Education

After a bruising spell during the COVID-19 pandemic, the sector is now facing a range of challenges and opportunities.

Alongside many other sectors of the economy, government support helped limit the number of insolvencies across the sector. This has started to edge up again in recent months, resulting in our stress rating increasing to moderate for Q2 2023.

Industrial action and budgetary pressures resulting from rapid inflation are creating immediate operational challenges across FE, HE and public and private schools. This, in turn, places financial challenges throughout the education supply chain. Further ahead, the prospect of visa caps for international students, elevated inflation and significant debt levels may precipitate urgent restructuring activity. This is particularly relevant for the higher education sector which has invested significantly in new facilities and where, for some UK students, alternatives such as skilled apprenticeships or ‘school leaver’ programmes are increasingly appealing.

In the M&A market we’ve observed an upward trajectory of deal volumes since Q1 2022. In the last two quarters (Q4’22 and Q1’23) deal volumes reached their highest level since Q2 2019. Consolidation activity within the nursery sector, in particular, has played a significant part in the volume increases. Ongoing uncertainty, not least as a result of rising energy costs increased the prevalence of distress amongst weaker players. That did however raise opportunity for groups with stronger balance sheets.