute any form of advice, recommendation, representation, endorsement, promotion or arrangement by Investor Publishing Ltd and is not intended to be relied upon by readers in making (or refraining from making) any specific investment or other decisions. Appropriate independent advice should be obtained before making any such decision. Any agreement made between you and any third party named or otherwise referred to in the EducationInvestor publication is at your sole risk and responsibility. Any information published in EducationInvestor may have ceased to be current by the time you read it. Those responsible for the publication of EducationInvestor and/or the authors of articles contained therein may on occasion have an interest in the shares or options, futures or contracts for differences relating to shares in companies referred to in the publication. Such interests are disclosed on an issue by issue basis to the extent required under the Financial Services and Markets Act 2000 (Financial Promotions) Order 2001. EducationInvestor is a trademark of Investor Publishing Ltd. © Investor Publishing Ltd 2010
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News
Focus
Change of plans over free school funding
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BSF decision expected shortly
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No promises on future schools spending
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Schools to become academies without consultation
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Government unveils further education measures
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Willetts hints at radical university reform
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ICT supplier frameworks to continue, despite Becta’s demise
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Warning on tuition fee hike 12 Failing schools could 13 become vocational colleges Rows ahead over charitable 14 status Free childcare entitlement to continue
The fat years are over No more years of plenty for schools
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When freedom fails 17 The growing list of failing academies raises questions about the new bill Free thinking 18 But it’ll take investment and regulatory reform, too, to patch up the FE sector Trouble at the top 19 The loss of two chief executives in three months is symptomatic of the problems facing Havelock Europa Laws of the playground 20 Trowers & Hamlins lawyers Amardeep Gill and Lucy Doran look at what’s in the Academies Bill Future proof 22 The government should be more radical in its approach to education reform, says Futurelab’s Dan Sutch
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up front
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Page 24
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Features
Finance Finance
The September revolution Can academy status rescue England’s schools?
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Education index of listed companies
Forced shutdown Scrapping Becta looked like an easy cut. But few seem happy about it
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BSF league tables 47 The biggest players in the school building programme
Strength in numbers Could Pearson’s takeover of Melorio herald a wave of consolidation in the training sector
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Deals The latest transactions in the education sector
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Distance is still distant Universities are keen to tap the profitable distance learning market. But it won’t be easy
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Results The month’s company announcements
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The Montessori story Philip Bujak tells EducationInvestor why his charity is at a tipping point
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OK computer The planned expansion of the academies programme should mean good times for ICT firm European Electronique
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46
Rounding off
EducationInvestor • July/August 2010
Diary On the job
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Companies index
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news
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Change of plans over free school funding New free schools will be met by raiding a fund intended to upgrade classroom technology, officials have confirmed. The Department for Education says that it will “reallocate” money from the Harnessing Technology Fund, which schools can use to upgrade their ICT network infrastructure or to invest in products such as whiteboards. The pot is worth £50 million this year. The fund will be used to pay for the start-up costs of the new parent- or teacher-led schools. EducationInvestor understands that more than a dozen applicants have put in bids for the new funding. Many will not require a new building: some involve taking over existing independent schools or saving a primary school slated for closure. Schools secretary Michael Gove also promised to rewrite the planning laws, to “make it easier for buildings which are currently being used as,
or classed as, residential or commercial to be converted to school use.” This should cut schools’ capital costs, by enabling them to lease a wider range of buildings. The first of the new free schools are expected to open in September 2011. Gove had in the past suggested that the new schools would be funded by taking 15% from the “extremely wasteful
Building Schools for the Future programme”. Such a move would have provided a fund worth hundreds of millions of pounds a year. But the plan ran into opposition from the Treasury, which is understood to have blocked the move out of fears that this underspend may never materialise. Further funding for 201112, expected to stand at £120
million, is likely to be subject to negotiations between the school ministers and the Treasury. Gove is said to have dismissed the idea of raiding an £85 million fund intended to provide free school meals, following Labour allegations that this would “take money from the poor”. More than 750 groups have so far applied to start free schools, of which half are teachers.
BSF decision expected shortly As EducationInvestor was going to press, the government was still resisting calls to conclude its review of the Building Schools for the Future programme. A statement on the future of the programme looked imminent, after the leader of the Commons, Sir George Young, said that one would be made in the week beginning 28 June. But the Department for Education said that such a statement was “likely, but not 6
certain”. And government insiders stressed that they would not be rushed into making decisions about the best way to cut the cost of a such a complex programme. Schools secretary Mcihael Gove has in the past described BSF as “inefficient” and “wasteful”. The new government hopes to continue the programme but to reduce its cost by as much as 40%, by replacing bespoke architecture with more standardised ‘offthe-peg’ designs.
Funding for schemes already beyond a certain stage of the procurement process – likely to be the appointment of a preferred bidder – will be safe. But those at an earlier stage of the process look set to be cancelled, and individual schools instead allowed to procure new buildings from a pre-approved list of contractors. In recent weeks, schools secretary Michael Gove has repeatedly ducked questions on the future of BSF, and declined
to even set a date for the conclusion of the review. Meanwhile, the Institute for Fiscal Studies, an independent think tank, warned that the coalition government’s plans for free schools could necessitate deeper than expected cuts in the BSF budget. In his budget Chancellor George Osborne pledged to maintain capital spending at the rates currently planned. But he made no comment on how that money would be allocated. EducationInvestor • July/August 2010
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No promises on future schools spending The schools department budget is facing cuts of up to 25% – and officials have declined to guarantee to protect schools spending after this financial year. In his budget speech on 22 June, Chancellor George Osborne re-iterated his promise to protect health and international development spending. “Once these are taken into account, the Budget figures imply that other departments will face an average real cut of around 25% over four years,” he said. But Osborne hinted that schools may be treated less harshly than other departments. “Not all departments will receive the same settlement,” he said. “I recognise, for example, the particular pressures on our education system and on defence.” Savings in the welfare budget could help “relieve the pressure
on other departments”, he added. Schools secretary Michael Gove has pledged to maintain spending on schools, colleges and SureStart centres in this financial year. But government insiders made clear that no such promise could be made for future years, and that decisions would be dependent on the outcome of this October’s Comprehensive Spending Review. The schools department budget for 2008-9, the most recent figures available, show that around 82% of departmental spending went to schools - making it impossible to make significant savings without hitting school budgets. But the government believes much of this is spent on bureaucracy or otherwise wasted. The government has already cut £670 million from the education budget, which has doubled since 2005.
In figures: the cuts £50.9 billion: predicted Department for Education spending for 2011-11 £670 million: amount cut from deparment budget on 24 May (1.2% of total budget) £80 million: amount saved from shrinking or axing quangos £311 million: amount cut from council schools budget £59.9 million: amount cut from 14-19 education budget £19.2 billion: predicated Business, Innovation and Skills spending for 2010-11 £836 million: amount cut from department budget on 24 May (3.9% of total budget) £200 million: amount cut from university funding this year 25%: potential cut from the departmental budgets over next five years
EducationInvestor • July/August 2010
Schools to become academies without consultation Schools will not be required to consult with parents or staff before converting to academies, EducationInvestor understands. Plans for schools to become academies as soon as this September have led some to warn that there would not be time for adequate consultation. And the AntiAcademies Alliance, a pressure group backed by the leading teaching unions, has threatened to block such moves by demanding judicial review of any decision that is made without discussions with parents and staff. But both political and civil service sources told EducationInvestor that there was no statutory requirement for governing bodies to hold any such consultation. “They can demand as many judicial reviews as they like, but it’s not going to work,” said one. Sources stressed, however, that schools should nonetheless discuss their plans with both teachers and parents. EducationInvestor also understands that the government has backed away from plans for hundreds of schools to become academies this autumn. Although a few may switch that soon, the complexity of the change process means that the government has accepted that many schools are unlikely
to make the jump before September 2011. On 25 June the government published a list of around 1,600 schools that had expressed an interest in becoming academies. Those that are ranked ‘outstanding’ by Ofsted – around 900 of them – will be “fast-tracked”. Academy status gives schools more freedom over their curriculum, building, opening times and staff pay, and means they are directly answerable to the education secretary rather than the local authority. It will also give them control of a greater proportion of their budget. But bodies including the Catholic Education Service, the National Governors Association (NGA) and the National Grammar Schools Association have warned schools against rushing into academy status before more information is available. Oona Standard, chief executive of the Catholic Education Service, warned heads that they would be “very unwise” to apply for academy status, which would mean “an uncertain future and a higher level of risk.” And the NGA pointed out that if governors decide to change their mind at a later date they would not be able to opt back into local authority control. 7
news
VT group renews Surrey public private partnership agreement VT Group has renewed its public private partnership agreement to provide education services to Surrey County Council. The contract will see VT Four S continue to provide support services for over 400 schools across the county for an extra four years from April 2011. Marcus Watson, managing director of VT Group’s education business stream, credited the combination of “VT’s specialist education support expertise [and] Surrey’s highly qualified and experienced education professionals” for improving the county’s schools’ performance. “The partnership has also exported its capabilities to other local education authorities,” he added, “earning revenue that has benefited Surrey schools by providing additional income for investment. By applying its specialist skills, the private sector can bring considerable benefits to the education system and VT looks forward to developing this capability in the future.” Since 2003 VT Four S has provided Surrey schools with back office services, curriculum advice, technical support and facilities management services. Surrey County Council holds a 19.9% stake in the partnership. 8
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Government unveils further education measures Further education minister John Hayes has unveiled plans to boost spending on college buildings and apprenticeship schemes. The minister announced plans to “refocus” the £200 million Train to Gain budget. Of this,£ 150 million will be invested in apprenticeships and £50 million used for “renewal grants” for up to 150 colleges. Colleges will be expected to raise private investment, to boost the size of the projects available. Hayes also announced plans to allow colleges to move money between adult learner and employer budgets, to release funds to spend on their own priorities; and to free colleges rated outstanding from Ofsted inspections. “These are all measures intended to increase the power of colleges to determine how best to manage their affairs, in the light of local training needs,” Hayes said. “I want not just to encourage them to listen to what local business have to say, but to
be free to act, to be free to respond, to be free to use that information with the minimum of fuss, delay and administrative cost.” The proposals have been welcomed by colleges and by business groups, which believe
that rules and red tape have often limited FE providers’ abilities to respond to business needs. But the measures provoked criticism from Labour spokesmen, who accused the government of slashing the skills budget.
US buyout for EducationCity Archipelago Learning, a Nasdaq-listed online education company, has acquired the UK’s EducationCity in an $87 million (£59 million) deal. Tim McEwan, Archipelago’s chief executive, said that the e-learning company offered “highly complementary products that fit perfectly with our strategy of
delivering high-impact low cost content-rich online tools to improve student learning.” He said that EducationCity helps students learn basic skills and concepts, while Archipelago’s own product, Study Island helps assess and use this knowledge. Together, he said, the two products would “provide a powerful comprehensive teaching and reinforcement solution to
maximizing student learning and teacher performance.” EducationCity will continue to operate as an independent business units from its offices in Rutland and Illinois. Archipelago said that it expects to firm to add $8.5 million to $9.5 million in invoiced sales and $2.0 million to $3.0 million in adjusted EBITDA in fiscal 2010. EducationInvestor • July/August 2010
news
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Willetts hints at radical university reform Universities should offer more distance learning courses, David Willetts has said. The universities minister told the BBC that allowing students to study for degrees by attending lectures at their local college would help make the higher education finance system more sustainable and meet rising demand for degrees. Such a reform “means that you don’t have the costs of living away from home but you do get a prestigious degree and that’s actually how we spread our access to higher education,” he said. Willetts also hinted that the government would back higher tuition fees. The current cost of higher education was a “burden on the taxpayer than had to be tackled,” he told the Guardian. And he dismissed concerns about the increased debt burden
on students, arguing that: “The so-called debt [students] have is more like an obligation to pay higher income tax.” But he claimed he was not prejudging the outcome of the Browne review of university finance, telling the BBC that he was not “assuming that fees should rise”. Meanwhile, the CBI has warned that weaker universities may have to close. Richard Lambert, the business lobby group’s director-general, said that some institutions were in “serious financial difficulty”, and that bailing them out would divert funding from successful ones. “That would mean the already reduced quantities of jam having to be spread even more thinly across the system, making our best universities pay the price for the incompetence of the worst,” he said.
BPP report calls for bigger private university role Universities and science minister David Willetts is believed to be in possession of a report looking at how private firms can expand their role in the higher education sector. Since taking office Willetts has come under increasing pressure from private sector companies to bring in changes that would enable them to compete on an equal footing with traditional universities. Suggestions have included allowing the private sector better access to the student loan system; giving more providers degree awarding powers; and making it easier for them to call themselves universities. Now the Times Higher EducationInvestor • July/August 2010
Education Supplement reports that Willets is in possession of a report looking at barriers to such changes. The report, written by law firm Eversheds and commissioned by private education provider BPP, also looks at what changes to the law would be needed to allow the private sector to take over existing universities. Many in the private sector are unhappy that Willets has not been more explicit about his plans for opening up the sector, and have called for guidance on their future role. BPP became the first fully commercial organisation in the UK to be given degree awarding powers back in 2007.
David Willetts, universities and science minister
Business warns against university cuts Senior business leaders have urged whitehall to be cautious over university funding cuts. In a letter to the Daily Telegraph senior executives from companies including Shell, Centrica, GlaxoSmithKline Pharmaceuticals and Network Rail said that universities made a vital contribution to the long term prosperity of the British economy. The government is planning to cut £650 million from England’s higher education budget. But the business leaders highlighted the importance of science, innovation and knowledge to future economic growth, and called for the government to continue to support innovation. The letter said: “Businesses
look to the UK’s excellent universities or graduate talent, research and innovation. Business helps to fund higher education, which in turn makes the UK a good place to invest.” They added: “We need a credible plan for restoring fiscal balance but urge the government to be cautious over those elements of public spending that are vital to the future growth and prosperity of our economy – science, innovation and knowledge.” The letter argued that this was the approach taken in America and other countries, and sounded a warning to the government that the UK could not afford to be left behind in international league tables. 9
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I want to go to a top class university.
How do we fix this? The Access Project helps bright children win places at top universities. Find out more at www.theaccessproject.org.uk
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1 in 10 UK school leavers wins a place at a Russell Group university. These students are joined by only 1 in every 100 students on Free School Meals.
