As education budgets remain under intense pressure, George Littlewood Head of Sales Vendor Finance, Commercial Finance UK, Siemens Financial Services (SFS) explains how recent changes to leasing regulations can help headteachers and finance managers invest in technology, classrooms and essential resources while keeping cashflow under control.
In the face of rising costs, the job description of today’s headteachers now entails coming up with innovative ways to raise money for their schools and find additional sources of funding.[i] So they may have been dismayed to read the Institute for Fiscal Studies’ (IFS) assessment that the schools settlement in the Spending Review amounted to a “real-terms freeze in the budget” if the cost of expanding free school meals was stripped out.[ii]
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New leasing opportunities
School managers and headteachers may want to turn their attention to some different reading matter this summer – or at least a summary of it.
The amended International Reporting Standard (IFRS) 16 can help ease budgeting pressures on headteachers and finance managers. That is because its introduction into maintained schools and academies in England in 2024, along with the associated general consent documents granted by the Secretary of State for Education, has made leasing a much simpler and wider-reaching tool for schools looking to address their capital spending challenges and manage budgets.
The principles and provisions of IFRS 16 obviously extend much more widely than the world of education, but for schools the introduction of the amended regulation is exciting on three different fronts.
Firstly, a much wider range of equipment is now available to them through finance leases, helping them to ease cashflow, manage budgets and minimise paperwork. As the UK Government itself says in its guidance to academies, taking out leases to support day-to-day operations can “be a sensible value-for-money approach as an alternative to buying assets outright”.[iii]
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By GlobalDataThe range of asset types that schools can lease under the new arrangements is broad, and includes:
- Temporary classrooms and structures
- IT & telephony systems – from whiteboards and tablets right through to door entry security systems and CCTV systems
- LED lighting systems
- Vending, catering & cleaning equipment
- Furniture
- Bathroom/sanitary items
- Gym equipment
- Grounds-keeping equipment
- Minibuses and other vehicles for the use of the school
All of these asset types can now be leased without schools needing to seek approval from the Department for Education (DfE) and / or the Education and Skills Funding Authority.
Secondly, the inclusion of IT in the list of asset types above means that schools can now using lease financing plans to make technology upgrades. This is helpful for keeping pace with shifts in tech capabilities and meeting the needs of pupils and their future employers.
Thirdly, schools can now make use of the flexible financing periods offered by finance companies, giving them more options to align budgets with vital equipment requirements by scheduling payments over a longer time period if they wish.
The role of finance specialists
We said above that IFRS 16 could provide some much-needed support for headteachers’ budgets. In reality, it could be easily lost based on many other daily challenges that schools face.
After all, experts and commentators point to a number of weighty issues that are currently occupying England’s schools, such as expanding free school meal and breakfast club provision, managing essential repairs to buildings, addressing the issues of RAAC (reinforced autoclaved aerated concrete) in schools, implementing more provision for children with special educational needs and disabilities (SEND), and budgeting for teacher pay rises.[iv] In addition, headteachers say they have to spend time going out into the local community to find private donors to fund activities, equipment and basic curriculum resources.[v]
But hearing about these demands on their time returns us to the third benefit of IFRS 16 listed above – the fact that asset finance specialists can now offer schools flexible financing arrangements for investing in equipment.
It is not just the added flexibility that is so important here, it is also the expertise on offer.
Experienced funders will be familiar with the issues schools and academies face, both day-to-day and in their longer-term investment planning. Technology evolution, and the need to upgrade IT infrastructure and equipment, has added to these issues.
By allowing specialist financiers to offer a broader range of finance products and advice, through the adoption of IFRS 16, the UK Government has provided schools and colleges with a powerful tool for navigating their complex financial landscape.
Obviously, IFRS 16 does not provide an instant catch-all solution for every maintained school or academy. They will still need to maintain rigorous internal financial management disciplines. Leases will need to be reviewed from a value for money perspective. And there’s a learning curve involved for schools and academies on making use of leasing solutions.
However, asset finance specialists can support on this process. In particular, they can make leasing arrangements accessible and streamlined for teams coming to them for the first time, and offer guidance for schools to make informed choices about their contractual arrangements and terms.
When done in this way, specialist leasing finance can be a win for both schools and their pupils – with the former gaining a new level of financial choice, and the latter gaining access to facilities and equipment that better support their ability to learn, develop and prepare for future career routes. With the UK Government saying it’s going to be “asking more from schools”, this IFRS 16 change is more welcome than ever.
Notes
[i] https://www.bbc.co.uk/news/articles/cy09e7w6jleo
[ii] https://ifs.org.uk/articles/spending-review-2025-initial-response
[iii] https://www.gov.uk/government/publications/leasing-for-academy-trusts
[iv] https://www.bbc.co.uk/news/articles/cy09e7w6jleo; https://ifs.org.uk/publications/annual-report-education-spending-england-2024-25
[v] https://www.bbc.co.uk/news/articles/cy09e7w6jleo
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