Rachel Barrett, Head of Academies, Duncan & Toplis
It’s a well-known fact that underlying financial pressures pose a constant challenge in the education sector – and this is particularly true for academy trusts which manage their own finances.
But according to the Kreston Academies Benchmark Report 2026, things are looking up. At first glance, the financial position of academy trusts appears stronger than it has been in recent years. Performance has exceeded expectations, with average surpluses climbing up to figures last seen in 2022.
Yet, despite these headlines, confidence across the sector remains low. While many trusts outperformed financial budgets and improved outcomes, the findings point to caution around growth and continuing structural pressures.
So, what complexities are academy trusts facing beyond the headline figures? And how can they effectively manage finances to cope with these complexities?
Low growth expectations
The size of a trust is often key to its financial performance. According to the report, Single Academy Trusts (SATs) and small Multi-Academy Trusts (MATs) returned modest surpluses this year, whereas medium and large MATs reached an average surplus of £0.4m and £1.1m respectively, highlighting a stronger financial capacity.
Despite this, plans for future growth have slowed. While 61% of academies expected to gain at least one school last year, this dropped to 36% for the next 12 months.
Although scale continues to support stronger financial performance, it’s clear that trusts have downsized their growth plans for the next 12 months. Although the withdrawal of growth funding may have had a small impact, the scale of the drop off in growth plans would suggest that, even for larger trusts with more income, uncertainty about ongoing costs and funding plans appear to be outweighing the perceived benefits of growth.
Reserve levels
With ever-increasing costs and uncertainties surrounding income, it’s no surprise that reserve levels are one of the main barriers to growth for academy trusts. The report shows that, whilst 2025 was a strong financial year, with the percentage of trusts with deficits falling, most trusts still predict a reduction in reserves throughout 2026 and 2027.
Interestingly, large MATs anticipate the biggest reduction, despite previously outperforming predictions – reinforcing a cautious approach to long-term finances, regardless of the size of trusts.
With this in mind, academy trusts must maintain a reserves policy to ensure financial resilience. Typically, this equates to one month of normal expenditure, but trustees should determine a level that suits their trust’s circumstances and document it in the annual financial statements.
Trusts should also consider steps to mitigate risks if their reserves are low. When it comes to spending, estate maintenance often eats up a large portion of budgets. This is a particular challenge for trusts not eligible for SCA funding, so those trusts should focus on essential maintenance by addressing the urgent issues that could risk safety or functionality in the short term. They should then make plans for the longer term, making sure they are putting themselves in the best position for CIF applications at the right time. Trusts in receipt of SCA funding are in a better position to plan their maintenance more long term, another benefit of being part of a larger trust.
SEND pressures
Alongside reserves, the ever-increasing Special Educational Needs and Disabilities (SEND) funding gap remains a key concern for academies. Funding shortfalls and increasing demand continue to strain budgets, with many trusts identifying the SEND system as a financial risk.
The government has now published its 2026 Schools White Paper, announcing that mainstream schools will receive direct funding to support SEND children as part of a £4 billion package, to make the system more inclusive. £1.6 billion will be provided to early years, schools and colleges over the course of three years through an “inclusive mainstream fund” and a further £1.8 billion over the same period will be used to create an “experts at hand” service – focusing on support from specialists such as SEND teachers and speech and language therapists.
On 25 March, the government released some more details with regards to the methodology for this funding. The grant comes in for the financial year 2026 to 2027 and the government will confirm final school-level allocations in May, with academy trusts receiving their allocations in early July. The release also includes the base rates and per pupil rates per setting, and academies should now be reviewing this and looking at what this means for their budget and how they can use that funding for the benefit of the most vulnerable children. Schools will be expected to publish an inclusion strategy by 31 December 2026, so should start thinking about that now, as well as the additional resources they will need to carry out their plan.
Rising workforce costs
For most academy trusts, the main area of spending is workforce costs, and the report shows that around 76% of academy income is directed towards this. Recent pay and tax changes have seen costs in this area rise and, although investment in team members is essential for educational outcomes, this has led to greater pressures when planning finances.
Executive pay is a tricky area to comment on. It certainly hits the headlines and attracts scrutiny when CEO pay in the largest trusts exceeds significant thresholds, but fewer roles bear the responsibility of the decisions made at trust level and therefore, in most cases, per pupil cost is lower and this should arguably be the better measure. Trusts should be benchmarking their leadership pay, ensuring they are comparing like with like in all areas when making pay decisions, as well as considering experience and added value.
To accommodate rising wage costs, there is a need for flexibility and cost-cutting in other budgets to allow academy trusts to adapt. For example, school finance professionals and the board of trustees should review current suppliers to ensure they’re still offering competitive pricing, as there may be cheaper alternatives available.
What’s more, individual academies should consider succession planning – do you need to automatically replace people when they leave or retire? Or can you consider cross-skilling team members to ensure operational continuity at a reduced cost? Any savings you can make to allow for healthier reserves for wage costs will bring benefits the next time the inevitable wage rises come around.
The report makes it clear that, while stronger financial headlines are a positive step forward, confidence will depend on more than one year of improved performance. With pressures around funding, reserve levels, SEND provision and workforce costs continuing, medium and long-term planning remains essential.
Duncan & Toplis provides accounting services specifically designed to support academies, including financial benchmarking, internal and external auditing, and payroll. To find out more, visit www.duncantoplis.co.uk.