THE ACCESS PROJECT
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ICT supplier frameworks to continue, despite Becta’s demise The government is still procuring a new framework agreement for firms supplying ICT to schools – despite scrapping the agency responsible for it. And EducationInvestor understands that ministers want Becta’s procurement functions to continue inhouse at the Department for Education (DfE), so as to retain the cost benefits it offers to schools. The agency’s research function is to be scrapped, however. Becta began procurement of a new ICT services framework by issuing a procurement notice back in March. The deadline for suppliers to complete their tender documents was 29 June. But on 24 May schools secretary Michael Gove announced that Becta was to close – leaving suppliers
in the dark as to whether to continue completing the tender documents. Now, however, officials have confirmed that the framework will still go ahead. A DfE spokesman told EducationInvestor: “The Department of Education has confirmed that Becta will continue to establish the ICT Services – Framework One and will proceed with the process through to award of framework contracts.” Becta director Dr Stephen Lucey said he was “delighted” by the news. “Our framework will make the whole process of procuring ICT much simpler and quicker and will give them access to a broad range of approved suppliers. “It will provide value for money and will help reduce their procurement costs. It will also help drive greater reliability of their ICT systems,
Havelock loses second CEO in three months The interim chief executive of Scottish education and retail furniture company Havelock Europa is to step down. David Hurcomb will leave the company in September to become chief executive of building services firm NG Bailey. Hurcomb has been in post only since the beginning of April. He took over following the resignation of Hew Balfour, who’d held the post for 20 years but left after the firm issued a series of profit warnings. In a statement, the firm EducationInvestor • July/August 2010
said that the search for a new permanent CEO was “well under way”. Education remains the strongest part of Havelock’s business, and the firm has struggled recently with the collapse in revenues for its retail interiors business. Havelock made an underlying pre-tax loss of £2 million last year, and announced it would not pay a dividend for either 2009 or 2010. At its recent AGM, chair Malcolm Gourlay announced a 12-month cost-cutting programme.
generate efficiencies and reduce bureaucracy.” In a statement outlining £6.2 billion of cuts to take place in the current financial year, the Treasury said that the closing Becta would save £10 million this financial year and £65 million a year from 2011. Becta spokesmen retorted that the agency saved more money than it cost to run. The DfE spokesman said that Becta’s “core functions relating to policy and ICT procurement” will return to the DfE, but that no more details were currently available. Becta’s research role looks set to be abandoned, however. “Clearly, research into the impact of ICT in education will continue,” said the spokesman. “But we are not expecting a formal transfer of Becta functions to another
agency.” The new ICT services framework consists of two “lots”. The first focuses on infrastructure and mobile connectivity services; the other focuses on “ICT service integrators”. The framework is optional, and will be available for schools and college to use from the end of October.
Uniform firms join forces School uniform supplier Blue Max has bought rival schoolwear firm the Banner Group. The deal, the value of which was not disclosed, will create the UK’s largest school uniform supplier with a turnover of over £25 million. And it will allow Blue Max, which previously supplied clothing to logo printers, the ability to supply directly to independent retailers. Blue Max’s chief executive, David Fawcus, commented: “Banner is exactly the right fit for our business. We have been looking to move into
the more specialised bespoke sector and our financial strength has enabled us to do this through acquisition.” The school uniform sector is growing fast and is currently estimated to be worth £450 million a year in sales. And Nigel Plenderleith, managing director of Blue Max, predicted that the sector would boom under the new government. Plenderleith noted the emphasis the last Conservative government placed on school uniforms, and predicted: “I think there will be an increased emphasis on uniforms, particularly for academies.” 11
news
Ofsted boss tops education rich-list Six civil servants working in the education sector are among a list of public sector “fat cats”, released by the Cabinet Office. Chief inspector of schools Christine Gilbert is the most highly paid civil servant in the sector, earning between £195,000 and £200,000 a year. Next on the list is David Bell, permanent secretary in the Department for Education, who earns £180,000-184,000. The list also includes four other directors from Ofsted, all of whom earn from £150,000 to £170,000.
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Warning on tuition fee hike Doubling tuition fees could halve demand for university places, a survey has found. Tuition fees in England are currently capped at £3,225. But Lord Browne is due to complete an independent review into the funding this autumn, which is widely expected to pave the way for a hike in fees. The survey, conducted by Ipsos Mori and commissioned by the Sutton Trust, found that if fees were increased to £7,000, less than half (45%) of students would continue with their education.
And if the fee cap were raised to £10,000 only one in four would continue to university. If fees were set at £5,000, however, a majority (68%) of teenagers would still hope to attend university. Sir Peter Lampl, chairman of the Sutton Trust, said: “The findings are a warning that significantly higher fees may affect university participation. “If Lord Browne’s review concludes that higher fees are necessary there is a significant task ahead in ensuring that all
young people, and particularly those from non-privileged homes, are equipped with the information they need to make well informed decisions.” A government spokesman said: “All these matters are being investigated by John Browne as part of his review of student finance. “The coalition programme makes it clear that the criteria for any reform include increasing social mobility and attracting a higher proportion of students from disadvantaged backgrounds.”
University leader predicts private sector growth Traditional universities will be unable to meet the huge demand for places this year, prompting the growth in private institutions, a university leader has predicted. Paul Marshall, executive director of the 1994 Group of universities, said that the swell of demand could be dealt with through an 12
expansion of online courses, or in the number of overseas universities opening campuses in the UK. But he also said he expects to see more private providers being encouraged to enter the market place. In a speech in London, Marshall said that the recent election “will bring in five years which will be the
most exciting, dramatic and completely terrifying period that the sector has known for at least 30 years.” “Co-creation of knowledge with businesses and charities, rather than an ‘ivory tower’ mentality, will become the norm,” he said. “It is wrong to expect the taxpayer and business to invest without a clear return on that
investment.” Marshall predicted that the government would raise the status of further education, and encourage private providers to enter the market place. The government also hoped to “genuinely provide access to a form of higher education for all, literally at the end of every street,” he said. EducationInvestor • July/August 2010
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Failing schools could become vocational colleges Twenty failing schools could be converted into new technical colleges for 14-19 year olds, Kenneth Baker has proposed. The Independent newspaper reports that the former education secretary unveiled the proposals at a meeting with schools ministers in June. He is reported to have told schools secretary Michael Gove: “You have 200 failing (secondary) schools. Give me 20 by the end of the year and we will close them and open them up as University Technical Colleges.”
Lord Baker has proposed creating up to 100 new University Technical Colleges (UTCs), which would combine academic and vocational education. Each UTC would be sponsored by a university. Before the election, both Conservative and Labour parties agreed in principle to the plans, with the Tories committing to opening 12. If Gove were to agree to these new plans, it would bring the total number of UTCs in the pipeline to 32. The first two UTCs are due to open this September.
Kenneth Baker, former education secretary
Harrods enters higher education market
Ofsted chair to join GEMS
Employees at iconic London department store Harrods employees will soon be able to bolster their CVs with a BA honours degree in sales. The luxury Kensington store will offer the degree in association with Angela Ruskin University. The two year course will teach students the psychology of selling alongside business modules. The qualification will be open to sales employees that have at least two years relevant work experience. Students will study for their degree while continuing to work at Harrods. Egyptian businessman Muhamed al Fayed recently sold Harrods to the Qatari royal family in a deal worth £1.5 billion.
The chair of Ofsted has resigned, to take up a post with private schools group GEMS. Zenna Atkins, who has chaired the schools regulator since 2006, will become chief executive of GEMS Education for the UK, Europe and Africa. She will take up her new post on 1 September. In a statement, Atkins also hinted that GEMS could become involved in providing the coalition government’s new “free schools.” “I am now ready for a new challenge and the free schools agenda, in particular, is one that really excites me,” she said. “I feel that there is now an opportunity to do something genuinely different on the front line of education and bring a 21st Century learning environment into the UK.” Ofsted chief executive Christine Gilbert will also resign next year.
EducationInvestor • July/August 2010
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News in brief The Equitix consortium n has reached financial close on Cambridgeshire’s £110 million Building Schools for the Future Programme. The consortium’s construction partner, house builder Galliford Try, will now undertake 40% of Equitix’s construction work in the first phase of the programme, including the £26 million redevelopment of one of Cambridgeshire’s community colleges. Galliford Try is also a member of the consortium rebuilding Haringey’s schools in north London. The government has n announced plans to abolish the Qualifications and Curriculum Development Agency (QCDA). In a letter to the quango’s chair, Christopher Trinick, schools secretary Michael Gove wrote that some functions, such as National Curriculum Tests, would continue to be needed after closure. But “in other areas – notably qualifications development and the curriculum – I would want QCDA to withdraw as soon and as far as is practicable.” The Department for Education is hoping to bring curriculum development functions inhouse. The government has also scrapped the General Teaching Council, the body which registers and regulates teachers. And it is scrapping the 17 Diploma Development Partnerships, the partnerships between employers and educationalists responsible for designing the curriculum of the new diplomas.
Oldham council has n selected Balfour Beatty Education as preferred bidder for its £170 million Building Schools for the Future programme. Balfour saw off competition from Equity Solutions. The construction giant will now undertake public and stakeholder consultations on its plans for one new and one refurbished school for the borough. The firm was also saw off competition from Vinci to be named winner of a £200 million BSF deal in Derby. The scheme is to build 10 schools and a pupil referral unit. An Interserve-led n consortium has been confirmed as St Helens Council’s choice for its £150 million BSF scheme. The consortium beat Vinci to win the scheme, which will see eight schools being built in the area. Swedish private equity n firm EQT has acquired the country’s largest schools company Academedia, in a deal that values the company at SKr 2.5 billion (£213 million). EQT, the private equity arm of the Wallenberg family, said last week that its offer of SKr205 per share had been accepted by 72.4% of the Stockholm-listed company’s shareholders. The deal means a victory for EQT over US private equity group Providence, which sparked a bidding war when it offered SKr170 for the company back in April.
Read the news as it breaks at www.educationinvestor.co.uk 14
Rows ahead over charitable status The government is planning to make it easier for private schools to justify their charitable status. According to the Sunday Times, officials are in talks with the Charity Commission about giving independent schools greater credit for community work such as sharing facilities with local state schools. This would allow them to retain their charitable status even if they do not offer as many bursaries as expected to poorer students. Private schools have to prove they provide a “public benefit” to qualify for tax breaks. But two schools failed Charity Commission inspections last year because of their lack of assisted places. The decision raised fears that struggling schools that can’t afford bursaries could be stripped of their charitable status, potentially forcing them to close. Allowing schools to find less expensive ways of providing “public benefits” would make this outcome less likely. Other options open to struggling schools include joining the state sector as academies; or becoming “exempt charities”, which are not subject to Charity commission rules. This latter option is the one expected to be taken up by the new “free schools”. Meanwhile, the favourite to win the Labour leadership has called for private schools to have their charitable status withdrawn altogether, as a way of cutting the deficit. In an email to his supporters,
former foreign secretary David Miliband former foreign secretary David Miliband argued that the poorest in society should not be forced to pay for the “recklessness” of the richest. “For instance, the idea of taking money from the poorest children by scrapping the child trust fund, even from kids in care, while continuing to subsidise private schools to the tune of £100 million a year is just wrong,” he wrote. “That’s half a billion pounds over the lifetime of a parliament. “We should be looking at savings like that rather than cutting jobs and hospitals,” he added. More than 1,000 independent schools are registered charities. The tax benefits this means can be worth as much as 2-3% of a school’s income. EducationInvestor • July/August 2010
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Free childcare entitlement to continue Education secretary Michael Gove has confirmed that the entitlement to free childcare for three- and four-yearolds will continue, and will be increased to 15 hours per week. Responding to a letter from former children’s secretary Ed Balls, Gove confirmed that childcare would also be extended to 20,000 of the country’s most disadvantaged two-year-olds. “I am sympathetic to the arguments for extending eligibility,” Gove said, “though surprised that a decision to do so was taken before any evidence on the impact on attainment could be collected from pilots.” Education minister Sarah Teather said: “Parents should be able to choose when and how they use their free
childcare to help fit in with their daily lives. We will be working closely with local authorities and nursery providers to help them promote greater choice for families.” But the moves have provoked a mixed response from the nursery sector. Purnima Taunuku chief executive of the National Day Nurseries Association said that while the extension of the free entitlement scheme will be welcomed by parents, “it is not free to a large proportion of nurseries and is a direct threat to their continued survival. “More than 60% of providers report that funding for free sessions does not cover their costs and the new government must look at how adequate funds can reach the
frontline,” she added. The education secretary also gave assurances that, despite the government’s programme of funding cuts, frontline spending on schools and children’s centres would be protected. Educational maintenance allowances, too, will be paid in full to students this year, and schools will still receive money to continue with the every child literacy and
numeracy programmes. He did confirm that Labour’s plan to expand free school meal pilots would be scrapped, however. Other cuts will include £25 million from the extended schools budget; £13.2 million will be cut from the budget which supported diplomas, and £8 million from cancelling the last round of grants for the youth sector development fund.
Recommend a friend Introduce a friend or colleague to EducationInvestor and, if they subscribe, we’ll send you a bottle of champagne to say ‘thank you’ For more information, contact Richard Freckleton on 020 7451 7064, or email richard.freckleton@educationinvestor.co.uk
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focus Schools
The fat years are over No more years of plenty for schools
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nce upon a time, that nice Mr Cameron made a promise to the people of Britain. His party, he said, was looking forward to taking an axe to the national budget, gleefully hacking away waste wherever it found it. But however slash happy it got, there were certain things that would be off limits. There were to be no cuts made to health, or schools, or international development. That, sadly, turned out to be just a fairy tale. For while the health and international development budgets are still safely ringfenced, the promise to protect schools spending was dropped long, long ago. And while ministers are proudly trumpeting the fact that they’ve protected schools (and SureStart centres, and courses for 16-19 year olds) this year, they’ve been able to make no such promise for the future. From April 2011 all bets are off. Last month’s emergency budget highlighted exactly how deep the cuts could go. Non-ringfenced departments, said chancellor George Osborne, could be facing cuts of up to 25%. He said he “recognised” the strain on the education budget – but, reading between the lines, all this means is that, if it’s lucky, it’ll suffer slightly less. In fact, it’s hard to see how he can avoid a drop in education spending. The department’s budget for this year is just under £51 billion. That’s nearly a quarter of all planned, un-ringfenced spending. Nor will it be possible to cut the department’s budget without directly affecting schools. Its annual report for 2008-9 suggests that funding for schools swallowed up 82% of the department’s budget. Pledges to strip money from wasteful quangos won’t get you anywhere near the required saving, 16
notes Dale Bassett, a researcher with the centre-right think tank Reform. “Some of the savings are going to have to come out of what are classed as the schools budget. Although,” he adds, “that isn’t the same as what actually goes to the schools.” There are two obvious routes to cut schools spending while limiting the damage to pupils. The first is to slash staff costs, which make up nearly 80% of school budgets. Freezing pay could help bring this down. So could wiping out the little loved teaching assistants, which would save the department £4 billion at a stroke. Even teachers themselves could be vulnerable: their numbers have increased rapidly in recent years That will understandably set the unions squawking. It would also mean bigger class sizes, rolling back one of the biggest educational achievements of the last few years. But the evidence that smaller classes improve education is mixed, at best, and surveys have consistently found that most heads would happily increase class sizes if it’d save them a few bob. Fewer staff, and bigger class sizes, then, look to be on the way. The second route to cutting spending is to lean on procurement costs. Head teachers, notes Bassett, tend to lack commercial acumen. “They’re exteachers,” he says, “and teachers are there to teach, they’re not there to manage.” Smarter procurement, he predicts, could save as much as £500 million a year. This certainly seems to be the way the government is thinking: it’s significant that the one part of schools ICT agency Becta it seemed determined to save was
its procurement function. All this has got to be bad news for firms that supply schools. Not only are they likely to buy less; they’re also likely to demand a bigger bang for their buck when they do open their wallets. In some ways, making the cuts shouldn’t be that hard. This year’s education department budget is more than double the £25 billion allocated to the defunct Education & Skills department in 2004-5. Actual spending per pupil in schools has grown slightly slower, but still doubled in the 13 years Labour was in government. The £670 million of cuts announced in late May might have panicked the sector. To put that figure into perspective, though, that figure is about a third of the increase in spending, just since 2009. But it’s always harder to cut spending than to increase it. Parents’ expectations grow; staff are hired and acquire employment rights. School budgets are going to fall. That’s going to be painful for pupils, teachers – and suppliers. n
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policy
When freedom fails The growing list of failing academies raises questions about the new bill
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nd it all seemed to be going so well. Just four years ago Shireland Collegiate School in Sandwell, near Birmingham, was rated outstanding, the highest mark available in an Ofsted inspection. Not long after, its head teacher Mark Grundy was knighted for his services to education, and a year after that, the school teamed up with children’s charity Ormiston to become an academy, free of council control. Somewhere, though, it all started to go wrong. And on 28 May, just as schools secretary Michael Gove was launching his academy revolution, Ofsted revealed that Shireland was now rated “inadequate”. It had harsh words for the quality of the school’s teaching standards, its pupils’ achievements and – this, we suspect, stings most of all – its leadership. The school was clearly shocked by the ruling (its nearby partner school, George Salter Collegiate, is still enjoying its outstanding status), and is currently in the process of appealing. In a statement, Sir Mark Grundy argued that “the levels of achievement at Shireland are higher than they have ever been”, pointing to the all time high in attendance and low in exclusions. It is just possible that this is a matter of Ofsted going off the rails, rather than the school: this year the regulator changed its inspection criteria to focus less on pupils’ improvement and more on final grades . But Shireland, alas, isn’t the only conjunction of school freedom and failure. The United Learning Trust, a
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Christian charity, has been banned from sponsoring more academies after three of its 13 existing schools were placed in special measures. And embarrassingly, in April, Surrey County Council had to step in to rescue a trail-blazing school in Gove’s own back yard, following its failure under private sponsorship. 3ES Enterprises signed up to work with Kings International College in Camberley in 2001. But following a heavily critical Ofsted report, the council asked the government for an entirely new governing body – asking, in effect, for 3ES to be sacked. The then-Labour government agreed. “Michael Gove has been talking about what is going on in Sweden,” local Liberal Democrat councillor David Whitcroft said, rather scathingly. “It might be more useful if he looked at what is going on in his own constituency.” Those opposed to the coalition’s planned reforms seized on all these events as proof that Gove’s plans would lead to catastrophe. They show, said Mary Bousted, general secretary of the ATL teaching union, that “the idea that changing a school’s status to academy... will automatically lead to improvements is a fallacy”. This, though, is something of a straw man. If anything, the coalition has moved away from the idea that a change in structure is the best way to
improve struggling schools. After all, it was Labour that saw academy status as a cure for the worst schools. The new government want to put outstanding schools to the front of the queue, making freedom more a carrot than a stick. What these examples do show, however, is the danger of leaving schools entirely to their own devices. The Camberley case highlights the fact that the local authority will always need to be the provider of last resort for when schools go bad, so the idea of stripping them of all education functions is a pipedream. Shireland, meanwhile, shows that good schools can go downhill very quickly. In the same week as Ofsted released its report on the school, Gove announced that outstanding schools should no longer faced Ofsted inspection. That now looks like an extremely big gamble. Greater school freedom is undoubtedly a good thing. But it shouldn’t come at the expense of accountability. The government should explain how it plans to monitor standards at its new academies – and who it is that will step in if things turn bad. n
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colleges
Free thinking
But it’ll take investment and regulatory reform, too, to patch up the FE sector
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reedom is something of a watchword for the education sector’s new political masters. Schools are to be freed of local authority control. Universities, meanwhile, are being freed of the burden of state funding and, it looks likely, will soon be free to set their own fees. And colleges, too, are to be rewarded with lashings of lovely new freedom. In June the government announced that outstanding colleges would no longer have to undergo regular Ofsted inspections. What’s more, further education minister John Hayes unveiled plans to allow colleges to shuffle money between different budgets, to enable them to best meet local demand. “I want not just to encourage them to listen,” he said, “but to be free to act, to use that information with a minimum of fuss, delay and administrative cost.” The freedom to shuffle money about, though, can only take you so far: even before the election, a poll conducted by the Association of Colleges found that principals were bracing themselves for budget cuts of 25% or more. That’s not the kind of savings one can find by cutting “administrative costs”. Little wonder, then, that more radical solutions are on the table. Lynne Sedgemore, the head of the 157 Group of larger, high-performing colleges, warned that colleges will be forced to merge or federate in order to survive. “There’s something about critical mass – being a certain size, economies of scale – that helps,” she said. “Colleges are looking at all the options and these are mergers, federations and management buy-outs.” As many as 120 colleges could be forced into such a move, she predicted. This would make a certain amount of sense. A recent report, written by KPMG for the defunct Learning & Skills Council, found that larger colleges had significantly lower overheads, while doing little damage to success rates. (If
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anything, in fact, larger colleges seem to do rather better.) But it also noted that government policy to date had implicitly discouraged such mergers – and even if that changes, it said, it would be mere tinkering at the edges. What is required, the accountants said, is more systemic reform. “The government should make some key decisions about the infrastructure of the sector,” it said, “before serendipity and invidious college ambition takes the lead.” The obvious solution to a public sector funding drought, of course, is to attract more investment from private and voluntary sectors. Plenty of existing training providers, after all, might fancy a bigger share of the FE market, while you’d think that service companies like Capita or VT Group would jump at the
chance to run colleges. But hefty barriers remain. For one thing, the failing colleges likely to come up for a takeover are almost certainly the ones of least interest to alternative providers (they’d rather focus on those colleges they could take “from good to great”, notes KPMG). More significantly, there are hefty regulatory barriers involved in taking staff from public to private sectors. The cost of taking on relatively generous public sector pension arrangements alone is a “huge deterrent to entry”. Until problems like these are tackled, alternative providers are likely to stay out – and with budgets shrinking and colleges hoping to merge their way out of trouble, capacity seems likely to drop. Freedom is a great thing. But it’ll take more than that to fix the creaking FE sector. n EcucationInvestor • July/August 2010
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market
Trouble at the top
The loss of two chief executives in three months is symptomatic of the problems facing Havelock Europa
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o suggest it has been a difficult year for Havelock Europa would be to engage in criminal levels of understatement. The education and retail interiors firm has lost 80% of its value in the past 12 months. At the end of March its long-standing chief executive Hew Balfour stood down, with immediate effect, after 21 years at the firm. Now it’s again on the hunt for a new chief executive after interim boss David Hurcomb announced he was leaving after just two months in the job. To compound matters, the company revealed in early June it is to cancel its listing on the main London stock exchange and retreat to the simpler – and cheaper – Alternative Investment Market. Considering the firm’s recent results, it is no surprise it is seeking more affordable pastures. Havelock charted a pre-tax loss of £5.9 million for 2009, compared with a profit of £7.7 million in 2008. From a high point of 158 pence in 2006, the share price has slumped to less than 10 pence. That values the firm at less than £4 million. These problems can be partly explained by the difficulties it has encountered in merging its retail interior and education supply operation: the firm has booked £3.2 million of exceptional costs to cover moving manufacturing operations from Dalgety Bay to Kirkcaldy, where the education business is based. The bigger problem, though, is Havelock’s exposure to the retail industry. There are few sectors that have been hit as dramatically as retail since the start of the financial crisis. And despite having long-standing relationships with leading
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brands such as Marks & Spencer, House of Fraser, Sainsbury’s and Primark, Havelock was always going to have a rough time Havelock’s education interests have always been something of a bright spot for the firm. In the first half of 2009, revenues in the education division jumped by 37% to £27.2 million, largely due to work contracted through the private finance initiatives and the Building Schools for the Future programme. (By way of comparison, revenues for the retail interiors division dropped a whopping 42%.) The most recent results, though, put a stop to that. Figures released at the end of April showed that – despite a respectable increase of 9% in revenue across the education division – the firm actually recorded a loss. It blamed the costs of the “integration of the IT systems and operations” of its subsidiary ESA McIntosh. The company has also warned that the educational supplies market has cooled of late, as local authorities reduced orders until the impact of the new government’s policies on educational budgets becomes clear. Amidst such turmoil, it is unsurprising Hurcomb didn’t stick around for long.
Regarded as a rising talent in the industry, he was headhunted to take up a role with building services firm NG Bailey in Yorkshire. Equally unsurprising is the fact that Havelock Europa has been keen to play down his departure, which, after a mere two months at the helm, must have come as a huge blow. The firm’s chairman Malcolm Gourlay suggested Burcomb’s departure was “no surprise”: he had only committed to staying with the firm for six months, after all, and “the chances of him staying with us were very remote”. He insisted, too, that Burcomb’s brief tenure had sowed the seeds for a turnaround at the firm – mostly through the companywide performance review dubbed ‘Project Horizon’. Perhaps. But it still doesn’t look like a huge vote of confidence in the troubled firm. And you can hardly blame Burcomb for questioning whether rescuing it was quite the project for him. n
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Comment
Laws of the playground
Trowers & Hamlins lawyers Amardeep Gill and Lucy Doran look at what’s in the Academies Bill
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he Academies Bill introduced to parliament on 26 May might bring about the biggest changes in England’s school structures in a generation. Teamed with the upcoming education bill, there is a real push from central government to concentrate on improving standards through localised governance and service delivery, in contrast to the previous government’s approach. Whilst building contractors may regret the move away from infrastructure, education service providers will be 20
keen to embrace new opportunities that the bill will herald. With governing bodies becoming autonomous – in most instances for the first time – they will need help and support in achieving the coalition government’s vision of improved education delivery. The new bill will change things in a number of ways. It’ll widen the scope of schools that qualify for academy status, to include for the first time primary and special schools. It’ll allow governing bodies seeking such status to apply directly to the education secretary, cutting back the local authority’s role
in the process to a simple right to be informed. It’ll also establish a “property transfer scheme”, which will address the transfer of property, rights and liabilities such as existing contracts, furniture and equipment in the school. Education secretary Michael Gove has said that his current intention is to approve as a priority all applications by schools that have been judged as “outstanding” by Ofsted, unless there are good reasons not to. One of the biggest unknowns in the Academies Bill is the ongoing role of the sponsor. The Bill is aimed at existing school governing bodies who wish to EcucationInvestor • July/August 2010
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convert to academy status; it remains silent on how sponsors will fit into these new arrangements. Until the full details of both the act and the Department for Education guidance are known, it could be argued that sponsors will no longer be needed. We would urge sponsors to watch this space, though. Although the Bill may be silent on their ongoing role, governing bodies will be keen to involve organisations who have experience in delivering successful academies and who will bring another level of experience to the table. There are already opportunities in existing legislation for sponsors to join governing bodies and it is unlikely that this will change with the Academies Bill. Sponsors may just need to shout a little louder to ensure that their useful role to date is maintained and replicated in future governance models. Early indications are that a significant numbers of schools will be opting out of local authority control. This could have EducationInvestor • July/August 2010
a significant financial impact on local authorities. That is certainly a concern. But there may also be upcoming opportunities for local authorities and service providers to work innovatively with academies to enhance education delivery. Education is not the only area that the new coalition government is intending to reform and local authorities might want to look holistically at the provision of services in their remit to achieve savings and efficiencies. As a central purchaser, local authorities and service providers are often able to achieve economies of scale and have more experience in delivering certain services to schools. Through opportunities such as joint ventures, management buy-out entities and trading vehicles, this could start a new trend for local authorities to move away from their traditional role as commissioner of educational services to become providers of educational services. We will shortly see a second education
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bill to deal with “free schools�, which will permit interest groups including parents to establish their own schools; the intention is to drive up standards through the creation of additional competition. Current providers of education services and sponsors should be excited by such moves. After all, together these bills will be a step closer to the education delivery models used in countries such as Sweden and the USA. They may mean that other restrictions on providing schools with services may need to be revisited. The increase in academies is just the first change that the new coalition government propose to make to education provision in England. For investors in education, the next few months may be uncertain; but as one door closes, another door opens bringing fresh opportunities. n Amardeep Gill is a partner, and Lucy Doran a solicitor, at City law firm Trowers & Hamlins 21
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Comment
Future proof The government should be more radical in its approach to education reform, says Futurelab’s Dan Sutch
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uch discussion about the future of education is based around a vision of schools providing the same kind of service but with better IT and newer buildings. Yet the pace of social and technological change means that anyone involved with delivering and supporting education needs to start thinking in far more radical terms. Futurelab’s research into a range of possible education futures demonstrates that the purposes and practices of education face many challenges, but also many new opportunities. Take schools. Historically they’ve been seen as the principle place for education. Yet both social and technological developments have highlighted the potential for education to be built around the idea of ‘personal clouds’ of learning. Instead of relying on huge numbers of physical learning institutions, individuals could be constantly connected to a ‘cloud’ of knowledge, resources, people and tools, and real and virtual networks and communities. The development of more sophisticated and lower cost mobile and personal technologies and data storage, for example, means people will increasingly be able to ‘wrap’ information and learning resources around themselves rather than managing it through the timetabled support of fixed institutions. Instead, formal and informal learning could take place across a wide range of different sites and institutions. Such developments will allow new providers from private, public and third sector organisations, both here and abroad, to offer widely accessible face to face, remote, work-based and informal education. There could be an erosion in the distinctions between places where you learn, where you work and where you play. There may also be a blurring between what have been very different stages in people’s lives. The 22
historic pattern of “play, learning, work, retirement” may break down. Periods of work are more likely to be broken up by bursts of learning and free time. Such a system could have substantial implications for the curriculum. The new ‘planned learning experiences’ would need to be designed to allow for learners to learn and work across a range of institutions and with different resources. That would require a number of parallel developments: compatible personal learning records that can be carried across different settings; systems and standards that would allow learners to demonstrate their attainment and experience across diverse settings; timetabling arrangements and tools that enable learners flexibly to build timetables across different providers to take advantage of learning opportunities in schools, museums, community settings, workplaces, universities, and homes. There’d also be a need for a map of the learning landscape, that could support learners and mentors to navigate their way through this complex environment. Supporting learners through this diverse range of opportunities and challenges would require changes in staffing, too. Lifelong mentors or guides would help to ensure learners can take informed choices from diverse education providers and balance education, working, caring and personal development choices across the lifecourse and at key transitions. It would also mean more varied roles for teachers, to include experts in workplaces, community educators, school and university lecturers, and voluntary providers. On top of that we’d need a review of existing child protection and CRB arrangements, and a new cohort of educators skilled in establishing and working within social networks across institutions and ages. Then there’s the drug issue. Research shows that a range of drugs which are said to improve memory, intelligence and
motivation are already in widespread use, particularly on US university campuses. These drugs are not necessarily being developed for use in formative education – but they may well begin to be applied in this field. The issue of drug-enhanced performance in education will be one of the most important debates in terms of shaping our future education system, not least because it will, just as earlier technologies did, challenge our concept of what constitutes a ‘natural’ performance. What exactly would we be assessing: the student, stripped bare; the student plus ‘tools’; the student plus ‘tools’ and ‘network’; or all of the above, enhanced with drugs? Could smart drugs be actively provided as an aid to learning - like free school meals or rhitolin - to ensure that everyone has the same opportunities.? Developments in technologies do not necessitate changes to educational practice. Yet socio-technological trends – the ways in which technologies are used in the workplace, in families and communities; the way in which decisions change in the light of new possibilities – don’t just affect classroom practice. They affect the very aims of education. When envisioning the future of schools and the future of education, we need to ensure that both the processes and the aims of education meet the needs of today’s society – and the society we want to create. The challenge to all who have a ‘stake’ in education – whether learner, parent, employer or employee – is to articulate what we demand of, and in, education. Only then can we create the most successful and appropriate education for all learners. n Dan Sutch is head of development at the not-for-profit education research institution, Futurelab EcucationInvestor • July/August 2010
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academies
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The September revolution Can academy status rescue England’s schools, asks Jonn Elledge
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he numbers look impressive. One of Michael Gove’s first acts as school secretary was to write to every primary and secondary school in the English state sector, to invite them to become academies, the so-called ‘independent state schools’. Those schools rated as outstanding will be given an extra push by being fast-tracked to reopen as academies next September. Meanwhile, those at the other end of the state sector, the failing schools, have a year to turn themselves around; then academy status, and new management, will became compulsory. And the response, Gove said later, was “overwhelming”. In just one week, more than a thousand schools had registered their interest; a fortnight after that, there were nearly a thousand schools in the ‘outstanding’ category alone. If all these were to follow through, it would be nothing less than a revolution. A host of new freedoms for state schools – and a host of new business opportunities for firms. Actually, though, those numbers aren’t quite as impressive as they at first appear. Nearly 3,000 schools are rated as outstanding, which begs the question of why the other two-thirds don’t seem to see the appeal. And all Gove’s talk of revolution disguises a worrying number of unanswered questions. In theory, academy status is all about freedom. Gove, in his letter to outstanding schools, rattled off a list of new freedoms that schools could enjoy if they took the plunge: the freedom from local authority control; freedom to set staff pay and conditions; freedom from the national curriculum, or over the length of terms or school days. All these add up to what one of the programme’s original founders, former schools commissioner Sir Bruce Liddington, has termed a “state of mind”: academy staff will be more willing to do whatever they think right to improve their pupils’ education, without waiting for the go ahead from the council bosses. “Schools that are set free from day-to-day local authority or central control tend to thrive,” he said. The majority of schools would be “foolish not to grab this chance with open arms”. Perhaps the most attractive thing about academy status, though, is the cash that comes with it. At the moment, local education authorities (LEAs) cream a chunk of school funding off the top to pay for services provided across an entire area.
A brief history of academies Academies are schools that are funded by the state but independent of local authority control, instead answering directly to ministers. They have their origins in the City Technology Colleges (CTCs) created by the Education Reform Act of 1988. The CTCs were academically very successful, but never had the impact their architect, Kenneth Baker, intended: just 15 were ever created, and all but three have now become academies. The ‘City academies’, devised by Tony Blair’s education advisor, Andrew Adonis in 2000, amended the CTC model in a number of ways. Firstly the new schools would require a much smaller funding contribution from their private sponsors than the CTCs. Secondly, unlike their predecessors, they would be bound by the admissions code and prevented from selecting on ability. By the time Blair left power, several dozen failing schools had been replaced by shiny new academies. The programme has continued to expand, but critics accused the Brown government of watering down Adonis’ vision. It reduced the contribution made by private sponsors yet further, in an apparent attempt to make sponsorship more attractive. It tightened ministerial control of the curriculum academies could teach. Most significantly, councils were allowed to become sponsors of academy schools. Before this year’s election, Michael Gove promised to reverse this trend back to council control and put “rocket boosters” under the academies programme. If all goes to plan, hundreds of schools could re-open as academies within months.
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This varies, between areas and schools, but can be as much as a fifth. Academies, though, escape this process. That money is theirs to spend as they wish. This is a pretty alluring prospect to cash-strapped schools, and the airwaves were soon filled with heads bemoaning the fact that that they were paying £400,000 into their LEA’s budget and getting only £20,000 of services back. No surprise, then, that many such heads are rather keen on academy status. If the academy revolution does take off as Gove hopes, it could mean a bigger role for private firms. The services councils provide to schools in exchange for their money include library services, school meals, school travel and extra-curricular activities, as well as a range of HR, financial, advisory or maintenance functions. Schools will continue to need many of these services, even after making the jump to academy status. But, says Alistair Stranack, a partner at management consultants the Parthenon Group, “despite the potential economies of scale, the way [many of these services] are currently procured by local authorities often don’t meet schools’ needs”. As a result, he suggests, academy status could mean a three26
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way split in the way these services are delivered. Some schools will take services in-house; others they’ll continue to buy from councils, but on a contractual, rather than automatic, basis. But some, he adds, they’ll likely buy in from the private sector. That could mean administrative support from the outsourcing groups, like Capita or Serco; or services from more specialised firms providing catering or offering music or sports facilities. Academy status will allow schools to make more purchasing decisions based on cost or quality, rather than simply accepting what they’re given, he argues. “Schools will become more commercially aware.” Commercial awareness, of course, isn’t to everyone’s taste. The Anti-Academies Alliance is a coalition of teachers, parents and trade unions that is leading the fight against the independent state schools. It has myriad other objections to the initiative: dodgy admissions practices, an increase in exclusions, the power they offer to private sponsors, a lack of evidence that they actually raise standards. One of its biggest concerns, though, appears to be academies’ exemption from national pay agreements for teachers. The initiative, says a spokesman, is “very clearly intended to smash teachers pay and conditions”. EcucationInvestor • July/August 2010
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The Alliance is clearly partisan (the teaching unions it’s affiliated to, after all, exist primarily to protect the pay and conditions of their members). But it’s far from alone in its criticisms of the academy model. Groups of parents, educationalists and even some in the private sector also seem slightly unnerved by the scale of Gove’s commitment. One complaint doing the rounds is that the policy has been mis-sold and that academy freedoms are largely illusory. Schools have been largely free of council control since 1988, after all, when the government handed them control over the vast majority of their funding. Most heads still complain that they’re drowning in government guidance – but it’s central, not local, government that provides most of that. The freedom schools need is not from town hall, but from Whitehall. And a policy that will make more schools directly accountable to the secretary of state, not local government, seems unlikely to provide it. Indeed, many characterise the relationship between schools and councils as being a supportive one: an arm round the shoulder, not a hand on the throat. Simon Lucas, the head of education at EC Harris, says that it’s a red herring to see the relationship entirely in terms of money and services. “It’s about the fact there’s a relationship there,” he says. “The LEA is there in the background, and because it has those relationships, it can see problems developing and nip them in the bud.” Significantly, the local authority is also the schools provider of last resort, ready to step in to run a school that gets into trouble, or provide alternative places for kids. The government has so far been worryingly hazy on who will play that role with the new academies. The extra funding, too, may have been over-sold. The accepted line is that schools that become academies can expect a budget uplift of around 11%. Actually that’ll vary substantially, depending on how much a school’s LEA currently holds back and in many cases may only be 2-3%. What’s more, much of that will have to be spent on the same kind of things as it is now, so although schools will have more control of their own money, the uplift is likely to be much smaller than it looks. And those schools that think they’re getting only £20,000 of services are simply wrong, says Lucas. “They do get more services. They just don’t see them as services.” They may be in for a shock when they find that, say, the council’s emergency planning or educational psychology services are no longer there for them. Some schools do put in more than they get out. But relatively little of this is down to LEA inefficiency. Rather it’s because stronger schools currently subsidise services – special needs education, pupil referral units etc. – for their weaker neighbours. Taking their contributions out of the system risks blowing a hole in the budgets for those kind of vital local authority-wide services. In effect, it would mean taking money from weaker EducationInvestor • July/August 2010
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schools and giving it to stronger ones. (The DfE says it is in discussions with the Department for Communities & Local Government about how to plug this hole.) Sir Bruce Liddington dismisses many of these concerns. Most services that local authorities currently provide – he cites transport systems – are things that schools can arrange themselves, he says. And while he accepts that many schools are likely to keep buying services from their LEAs, he argues that this is vital to creating an independent state of mind. The important thing is that they begin to ask themselves, “Can I get this better or cheaper from anywhere else?” Even he admits that there are many questions still surrounding the policy, though. Will there still be a role for sponsors? Can academies that signed the more tightly constrained funding agreements put in place by the Brown government negotiate more freedoms now? Perhaps the biggest unanswered question, though, is still how the government is going to achieve its revolution by this September. Officials maintain that there’s no need for a formal consultation (this is good because, with just days left in the summer term, there’s no time for one). But it’d be a brave school indeed that made the jump without checking it could take its parents or staff along with it. The Anti-Academies Alliance is already promising an avalanche of judicial reviews. Recently officials have quietly begun to admit that September 2011 is a more realistic date for the revolution These concerns perhaps explain the fact that – for all the talk of overwhelming responses – the response to Gove’s incitement for schools to throw off their chains have in some ways been rather cautious. Many of the headteachers whose views were sought by the media in the days after the policy was launched seemed more worried about the gaps in the policy than enthused by the talk of freedom. (“We couldn’t possibly do a proper job of weighing out the pros and cons by September,” one head told the Guardian. “It’s suspicious.”) Governors, too, expressed concern about the lack of consultation with parents, and the unanswered questions about who’d take on the local authority’s support role. Indeed, it’s not clear that many schools will even want more freedom, if it means taking on a lot more work. The Grant Maintained status that was the precursor to the academies initiative never managed to attract more than a fraction of schools, after all, and it’s not clear that it’ll be any different this time round. If a school’s LEA is doing a perfectly good job, why go to the trouble? So for all the apparent enthusiasm, it’s not clear that’ll translate into new academies: an expression of interest is a request for more information, not a formal application. And whatever happens, the revolution is likely to be rather slower than the figures now being bandied around may suggest. That may be no bad thing. A change on this scale may produce all sorts of unintended consequences. Moving more slowly would make time to iron out any problems. “It’s understandable they want to hit the ground running and prove they’ve made a difference,” says EC Harris’ Lucas. “But at the same time we want to make sure we use the lessons we’ve learnt to make sure it works first time. “We may have two or three shots at this,” he adds. “But the kids only have one.” n 27
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Forced shutdown Scrapping Becta looked like an easy cut. But few seem happy about it, finds Jonn Elledge
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ity the quangos, unloved and unmourned. Within weeks of David Cameron’s arrival in Downing Street, no fewer than three quasi-autonomous education agencies found their necks on the block. The General Teaching Council for England was to go. The Qualifications & Curriculum Development Agency had had it. And Becta, too, was not long for this world. This November, after 12 years, the agency that helped guide Britain to being a world leader in educational technology will close, with the loss of 240 jobs. This, the government claims, will save the taxpayer £10 million this year and £65 million next. That, though, is a matter of some debate. Becta’s directors used a rather hurt-sounding statement to highlight the agency’s achievements and international reputation, going on to claim that “our procurement arrangements save the schools and colleges many times more than Becta costs to run”. They put the annual saving at £55 million. And for all the complaints that have followed Becta like a black cloud for the last few years, surprisingly few in the market appear to be cheering its demise. “You went to their offices and they didn’t look bloated,” said one supplier, who asked not to be named. “You didn’t see Bentleys in the car park, I can tell you. Is the cause of ICT advanced by this? Of course not.” At first glance, the decision to scrap Becta seems straightforward enough. Before the election the Conservatives promised two things: to protect front-line services, and to get the deficit down. What’s more, the party has ideological concerns about too much power accruing in the hands of unelected
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officials: much better to either devolve power to local people or, where that was impossible, leave it safely in the hands of Conservative ministers. All this pointed to what David Cameron promised would be a veritable “bonfire of the quangos”. So when the first round of cuts arrived, and the education department found itself scrabbling to shave £670 million from its budget without un-funding schools, the quangos were an obvious target. Becta, says one education expert, looked like a “quick and easy win. I think they thought that not many people will complain about an agency procuring ICT.” And Becta’s approach had made it more than its share of enemies over the last 12 years. The use of procurement frameworks, under which the agency gave certain suppliers their stamp of approval – essentially, recommending their products to schools – had the inevitable effect of alienating those suppliers that, for one reason or another, didn’t make the cut. (Those firms that have cheered the agency’s demise, understandably, tend to fall into this category.) Schools, too, felt aggrieved by a system in which the best way to meet their ICT needs was agreed between Becta and suppliers, with school staff getting barely a look in. The framework system has come under fire for other reasons, too. Firms below a certain size were barred from the frameworks (ostensibly, to reduce the risk of a company going under, leaving schools without support), which made it harder for new ideas to reach the schools market. And to maintain quality Becta set tight specifications for its products, and set itself firmly against open-source alternatives such as ‘virtual learning environment’ software Moodle. The result, say the critics, was a sort of levelling down, in which ICT giants competed to best meet Becta’s specs rather than schools’ needs. All the recommended products ended up looking remarkably similar, and schools ended up locked into long-term contracts for products that rapidly went out of date. Meanwhile, open source software that could offer much of the same functionality for a fraction of the cost was off the table. In other words, Becta ended up inhibiting innovation rather than encouraging it. Another source of dissatisfaction is the sense that Becta was more concerned with following ministerial diktats, rather than providing what schools actually need. Gareth Davies, managing director of learning platform company Frog (not a firm on any of Becta’s shortlists) reckons that an obsession with meeting targets for how many pupils had access to new technologies resulted in poor quality products (“They were more concerned with reducing costs than achieving real value,” he bemoans). Becta, agrees the unnamed suplier, “played a part in its downfall by pushing technological change faster than schools were able to absorb it”. The result, he adds, is that the agency “lost a lot of friends. If the Tories were sitting with heads or the industry, it can’t have helped its case.” The comments of Philip Parkin, general secretary of teaching union Voice, are a case in point. Becta, he said, had “driven ICT to such an extent that technology was overshadowing the curriculum. Schools were concentrating more on keeping up to date with technology than on what actually helped them. If schools step back and take a breather, that’s no bad thing.” Removing Becta, it may have seemed to Gove’s team, would help get teachers focused on teaching again. EducationInvestor • July/August 2010
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All of this, though, rather glosses over Becta’s real achievements – and the questions over whether they can be maintained in its absence. It’s supported school ICT staff by offering guidance, advice and a conduit to share best practice. It’s published research on everything from technology’s impact on learning to teacher training. Most recently, through the Home Access Programme, it’s been trying to close the digital gap by offering laptops and broadband connections to children from deprived backgrounds – a programme that seems almost certain to be scrapped. And while those targets and frameworks got plenty of backs up, it seems churlish to give those things no credit for the fact that England’s schools now lead the way in the use of learning platforms and electronic whiteboards. Becta, says the supplier, gave “a physical presence to the previous government’s commitment to ICT in education. It’s a very complicated, rapidly moving field, and Becta was one of the organisations that made some sense of the technology.” This, indeed, may be the agency’s biggest achievement: to help ICT to become so embedded in school life that it finds itself utterly taken for granted. One technology blogger summed up attitudes to Becta simply by linking to the ‘What have the Romans ever done for us’ scene from Monty Python’s Life of Brian. Taking Becta out of the equation raises a number of questions. Firstly, what’ll happen to its most respected parts, the research and guidance functions. Existing research can presumably be hosted somewhere on the Department for Education (DfE) website. But with technology changing so fast, this seems likely to go out of date pretty quickly – and officials admit no more will follow (“Clearly research into the impact of ICT in education will continue,” says one spokesman, “but we are not expecting a formal transfer of Becta functions to another agency”). If no new research is produced, it’ll soon become harder for schools to judge which technologies to invest in or how to best make use of it. Ray Barker, director of the British Educational Suppliers Association trade group, distinguishes between “leading edge” schools that will tend to look for new technology, and others that “need convincing through research”, asking: “Who’s going to do that job now?” Without Becta acting as a bully-pulpit, he fears, schools could lose interest and Britain could start losing its edge. “The issue in the past has been that if no one is there to push things forward, it’s all too easy for schools to back off and say it’s much too difficult.” There’s also a question over whether schools have the capacity to cope without Becta. The DfE has confirmed that the current ICT services framework, which is currently in procurement, will continue, but it’s keeping tight-lipped about what happens after that (“Some core functions relating to policy and ICT procurement will transfer to the DfE,” says the spokesman. “Currently it is not possible to provide more details”). And in the past officials have made clear they want to give more responsibility back to schools, which are “best placed to know how to use the resources that they are allocated.” Barker’s leading edge schools probably will do a better job than Becta’s frameworks at getting the technology that meets their needs. But most of these already ignore the agency and go their own way. It’s those schools that aren’t so clued in that the framework arrangements were intended to help. These, Toshiba education advisor Bob Harrison claims, “will get ripped 29
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off if they don’t have the protection of the framework”. At the National Association of Head Teachers’ annual conference back in April, general secretary Mick Brookes called for an inquiry into ICT suppliers that exploit schools’ naivety by overcharging them. Even if suppliers do have schools’ best interests at heart, the end of Becta is likely to raise their prices. Harrison points out that selling to individual schools, rather than signing up to a framework contract, will force firms like his to increase their marketing budgets. “We’re going to have to double our sales team,” he says. “We’ll be charging higher prices.” In other words, scrapping Becta won’t necessarily save the state any money? “It’ll do the exact opposite.” This is a surprisingly common view. Chris Keates, of the NASUWT teaching union argued that schools often get tricked by “slick salesman” into buying unnecessarily big and expensive systems. The unnamed supplier, too, thinks there’s a “huge risk”
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that the abolition of Becta will only raise the cost of ICT. Even Parkin, who’s not shy of criticising the agency, says that the cut is “short-termism. It’s just a way for the government to save money and deflect those cuts onto the schools.” As EducationInvestor was going to press, government insiders admitted that the decision to continue with the ICT services framework was a strategic move, designed to retain the parts of Becta that can generate value. Other frameworks may well follow, But even if DfE officials can do Becta’s job - by no means certain - there are other reasons to worry that schools may struggle to get the same value they’re used to. More than one local education authority has made deep cuts in its own ICT advisory team. That is likely to mean more schools spending more money on private consultants, to solve problems that Becta could once have helped with. This may not be quite the value-for-money policy the government intended. n
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Strength in numbers
Could Pearson’s takeover of Melorio herald a wave of consolidation in the training sector, asks Sara Utecht
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efore spending millions to get a foothold in a new market, you have to be pretty confident of success. So when Pearson, the education and media conglomerate behind everything from Penguin books to the Financial Times, decided to pay £99 million to acquire Melorio, it was seen as quite a vote of confidence in the UK training sector. The group certainly see it a good fit with their existing ventures. “For a long time on the education side, we were in content publishing and in testing and accreditation,” explains Pearson’s director of vocational education Rona Fairhead. “But the whole bit in the middle, which is the lion’s share of the value in education – the teaching or placing or employing of a student – we really haven’t had much of a role in.” Buying Melorio is a quick way of plugging that hole. In some ways this may seem a strange time to be taking the plunge into training. The vocational training sector is looking distinctly changeable right now, as successive governments have seemed increasingly enthusiastic about fiddling with its institutional architecture. The outgoing Labour team scrapped the Learning & Skills Council, replacing it with two more quangos; the new coalition have made it clear that the Qualifications & Curriculum Development Agency and the
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employer-led partnerships behind the new diplomas are to follow. Perhaps most worrying, though, is the issue of funding cuts, which looms terrifyingly large over the education sector. The Department for Business, Innovation and Skills was one of the hardest hit by the first round of cuts, seeing £636 million stripped from its budget. And one of the first casualties was Labour’s flagship ‘Train to Gain’ programme, whose budget has dropped by £200 million, a move that skills minister John Hayes cheerfully admitted was “the beginning of the end”. The flipside of all, though, is that the UK is going to need to upskill its workforce if its economy is to have any hope of making a sustainable recovery. A recent survey by the business lobby group, the CBI, and training and assessment firm EDI spells out in stark terms the breadth of the problem. Nearly half (45%) of businesses say they’re finding it hard to find staff with the right skills. And despite the unstable business environment nearly three-quarters (72%) say that they would be maintaining or increasing their investment in training. Half of the firms surveyed also said they would like to see increased support for intermediate and higher level skills through initiatives such as advanced apprenticeship programmes. And the new government seems to recognise this demand: that £200 EducationInvestor • July/August 2010
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million stripped out of Train to Gain is being redirected to other areas, including apprenticeships and new college buildings. So demand may prove surprisingly buoyant. Barry Brooks, for one, claims to be optimistic. Director of skills at consultancy Tribal, he argues that, “From what John Hayes has been saying he’s clearly very positive about keeping breadth in the sector.” And he’s blasé about the decision to divert funds away from Train to Gain. The programme “had some serious flaws,” he said. “And I can understand why the new government doesn’t want to put its name to a Labour initiative. But they’re not taking money away from the sector, they are redirecting it to support a broader apprenticeship agenda.” EDI chief executive Nigel Snook, too, feels pretty positive. “Despite making £6.3 billion of spending cuts the chancellor invested a further £500 million in apprenticeships,” he points out. “I think that is a clear message from the government about the importance of the vocational training sector.” That, he adds, is just what the sector needs. His firm’s recent survey suggests that employers are happy to invest in training and education as they see it as being valuable to their company – but there does need to be funding there to persuade them to invest. (Many also want the government funding to be more accessible.) For the moment at least, the government appears to be granting that wish. “The way it is looking,” says Snook, “is that funding for apprenticeships for the 16 to 18 age group may increase by as much as 15%, and even for the 19 to 25 age group there may be some increase.” It’s only the over 25s that may see funding trimmed back. What’s more, Pearson’s ambitions in this sector aren’t restricted to the UK. Melorio has concentrated much of its EducationInvestor • July/August 2010
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efforts on emerging markets – and “Pearson has said that it is committed to international coverage and developing the business,” says Alex Sheffield, financial director at Melorio. In these other markets, of course, demand for better skills is soaring - and the confusion that reigns in the domestic training sector doesn’t apply. So the consensus among the market watchers is that the Melorio acquisition is the right step. “It’s a positive logical move for Pearson,” comments one analyst. “It’s an area which has very good synergies with what they do already, and they have a very good track record in managing examinations, so it makes sense.” What’s more, he says, the current issues over funding are likely to be short term. That makes it an excellent time for companies with the financial fire power necessary to ride out the current difficulties to buy at good prices. Pearson, then, may have got itself a bargain. Whether the Melorio takeover heralds a wave of further upheaval in the training market, though, remains to be seen. “I think that we will see larger providers emerging,” predicts one insider, “as there is going to be an increased emphasis on quality. Whether this comes about through consolidation, though, is harder to answer.” Brooks, for one, predicts the smaller providers may be able to survive. The government is encouraging more collaboration within the sector, he notes, so although there will often be one main contractor there may be opportunities for smaller contractors within a consortium. EDI’s Snook, though, comes to the exact opposite conclusion. Growing pressure on providers to work in consortia can often be a prelude to market consolidation, he notes. “The way contracts are being structured could potentially see smaller providers 33
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being squeezed,” he says. “Although there is uncertainty as to just how large the new government wants to see providers getting.” One man with no doubt that a wave of consolidation is coming is Mark Jeynes, a management consultant with the Parthenon Group. At the moment, he notes, the sector contains around 1,500 providers – both private and FE colleges – reliant on government funding. These are mostly tiny, and very few of them have turnovers of more than £100 million But the need to vet and inspect providers means there’s a cost to doing business with each of them. As a result, he says, there’s an expectation that the government will try and save money by moving towards bigger, longer term contracts. “The general thinking is that in effort to manage costs down, the Skills Funding Agency [the sector’s latest quango] will put in place restrictions on the size of businesses it works with.” Refusing to work with any company that takes in contracts worth less than, say, £250,000 a year would force a lot of smaller players out of business. And that could mean tasty pickings for companies that are looking to grow. “They’re ambitious businesses, in many cases backed by private equity,” he says. He points to JHP Training as one firm likely to move in this direction. However things turn out, it’s unlikely to be a big problem for the likes of Pearson, which has the capacity to turn to other 34
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markets if the UK gets too tough. Others, though, may not be so lucky, and the changes now underway may mean some fall by the wayside. “The industry has gone from being predictable and boring to inconsistent and confusing,” says Snook. “The signs for the future are encouraging, but I think everyone in the industry is looking forward to being able to get back to boring predictability.” Until that happens, the general consensus is that those who will do well in the sector will be the ones who are nimble and flexible enough to be able to adapt to the ongoing changes. Despite all the upheaval Snook doubts whether there’ll be too much room for newcomers. “It’s quite a difficult area to get in to unless you have a solid track record,” he says. “The only way you can really do it is to buy existing providers, so I guess we could see new people turning up through acquisitions.” Brooks agrees – with one caveat. There’s no room for new providers offering more of the same – but, he says, new providers could be successful if they come to the table offering something new. At any rate, it’s likely to be some time yet before the new government’s exact intentions for training become clear. Those who are considering entering this space and don’t have the resources of the likes of Pearson behind them could be forgiven for waiting for the dust to settle. n EducationInvestor • July/August 2010
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Distance is still distant Universities are keen to tap the profitable distance learning market. But it won’t be easy, finds Rob Buckley
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t seems an obvious solution to a growing problem. More and more people, both in the UK and overseas, want to study undergraduate and postgraduate degrees at UK universities. Campus and staff resources are already overstretched, though, and the combination of soaring demand and shrinking budgets mean that as many as 200,000 look set to miss out on places this year. But what if the campus were virtual and all the students remained at home for most or all of their degree courses? Costs could be kept lower and there’d be the potential to increase student numbers. And if a course were to prove popular, universities would no longer have to turn so many students away because of lack of places. This – and the fact that successful distance learning organisations such as Kaplan in the US can earn billions in revenue – is why many universities are looking to shift their teaching model to include more distance and remote learning. Looking, but not yet moving. The model already has proponents in the UK, the Open University (OU) being the most obvious example. The new government, too, seems keen. In a recent speech university minister David Willetts was openly pushing the idea that students should be able to study for a degree at any university in England, by attending lectures at their local college. Even before Willetts spoke up, the OU’s vice-chancellor Martin Bean was already suggesting that other universities may soon be following in his own institution’s footsteps. “We might be different but the rest of the sector is coming our way now,” he told the education technology conference JISC 2010. “We might have been looked down at historically but I think we are the trendsetters now where most of higher education needs to go.” The Online Learning Task Force (OLTF), of which Bean is a member, was created by the government last year to look at ways to foster online learning. The OLTF, which reported in June, says that the government understands that the market for online learning has “huge potential for international growth in UK market share over the next five to 10 years, for both existing and new models of HE”. Making the shift is not going to be easy, however. The University of London’s External System has been awarding degrees to remote learners for over 150 years and currently has 49,000 students studying for undergraduate and postgraduate degrees off-campus. Professor Jonathan Kydd, dean of the system, says distance learning requires a strong infrastructure and considerable expertise. “It has high fixed costs and relatively low variable costs.” To generate enough content for a purely online degree course takes considerable time and money. As a result, many online educators have focused purely on vocational courses, in particular business courses. John Holden, executive chairman of Resource Development International, says, “We’re definitely market-drive and business courses represent 80% of demand”. His company had to make a considerable investment three years ago to adapt its systems, content and staff to true online learning. BPP, which was the first private company to be able to award UK degrees, had similar obstacles to overcome. Its blended learning model allows students to move from purely online learning at the same speed as the rest of
the class, to face-to-face learning, to mixed learning at whatever speed they want. Such a complex system, though, means it’s had to invest millions of pounds in computer systems and course materials. “We’re in this for the long term and we want to offer maximum flexibility,” says Peter Crisp, chief executive of BPP Law School. “To achieve that, there has to be a long-term investment case.” He adds that a lot of the investment has been in ensuring the quality of the teaching materials and resources available for students, as well as training tutors: the skills necessary to lecture to an audience are different from those needed to lecture to camera, for example. The University of London’s Professor Kydd says the resources and investment required to start offering online learning are too high for individual departments and colleges to “commit to distance learning on a scale that allows them to do it well and in a way that makes it financially viable”. In other words, for most universities to make distance learning viable, they’ll have to work together in groups. Indeed, in many cases, online educators have had to work with partner providers to cut costs. One such partner is E-learning provider CrossKnowledge has invested €40 million (£32 million) in developing content in 15 different languages for MBA courses. This content includes video sequences involving actors in various scenarios, rather than simply lectures; over 50% of it is available on mobile devices, making it more popular with younger learners and those in countries that have poor broadband connections. CrossKnowledge licenses this content to other educators, including five business schools in the UK. In cases where a course cannot be totally online – law degrees that require students to be assessed in person, for example – private partners can provide some of the necessary physical resources as well. AEC Education has partnership agreements with universities such as the University of Birmingham and Manchester Metropolitan University to provide learners in Singapore with facilities. Private partners can also help with marketing, something few UK universities are good at, particularly with overseas students. “If you want to increase the revenue from non-home, non-EU students,” says AEC’s executive chairman Liam Swords, “you need people with major access to those students and who market to those students.” There’s also the IT infrastructure necessary for online learning to consider. Storage and internet bandwidth to convey content to students can be expensive. So can the support staff necessary to manage the hardware and software: online learning requires ‘virtual learning environments’ (VLEs) to give students a way to talk with one another, find out their timetables, look at lessons, download course material, and interact with and be assessed by their tutors. Most universities have a hotchpotch of systems for their VLEs; the most popular paid-for virtual classroom systems include
Even the idea that budget cuts will force job losses isn’t being acknowledged
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Blackboard, while the free Moodle and Wimba Classroom are also popular choices. Some universities, such as Hamburg in Germany, have even turned to virtual reality system ‘Second Life’. Microsoft’s Sharepoint server, while not explicitly a virtual classroom, is used by 78% of UK universities either by itself or in combination with Blackboard as a way to organise and collaborate on work, according to Microsoft’s Ray Fleming. Adobe’s Connect, Microsoft’s Live Meeting and Skype are used for video conferencing and video streaming of lectures in some cases. To keep costs down, some educators turn to managed ‘hosted’ services such as the one provided by Blackboard, although these are relatively rare. Rather than pay a licence fee for the software and running it on university resources, the host company provides all the resources necessary; the university just has to show up with the content. “Managed has really taken off in the last three to four years,” says Blackboard’s director of academic innovation, Demetra Katsifli. “We’re seeing bigger adopters, and have about 800 customers, increasingly in further education, especially in the UK – we’ve heard the pain around the budget cuts, particularly in the last four months.” Blackboard’s service delivers every aspect of support, training for teachers on how to use the system, as well as consultants who advise universities how to use the system. Those who’ve gone for the managed option include BPP and German training provider TeleLearn Akademy (TLA). TLA’s director Olaf Dierker says the reason was clear: “We wouldn’t have to manage our own technology. We don’t have an IT pro and they’re hard to get and expensive.” Blackboard’s Katsifli says that many university bosses she’s spoken to are looking to invest in online. “I recently spoke to nine vice-chancellors of London universities and they all said the same thing: increasing online provision to increase revenue is one of their major objectives. The challenge is to set themselves up for the new way of working.” 38
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But a big shift is yet to happen. “The biggest problem,” says RBI’s Holden, “is cohesion. Unless there’s a very strong vice chancellor who can pull the university together, it’s doomed to failure from the start.” The staff turnover at universities precludes the possibility of taking big projects to fruition, he says, and the lack of the “entrepreneurial spirit” in the higher education sector makes it hard to get support. Many universities are indeed conservative on the issue. “There are opportunities being missed at the moment,” agrees Mike Waterston, managing director of the Waterstons consultancy, who works with universities in the north east of England. “I’m meeting with IT directors and they want there to be a clear difference between the Open University and them. They’re dreadfully traditional and don’t like change.” Many universities don’t recognise the power of technology to reduce costs; even the idea that budget cuts will force job losses isn’t being acknowledged. But he adds that business schools are far less conservative, and predicts that pressures from the student body will force change, even at those universities that are reluctant to make the move. John Brennan, professor of higher education research at the Open University, says that most universities still attach a lot of importance to face-to-face elements of education. “That’s not just the formal teaching, it’s the social aspects of a university education.” He accepts there’s likely to be more mixed-mode teaching and more online learning, but it’s unlikely to be even the majority of the average university’s teaching. Fortune favours the brave, though. The University of Derby has been running distance learning degrees for nearly 10 years. But when it invested in its online infrastructure and courses two years ago and began to run “virtual open days”, it saw the number of enrolled students double – and the university’s online distance learning project lead, Julie Stone, says that “trajectory is likely to continue for” the foreseeable future. It could be those universities that fail to adapt that will lose out. n EcucationInvestor • July/August 2010
EducationInvestor
Who’s Who in Education 2010
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interview: philip bujak
40
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EducationInvestor • July/August 2010
interview: philip bujak
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The Montessori story Philip Bujak tells Sara Utecht why his charity is at a tipping point
F
or the uninitiated, Montessori schools are the strict preserve of the well-to-do. The alternative teaching method, which is named after its pioneer, the Italian physician and educator Maria Montessori, is built on the idea that children are the best people to manage their own learning process. The theory goes that the most effective way to teach is to remove any obstacles to this natural development, and facilitate children to learn at their own pace. All in all, very Notting Hill. But as the method begins to make in-roads into the state sector, Philip Bujak, chief executive of the Montessori St. Nicholas Charity since 2004, is determined to tackle what he calls this “common misconception”. “This idea that Montessori is purely for those who can pay for private education is just an accident of history really,” he tells me, when we meet at the charity’s central London offices. “The Montessori way of teaching was developed in the slums of Rome, so it was never solely intended for the privileged few – if anything it is more beneficial for those from a deprived background. It works for all children who want to learn.” To date, of course, the Montessori method has only really flourished in the private sector. Despite its lowly origins, Montessori is more likely to appeal to parents in London’s affluent ‘nappy valleys’ than local authority commissioners. Crucially, however, Montessori is a method, not a trademark – Bujak’s organisation is not the sole provider – and the private sector does not have exclusive rights to the brand. “The method was a gift from the founder,” he says. “It’s just that private schools are the ones that have accepted it – the state has often been very resistant to change, and never really gave it a chance.” Slowly, this is starting to change. Bujak has already brought the method into several state schools, the most advanced of which is the Gorton Mount Primary School in Manchester. His big ambition now is to bring a Montessori state school to the east-end of London. So far, though, this is a project that’s encountering a certain amount of resistance. “We just had a big disappointment with Barking and Dagenham council,” he explains. “We were trying to get a Montessori state school set up in the borough, but they turned us down because they wouldn’t employ teachers without a degree.” EducationInvestor • July/August 2010
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▶
interview: philip bujak
▶
It’s not just the local authorities who have mixed feelings about the organisation’s move into state education. If parents have shelled out thousands of pounds on a private school offering a Montessori education, then they might be unpleasantly surprised to hear the local state school is providing it for no extra cost. In other words, what happens to the Montessori private sector if the public sector truly embraces the method? “I’ve got complaints about that already,” concedes Bujak. “But we were set up in the fifties to promote the method, not private schools themselves.” Anyway, Bujak does not accept that expanding Montessori into the public sector will necessarily take business away from independent operators. “We would never intentionally undermine private schools,” he says. “The state school project is just an initiative to open more people’s minds to the benefits of this way of education.” Bujak is well placed to spearhead this initiative, having worked for a number of years as a teacher and a head teacher in traditional schools. Oddly enough, though, he never worked at a Montessori school (“although I did employ a couple of Montessori teachers”, he stresses). “But since coming here I can really see the benefits of it,” he goes on. “It’s the perfect educational system, and I do wish I’d been educated in it when I was a teacher.” The former head’s whole-hearted conversion to the Montessori 42
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way has clearly helped to drive the group forward. But he is not shy about extolling the benefits he himself has brought to the organisation. “I do feel that I’ve brought about something of a seismic change,” he says. “What we have is a proper movement now, not just a pipe dream. We have a real platform from which we can espouse our values.” The statement may sound a little on the immodest side. But Bujak has been remarkably active in his leadership role. “There is now a national association with various regional bodies,” he points out. He also counts raising awareness around Montessori as a key achievement in itself. “We get people like you wanting to talk to us now,” he jokes. “People do actually want to know where we stand on issues around education.” So just where does Bujak – and his charity – stand on the many educational issues facing the coalition government? In one respect, he is in full support of the government’s plans to make it easier to set up new schools; this would, of course, help him with the creation of Montessori schools. But when I ask him his views on parents establishing their own schools, perhaps unsurprisingly, there is a note of caution. “I worry about the impact it will have on existing schools,” he says. “I think it is a very good thing that it will be easier for charities and other organisations to set up schools… But the idea EducationInvestor • July/August 2010
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interview: philip bujak
Snapshot: Philip Bujak Bujak was educated at both state and private schools, before spending a period of time in the Junior Leaders Regiment. He then went on to read English and European political history at the University of East Anglia. Bujak then moved on to teach history at several different schools, before being appointed headmaster of Stover School for Girls in 1994. “A boarding school is a pretty demanding environment,” he admits, “and when that headship came to an end I decided I wanted to do something different. That’s how I came here.” As well as his duties as chief executive of the Montessori charity, Bujak also finds the time to write a number of articles on local history and has written books on military history and Hyde Park. He has three children, and in his spare time enjoys various sports. Describing himself, he says, “I usually always start the day with a smile, but I don’t suffer fools gladly”.
of parents doing it makes me wonder just where the leadership that is necessary will come from.” Children, after all, grow up, raising questions about whether parents will really be in this for the long-term. “With schools you need long term sustainability – these are children’s lives we are talking about – and you need a system in place that can give them a solid minimum of 13 years of education.” It’s not the only policy concerning Bujak. He welcomes Michael Gove’s initiative to allow more schools to become academies, but is sorely disappointed that the offer was not extended to early-years education (that is, for the under fives). “[It] is often overlooked and it seems to have been again,” he says. “It’s really important to get education right from the start, so I am disappointed that academy status hasn’t been extended to this sector. But it is still very early days and we have to give the new government a chance.” One of the key issues he is hoping Michael Gove and his team address, and sooner rather than later, is the thorny topic of the Early Years Single Funding Formula. Nurseries are currently being told that the 12.5 hours a week of free childcare they provide to parents has to be raised to 15. This, many providers, say, is unworkable without a substantial increase in funding – from the £3.50 an hour the government currently offers, to as EducationInvestor • July/August 2010
high as £7. “This has been debilitating for a lot of our schools,” Bujak says. “We don’t want to exclude anyone, but this is driving many of our schools to closure and making others go completely private. That really isn’t what we want at all.” There’s another problem that ministers so far seem reluctant to address. If Montessori’s infiltration of the state sector is to succeed, there will have to be a greater recognition of the Montessori teaching qualification, which is currently snubbed by the state. “We’re not saying it should be on the same level, but it’s extremely short-sighted of them not to recognise it at all,” he says. (It doesn’t seem to be deterring students from enrolling on Montessori teacher training courses, though, he adds.) For the most part, though, Bujak is enthused by the prospect of new political leadership in education. “I really hope that the new government will come and talk to us,” he says. “It’s too early to really judge at the moment but I’d say they have made a satisfactory start.” You could apply the same judgement to Montessori itself. It seems to be performing well in the six state schools currently trialling its methods. If Bujak can forge a good working relationship with the new government, the next few years could see the Montessori method blossom in the UK. But as Bujak himself concedes, “there is still a mountain to climb”. n 43
company profile: european electronique
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OK computer
The academy revolution should mean good times for European Electronique, its chief executive tells Jonn Elledge
F
or the last few years, if an ICT firm wanted to become a major schools supplier, there’s been a handy shortcut: the Building Schools for the Future (BSF) programme, which allowed the lucky few to rack up business worth tens of millions and get their products into dozens on schools with just a few contract wins. Those on the outside looking in as rivals reinforced their market share could be forgiven a twinge of jealousy. Now, though, the programme’s days appear to be numbered, and the government’s big idea is letting schools spend their money how they want. Those who bet against BSF may have made the right call after all. “When BSF was first announced,” says Yolanta Gill, the chief executive of Oxfordshire-based European Electronique (EE), “we decided it was just too large and too risky. So we decided to focus on academies.” The decision appears to have paid off and the firm is now the market leader, working with more than 50 of the 200 or so existing academies. “The extension of the academy programme,” she adds, “is very good news for us.” Like many other firms in the ICT sector, European Electronique never set out to specialise in education. But the size of the
44
schools market, combined with the investment and technical advances of the last decade, have made it a big part of the firm’s business. The company has a number of corporate customers, but public sector work provides about 70% of its revenues, and education is by far the biggest share. The firm’s products run the gamut of the school computing world. As well as providing the desktop units themselves, it offers networking equipment, client devices, telephony and managed services. As a result, the firm feels it can offer a pretty comprehensive package to schools in need of a network. “A lot of our customers are ‘green field’,” says Gill. “They basically start off as empty buildings.” All this is a far cry from the firm’s roots in the eighties selling and maintaining printer systems. The company was the brainchild of salesman Mike Gill (Yolanta is his wife) and computer engineer David Street, who met working for a rival printer firm and decided they could do better. From there the firm grew in a fairly ad hoc way, adding products and services based on market demand rather than any grand plan. So the search for a product that could be cross-sold with its printers led the firm to grab a share of the market for desktop computers. The need to link these things together took EducationInvestor • July/August 2010
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company profile: european electronique
Snapshot: Yolanta Gill Yolanta Gill has followed a faintly unusual career path. A lawyer by training, she’d found that a detailed knowledge of the law of her native Poland was of depressingly little use in Oxfordshire. Instead, she decided to launch a business career, studying for an MBA and joining her husband as the firm’s managing director when Street retired in 1996. Although Gill, M. remains a director and shareholder, he stepped aside as chief executive to let Gill, Y take the reins when he retired. Business and marriage don’t make a good combination, she says. “It’s not a good thing working with your husband. You just end up talking about work all the time”. What does Mike spend his time on now? “Fishing, mostly.”
it naturally to networking equipment, cabling and wireless telephony. “Once you’re in a market and start winning some projects,” says the firm’s current CEO, “the next step comes quite naturally.” Much of the firm’s public sector work has come through its strong position on a number of ICT framework arrangements. Besides being one of Becta’s approved infrastructure suppliers, the firm is on frameworks including the public sector-wide “buying solutions” framework, the Cambridge University networking frameworks and various regional arrangements. Through these, the company has built up contracts with more than 500 schools and 200 further education colleges. (Like so many groups working in the latter sector, though, the firm was hit by the collapse of the Building Colleges for the Future programme last year, winning contracts only to find, in Gill’s words, that “there was no money. This,” she adds, stoically, “was a problem for us.”) Although the firm made a conscious decision to stay out of BSF, the size and dominance of the programme does seem to have caused a few wobbles in the years since. A couple of years back, when delivery agency Partnerships for Schools took over the academies initiatives, the firm decided it was time to try again. The results were not encouraging. After 18 months and £300,000 of bid costs the firm found itself one of the last two bidders in the running for Hartlepool’s £12 million ICT contracts. “I thought we’d done very well. I really thought we were going to win it.” But in December last year, the council announced that the contract would go to Northgate. It was, says Gill, a “terrible December for us.” It did rather seem to validate the firm’s decision to stay out of BSF, however. “At the same time we won three other projects worth £5 million. They cost us a fraction of what we spent bidding for BSF.” One reason Gill gives for the firm’s continuing absence from BSF is path dependency: once you were out, it was much harder to get EducationInvestor • July/August 2010
back in. “In the first few years it was almost a requirement to have some proven track record in the BSF market,” she says. As a result, once a few firms like Ramesys and RM had won a few contracts, they were disproportionately likely to keep dominating the bids. “It was quite difficult for someone else to get into the BSF market.” The situation has forced the company to develop other strengths, though. The firm has built up a position as one of the main ICT suppliers working with academies, the independent state schools that the new government is so keen to expand. In the early years of the initiative, from 2003-2006, the firm wracked up the contract wins comparatively slowly, winning eight academies in four years. In 2007, though, business rocketed, and the number of contracts hit double figures in each year since then. Now it works with around a quarter of all academies. Gill declines to speculate too much about future ICT budgets. She accepts they’ll “probably get squeezed,” but argues that there will be continued investment, “because these days you can’t run schools without ICT”. Even if budgets do get crunched, the scramble for savings could force them to outsource their entire ICT function – this, EE is hoping, will provide plenty of business in itself. The firm’s growth has been shaken over the last year or so. Its turnover in the year to March 2009 hit a record of £36 million, and the firm was predicting it would go even higher in the following year. In the event though, the recession and a relative paucity of contract wins meant it dropped to £34 million. Profits dropped, too. These troubles, Gill predicts, are behind them now. Even during the dark days of 2009, despite a painful increase in the cost of sales, the firm remained solidly in the black. Now, thanks to projects currently in the pipeline, she says, “I would expect that hopefully we’ll be doing £40 million this year, if not more. Two and a half months in we’re certainly up on last year.” The firm takes a less freewheeling approach to business than it did in the eighties, Gill admits. “The more you grow, the more you move from entrepreneurial sprit to something more organised and structured. That’s where we are now.” But, she adds, she’s still willing to follow wherever opportunities lead. “My strategy is never to have a stretegy.” n
In figures Year to
31/03/08
31/03/09
Turnover
£30.7 million
£36.0 million
Cost of sales
£27.5 million
£32.8 million
Gross profit
£3.2 million
£3.2 million
Operating profit
£1.3 million
£972,000 45
finance
Hardman & Co 4 - 5 Castle Court London EC3V 9DL United Kingdom
Phone Roger Hardman or Robert Justice on 020 7929 3399
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Or email research@hardmanandco.com
EI index Tel: 020 7929 3399 Fax: 020 7929 3377
T
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he coalition government’s first budget wasn’t a happy experience for the education sector. Departmental spending could fall by as much as 25% over the next four years. – and although Chancellor hardman_ad.indd 1 George Osborne said he recognised the demands on the education system, he pointedly didn’t guarantee to protect it. Even before the budget, fears that spending cuts could trigger a second wave of recession were hanging heavy on the market. The EducationInvestor Index was down by 4.43% during May, although still outperformed both the FTSE100 and FTSE AllShare Indices, which were down by 6.57% and 6.64% respectively. Employer sentiments remain negative, particularly in the public sector, and the share price of recruitment firm Savile Group was down 13.3% across the month. Even worse, though, was that of training and HR consultancy Penna, which was down 13.6%, and fell 19.2% on the day the group published its results, closing at 147.5 pence on 4 June. The results showed that pre-tax profit had fallen by 42%, despite rising revenue, as it was hit with both the costs of acquisition of online recruiter Barker and some redundancy costs. The group said business has been affected by an announcement by the new coalition government about its plan to freeze public sector recruitment. Penna is expecting a stronger second half as downsizing projects in the public sector begin, and there’s a pickup in recruiting activities in the private sector. Ominously, though, the group says it expects the trading environment to remain challenging. The EI Index top performer of the month is training and assessment provider Melorio. On 19 May, Pearson, the international education and information group made an all-cash bid for Melorio, valuing the firm at approximately £99 million. The offer will be 225 pence in cash for each Melorio share, a 31% premium to the closing price of 171.5 pence on 17 May. The acquisition is expected to provide a hefty boost to Pearson’s earnings in 2011. AEC Education, meanwhile, has announced a great set of results this month. Revenue has more than doubled to £14 million and profit topped £1 million for the first time. AEC’s business strategy is clearly working well for the group, as demand for UK academic and business courses in emerging markets continue to increase. The group’s performance was further boosted by Malvern House, which it acquired in July last year and which contributed revenues of £5.5 million and profits of £317,000 in the half year since the acquisition. Through Malvern House, AEC believes, the group will be able to drive further growth by selling to a wider student population in emerging markets. With a healthy cash balance in the bank and loan facility, AEC has plenty of funding for further expansion strategy. However, despite the excellent performance, its share price has gone nowhere in the past six months – largely due to AEC’s tight shareholder structure and the lack of liquidity. n Yingheng Chen, Hardman & Co Market cap total at 28.05.10
£30.8bn
Market cap adjusted at 28.05.10
£3.1bn
Index at 28.05.10
97.38
Market cap total at 30.04.10
£32bn
Market cap adjusted at 30.04.10
£3.2bn
Index at 30.04.10 Change
101.89 -4.4%
46
Compiled by 28 June 2010 Market Company
Share Share Market Price price (p) price (p) cap (£m) change Ticker 30.04.10 28.05.10 (%)
AIM
AEC Education
AEC
18
16.5
7.3
LSE
Bloomsbury Publishing
BMY
111.5
107
79.0
LSE
Capita*
CPI
799
780.5
4,828.1
LSE
Compass*
CPG
534.0
LSE
DRS Data/Research Services DRS
15.0
15.0
4.9
0.0
535.5 10,073.7
-8.3
3/2/09 11:34:29 -4.0
-2.3 0.3
AIM
Education Development
EDD
136.5
109.0
61.9
-20.1
AIM
Electric Word
ELE
4.3
4.13
9.8
-2.9
LSE
Findel
FDL
24.0
22.8
111.3
-5.2
AIM
Gladstone
GLD
33.3
33.5
18.5
0.8
LSE
Havelock Europa
HVE
15.8
13.8
5.3
-12.7
LSE
Holidaybreak
HBR
269.5
273.8
193.2
1.6
AIM
Huveaux
HVX
11.3
11.3
17.1
0.0
AIM
ILX
ILX
22.5
22.0
5.2
-2.2
LSE
Informa*
INF
396.8
378.0
2,270.6
-4.7
AIM
Melorio
MLO
166.5
223.5
88.1
34.2
LSE
Mouchel
MCHL
197.0
180.0
202.3
-8.6
AIM
NetDimension
NETD
23.0
24.3
6.1
5.4
LSE
Pearson*
PSON
1,051.0
950.5
7,714.1
-9.6
AIM
Penna
PNA
217.5
188.0
48.5
-13.6
LSE
RM Group
RM.
177.5
176.0
164.4
-0.8
AIM
Savile Group
SAVG
37.5
32.5
4.8
-13.3
LSE
Serco*
SRP
630.0
611.0
3,010.9
-3.0
AIM
Stagecoach Theatre Arts STA
43.5
44.5
4.4
2.3%
LSE
Tribal
TRB
74.3
66.5
62.3
-10.4
LSE
Unite Group
UTG
218.6
192.0
307.7
-12.2
LSE
VT Group*
VTG
748.0
742.0
1,343.0
-0.8
LSE
Wilmington
WIL
144.5
140.0
115.7
-3.1
PLUS
Woodspeen Training
WSTP.PL
44.5
44.5
9.1
0.0
* Weighted to 5% in total index valuation
THIS MONTH’S... TOP five PERFORMERS Melorio NetDimension Stagecoach Holidaybreak Gladstone
34.2% 5.4% 2.3% 1.6% 0.8%
BOTTOM FIVE PERFORMERS Education Development Penna Savile Group Havelock Europa Unite Group
-20.1% -13.6% -13.3% -12.7% -12.2%
HOW THE INDICES COMPARE EducationInvestor Index FTSE 100 FTSE All-share Index
-4.43% -6.57% -6.64% EducationInvestor • July/August 2010
finance
www.educationinvestor.co.uk
BSF league tables Construction league Company
No. of BSF contracts at financial close
Balfour Beatty
10
Willmott Dixon
6
Carillion
5
Bouygues
3
Laing O’Rourke
3
Facilities management league Company
No. of BSF contracts at financial close
Carillion
6
Mitie
4
Haden Building Management
3
Lend Lease
2
Interserve
2
Skanska
2
Ecovert
2
ICT league Company RM
No. of BSF contracts at financial close 17
Ramesys
7
Northgate
3
Civica
3
Carillion (plus sub-contractors)
3
Funders league Company Barclays
No. of BSF contracts at financial close 10
Nationwide
9
SMBC
6
NIBC
2
RBS
2
Nord
2
Equity provider league Company
No. of BSF contracts at financial close
Carillion
6
Laing O’Rourke
3
Transform
3
Equitix
3
Barclays
2
Bouygues
2
VT Education & Skills
2
O
ne of the more notable developments in the Building Schools for the Future (BSF) market this month was the appearance of the following statement, the government’s official line on where we are and what’s happening. The Department for Education, it promised, “has not taken any decisions on the BSF programme. The Department is reviewing BSF to ensure that when we build schools for the future, we do so in a more costeffective and efficient fashion. Any future rollout decisions will be announced in due course.” All very reasonable and innocuous, one might think. Except that the statement was posted on the website of delivery quango Partnerships for Schools (PfS). “In effect,” one slightly baffled procurement lawyer told EducationInvestor, “PfS has been forced to publically announce that it’s ineffective and inefficient.” At time of writing, we’re still on the edge of our seat waiting for news on how the new government plans to turn BSF into the lean, mean school-building machine that it desires. Officially, in the market it’s been business as usual. But schools secretary Michael Gove has found an impressive number of ways of rephrasing “I’m not telling you, nyah nyah nyah” in response to parliamentary questions, and anecdotally the lack of information has split the market down the middle. Those working on schemes in the early stages of procurement have been holding back, wary of investing too much time or money in something that may never happen. Those in the later stages, though, have scrambled to appoint bidders and reach financial close, in the desperate hope of getting to a point from which funding cannot be snatched back. So a number of schemes have continued edging forward. The biggest news – and the only change to the league tables this month – is the financial close of Cambridgeshire’s £110 millon scheme. It’s only the second close for Galliford, denying it a place in the construction leaders’ board. But it does mean that Nationwide is gaining on leaders Barclays in the funders league, while Equitix and Mitie both pull into second place in the equity and FM leagues respectively. Elsewhere, two councils named a pair of construction giants as preferred bidder for their schemes. The £270 million Barking scheme has gone to a consortium led by Laing O’Rourke. In Oldham, meanwhile, a £170 million scheme will go to Balfour Beatty. If the government goes through with long standing threats to break the giant, council-wide schemes into much smaller units, of course, it’ll blow the league tables right open. Smaller, local players will suddenly find they’re able to compete for contracts previously only open to the construction giants. Watch this space. n If your organisation is involved in BSF, you can keep us updated by sending details of the project to jonn.elledge@investorpublishing.co.uk
Source: Partnerships for Schools
EducationInvestor • July/August 2010
47
finance
www.educationinvestor.co.uk
deals US buyout for EducationCity
involves an initial cash payment of £1 million, a performance related pay of £1.8 million over a further three years.
Company: Archipelago Learning Transaction: Acquisition Target: EducationCity Consideration: $87 million (£59 million)
Compass continues acquisition spree
Archipelago Learning, a Nasdaqlisted online education company, has acquired UK learning platform company EducationCity in an $87 million (£59 million) deal. EducationCity will continue to operate as an independent business unit from its offices in Rutland and Illinois.
Company: Compass Group Transaction: Acquisition Target: Southeast Service Corporation Consideration: $65 million (£45 million)
Blue Max acquires the Banner Group
Compass Group has acquired Southeast Service Corporation, a Tennesseebased supplier of support services to the education sector. The deal, which follows the group’s recent acquisition of France’s Caterine Restauration, is valued at $65 million.
Company: Blue Max Transaction: Acquisition Target: The Banner Group Consideration: Undisclosed
EQT buys Swedish schools giant
School uniform supplier Blue Max has bought rival schoolwear firm the Banner Group. The deal, the value of which was not disclosed, will create the UK’s largest school uniform supplier with a turnover of over £25 million.
Cohort acquires Abacus EW Company: Cohort Transaction: Acquisition Target: Abacus EW Consultancy Consideration: £2.8 million AdvisErs to Cohort: Investec Bank: Keith Anderson, Daniel Adams Pitmans: Andrew Peddie, Rishi Sharma Cohort, an Oxfordshire-based provider of consultancy and support services to the defence sector, has acquired Lincoln-based training business Abacus EW Consultancy. The deal 48
Company: EQT Transaction: Acquisition Target: Academedia Consideration: SKr 2.5 billion (£213 million) Swedish private equity firm EQT has acquired the country’s largest schools company Academedia, in a deal that values the company at SKr 2.5 billion (£213 million). Academedia runs 150 schools with 45,000 students across Sweden.
Granada acquires W3 Insights Company: Granada Learning Transaction: Acquisition Target: W3 Insights Consideration: Not disclosed Educational publisher Granada Learning has acquired W3 Insights,
a provider of psychometric attitude measurements for schools for an undisclosed sum. Granada Learning managing director Adrian Eaglestone said W3 would “be a natural complement to our popular Cognitive Abilities Test (CAT), which is used to assess children’s reasoning capabilities, and so will help broaden teachers’ understanding of their pupils”.
Management buyout for Cliff Nursery Silkstone Company: Private group, led by Julie Herbert Transaction: Management buy out Target: Cliff Nursery Silkstone Consideration: Undisclosed Advisers to buyers: Ironmonger Curtis; Strategic Corporate Finance: Andrew Coates The management of Cliff Nursery Silkstone, a nursery for children aged up to five, have acquired the facility from Alpha Plus Holdings, a subsidiary of Delancey Real Estate Asset Management. The terms of the deal were not disclosed.
Shareholders rescue Wynnwith from administrators Company: Morson Wynnwith Transaction: Acquisition Consideration: £7.8 million Advisers: Brewn Dolphin Securities: Matt Davis In a deal worth £7.8 million, Morson Wynnwith Group, a joint venture between Manchester technical firm Morson Group and the existing shareholders of Wynnwith, have acquired the group from administrators. EducationInvestor • July/August 2010
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Pearson on track to get Melorio
AdvisErs to Pearson: Freshfields Bruckhaus Deringer: William Lawes, Stephen Hewes and team
Company: Pearson Transaction: Acquisition Target: Melorio Consideration: £99.3 million AdvisErs to Melorio: Cenkos Securities: Stephen Keys, Beth McKiernan Hawkpoint Partners: Simon Gluckstein, Emily Ashwell Lazard: Nicholas Shott, Giles Roshier
Education and media giant Pearson has agreed terms on a recommended cash offer to acquire Melorio, a London-listed vocational training company. The offer is 225 pence per share, valuing the company at around £99.3 million and representing a premium of around 31.2% to the share price on the day the offer was made.
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The dealmaker: Andrew Peddie Corporate partner, Pitmans Andrew Peddie, a corporate partner at law firm Pitmans, advised on Cohort’s acquisition of the Abacus EW Consultancy. Andrew joined Pitmans in 2009 and specialises in corporate M&A, largely in the technology and defence areas. Before joining the firm he worked for Andersen Legal and Olswang. He took a degree in history at York University before going on to train at the London College of Law. In his spare time Andrew enjoys tennis, golfing and the occasional squash game. At the moment, though, most of his free time is spent constructing a clay oven in the garden, after he was inspired by the River Cottage ‘bread book’. What did you like about the Cohort deal? “It was an opportunity to work again with a client group I have acted for over the last four years. But I’ve not acted for the particular subsidiary, Mass Consultants, that made the acquisition. This gave me the opportunity to complete a transaction within a short timescale for them.” What has been your best deal to work on? “Over recent years, probably Cohort’s acquisition of SEA Group, which was undertaken during the autumn of 2007 and was a major transaction featuring a number of points of legal complexity. SEA had a relatively large number of shareholders, and so the deal had to be structured as an offer, rather than through a share purchase agreement that everyone signed up to. There were also different levels of consideration for different groups of shareholders, the tax structuring side was complex, and the deal was partly funded by a placing of shares. So there was a lot going on.” What would your dream deal be? “Another similar transaction to the Cohort/SEA deal!” What is the best thing about your job? “The best part is that it is both technically demanding and involves working closely with people in a number of different disciplines. There is also the sense that it involves working towards the clearly defined goal of getting the deal completed, and there is a clear satisfaction when that is achieved.” And the worst? “The flip side of working to a clearly defined deadline and timescale is that often you are juggling a range of commitments and that can only be coped with by working anti-social hours as you get towards completion. But you tend to get used to that.” Pitmans is a Thames valley law firm with offices in Reading and London. The firm has been established for around 150 years, and as a member of the European law network Interact it is part of a network with offices in 15 European cities. EducationInvestor • July/August 2010
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company results AEC International teaching group AEC Education has reported a 36% rise in its profits for the year ended 31 December 2009. The company saw its profits rise to £1.8 million, compared to £0.8 million in 2008. Meanwhile revenue more than doubled, from £6.1 million to £14 million, helped by strong organic growth and contributions from acquisitions. AEC chairman Liam Swords said that the results made it “another very successful year for AEC”. “The acquisition of UK-based Malvern house in July 2009 was another milestone in the group’s development,” he went on, “It not only substantially increases group revenue and profits, but it also provides AEC with a strong brand in English language training in the UK. Going forward the board believes there are opportunities to develop synergies with the group’s existing language training offering in Asia and build the Malvern House brand internationally. “With strong cash balances AEC is well placed for further strategic development across all of its activities, and the board remains confident that the group will continue to show growth in revenues and profits in 2010 and beyond,” he added.
EDI Education Development International (EDI), a provider of qualification and assessment services, has seen increased
revenues and profits for the six month period ended 31 March 2010. EDI reported an increase in revenue of 5.2% to £13.4 million over the period, compared with £12.8 million in 2009. Operating profit rose from £3.6 million in 2009 to £3.9 million, and adjusted operating profit rose by 8.1% to £4.3 million compared with £3.9 million the previous year. EDI chief executive, Nigel Snook, said: “Performance during the first half of the year demonstrates that we have been able to consolidate the significant gains made in the same period last year. “In the UK we have made progress in the vocational qualifications market and our international business continues to grow. “While there are uncertainties in the UK market as a result of pressure on public funds there are positive early signs of the government’s support for vocational education. We are continuing to invest in our staff and systems to reinforce the quality or our business and its capacity to grow.”
ILX Group Profits at ILX Group, a provider of e-learning software and business training, have dropped by a third. The company posted pre-tax profit of £1.1 million for the year ended in March, compared with £1.7 million the year before. Revenue fell to £14.7 million from
£15.6 million, while operating profit before exceptional items fell from £2.09 million to £1.5 million. But the firm said it had strong cash generation and has reduced net debt by £1.5 million. ILX Group chief executive Ken Scott commented: “The business was performing well but set against a difficult macroeconomic backdrop. “The upturn in the UK still looks some time away but outside of the UK is a different matter as many areas around the world are more vibrant and are showing good signs of recovery. “In the year to 31 March, 2010, revenues attributable to the group’s e-learning software products accounted for 44% of revenues and 62% of gross profit. “All of these revenues come from the company’s proprietary software products. “Revenues across the group for the current year to date are up 10% and overall, the outlook is one of steady improvement.”
Penna Recruitment and training firm Penna Consulting has posted a decline in profits in its latest results. In preliminary results for the year to 31 March 2010, Penna said that pre-tax profits had dropped to £3.6 million, from £6.0 million last year. The firm credited the decline to charges related to the acquisition of Barkers Group.
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Excluding one time charges, pre-tax profit rose by 22% to £7.3 million, and the acquisition helped revenue rise by 72%. Penna said it was only expecting marginal profits for the first half of the year, however, sending share prices falling by over 10%. The company has recently been hit by the government’s plans to streamline the
public sector. Analyst Caroline De La Soujeole of Seymour Pierce, cut the shares to a hold recommendation from a buy, pointing to a subdued outlook. She commented: “The outlook for 2011 is mixed. The group derives two-thirds of its revenues from recruitment activities, of which approximately half is in the
finance
public sector. The coalition’s decision to freeze recruitment in the public sector will adversely affect this part of the business. “However, Penna’s career transition business is expected to show strong growth in 2011 and generate the largest share of profits, although this will be second-half weighted.” n
The Big Hitter: Gary Browning Chief executive, Penna Gary Browning is chief executive of global HR consulting and training group Penna. Gary has had what he calls an eclectic career. He is a chartered accountant, having studied at Warwick University and qualified with KPMG. After that he spent 12 years at advertising giant WPP, before joining Penna in 2002. He joined the board in 2005. Gary is married with two sons aged 18 and 20. He is an avid sports fan, and a keen supporter of Liverpool FC, regularly accompanying his sons on trips to Anfield. How do you feel Penna has performed recently? “Overall we are very pleased with the performance. Over the last five years the company has reinvented itself, and in the year ended in March 2010 we achieved outstanding profitability. Last year we also made a major acquisition, with the Barkers Group, and were ranked sixth in the Sunday Times Best Companies to Work For in 2009 list.” What are your plans for the company? “The next year brings challenge and opportunity in equal measure. The public sector restructuring means that our central government recruitment activities have already been impacted with the freeze. On the other hand, our outplacement and restructuring businesses are likely to be very busy indeed over the next three to five years. Health and education are important sectors for Penna and change across these sectors drive activity for us.” What does your job as chief executive entail? “A cliché, I know, but no two days are the same. I have three groups of customers I need to satisfy at all times – employees, clients and investors. Most of my days are spent balancing the three. But it starts with employees: their engagement drives client satisfaction which in turn drives shareholder value.” Why did you choose to work in this sector? “I am fascinated by people, and Penna is all about people. Earlier in my career, a long time ago, I worked for a photocopier distribution group – try getting passionate about that.” What’s the best part of your job? “It’s the diversity and the fascination with what we do – you can really get passionate about people, their development and careers.” And the worst part? “It’s the short termism which comes from being a PLC. I wouldn’t always take the same decisions if this was a privately held company.” HR consulting group Penna offers services including career transition, recruitment, marketing, communications, and board and executive coaching. The group has a network of offices across Europe, the US, Canada, South America, the Far East and Australasia.
EducationInvestor • July/August 2010
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On the job Islington schools get a bad press. Everyone from Labour ministers to Tory mayors seem quite happy to live in the north London district – providing they can send their kids to school elsewhere. Now it looks as though they may have had a point. Canonbury Primary, the school attended by Boris Johnson’s kids, has been placed in special measures by Ofsted. It’s gone downhill on almost every measure since its headteacher Jay Henderson was fired last year for gross misconduct. His crime, reports say, was watching porn on his office computer. Ofsted’s last report actually had been very keen on Henderson. “The headteacher,” it wrote, “is an inspirational leader who leads by example.”
Small mercies Running a quango in a time of fiscal retrenchment is a nerve-wracking experience: you never know when a minister will carelessly announce the date of your retirement. So it was that Becta chief executive Stephen Crowne backed out of his planned appearance at a recent Govnet conference at just a few hours’ notice, on the not unreasonable grounds that his agency had been abolished the previous day. Partnerships for Schools’ Tim Byles, too, failed to put in an appearance thanks to a road accident, which at least gave him an excuse to avoid questions about his own agency’s future. (He’s now doing fine.) But Peter Lauener, chief executive of the Young People’s Learning Agency, did show his face. “We’re now seven weeks into existence,” he told the audience
MEDIA WATCH n Not everyone is convinced by the
academies revolution. The Guardian’s Simon Jenkins wrote that talk of freedom was actually little more than a ministerial power grab. “If Gove wants to free schools of bureaucracy he should look to the beam in his own department’s eye,” he wrote. “He can call off his health, safety and
EducationInvestor • July/August 2010
cheerfully, “but we’re still here.”
Reputational damage The Learning & Skills Council, you’ll recall, never was very good at watching its finances. In June the Serious Fraud Office convicted Paul Kent, a former director at the agency’s Shropshire branch, for corruption. He’d taken £300,000 in kickbacks on contracts valued at around £1.3 million. Kent was imprisoned for four and a half years. Three others were convicted, too. employment mafias. He can disband his curricular centralism. He can abolish more than one measly quango.” Instead, “dreary abuse of local democracy is being mounted yet again to cloak a bid to ‘nationalise’ schools.” (Guardian, 27 May)
n An editorial in the Financial Times,
meanwhile, called for more radical reforms to save England’s schools. “The country’s root problem is that while it
The information vacuum You may have noticed a banner that’s quietly appeared on a whole range of government websites lately. “A new UK government took office on 11 May,” it notes helpfully. “As a result the content on this site may not reflect current government policy.” It’s bad enough that they’re keeping quiet about what policy is. Now, it turns out, they’re actively telling us what policy isn’t. n has a wealth of excellent schools, they are open only to the better-off. Schools that are available to deprived children are, far too often, appalling.” The solution, it said, is to distribute places at oversubscribed schools by lottery rather than geography, taking house prices out of the equation. The real test of the school reforms, it concluded, will be “how effectively they undermine the hereditary principle in British education”. (Financial Times, 25 May) 53
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companies index 3ES Enterprises Abacus EW Academedia AEC Education Archipelago Learning Balfour Beatty Banner Group
48, 14, 37, 46, 8, 14, 11,
Barclays
50,
Barkers Blackboard
11,
Blue Max Bouygues BPP Capita
9, 37, 18, 26,
Carillion Caterine Restauration Cenkos Securities Centrica Civica Cohort Compass
22, 48, 46,
CrossKnowledge
17 49 48 50 48 47 48 47 51 38 48 47 38 46 47 48 49 9 47 49 48 37
Delancey Real Estate Asset Management EC Harris
48 26, 27
Education Development International EducationCity EQT Equitix
EducationInvestor • July/August 2010
50 8, 48 14, 48 14, 47
14 5, 44, 45 Eversheds 9 Findel 46 Freshfields Bruckhaus Deringer 49 Frog 29 Futurelab 4, 22 Galliford Try 14 GEMS Education 13 GlaxoSmithKline 9 Haden Building Management 47 Hardman & Co 46 Havelock Europa 4, 11, 19, 46 Hawkpoint Partners 49 Holidaybreak 46 ILX 46, 50 Interserve 47 Investec 48 Ironmonger Curtis 48 JHP Training 34 Kaplan 37 KPMG 18, 51 Laing O’Rourke 47 Lazard 49 Melorio 3, 5, 32, 33, 46, 49 Mitie 47 Mouchel 46 Network Rail 9 NG Bailey 11, 19 NIBC 47 Equity Solutions
Northgate
European Electronique
Parthenon Group Pearson Penna Pitmans
45, 25, 1, 3, 5, 32, 34, 46, 46, 50, 48,
Providence
45,
Ramesys RBS Resource Development Int. RM
45, 46,
Savile
26,
Serco Seymour Pierce Shell Skanska SMBC
Southeast Service Corporation Stagecoach Theatre Arts Strategic Corporate Finance Transform Tribal Trowers & Hamlins
33, 4, 20,
Unite Vinci VT W3 Insights Willmott Dixon Wilmington Woodspeen Training
8, 18,
47 34 33 49 51 49 14 47 47 37 47 46 46 51 9 47 47 48 46 48 47 46 21 46 14 46 48 47 46 46
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