Kreston Reeves Academy Benchmarking Report 2025:
Key Insights on the State of Trust Finances
The Kreston Reeves Academies Benchmarking Report 2025 provides a critical analysis of the financial health, funding trends, and operational challenges facing Academy Trusts across England. With increasing financial pressures, shifting government policies, and changing pupil demographics, the report offers essential insights for MAT leaders, school finance professionals, and policymakers.
Academy trusts have found themselves in an increasingly complex financial landscape. Rising costs, a change of government, and shifting pupil demographics all contribute to an environment that demands strategic decision-making and careful financial planning. This year’s report provides a detailed look at how Trusts are managing their reserves, tackling financial stability, and adapting to policy shifts.
Financial Stability & Trust Reserves Under Pressure
Deficits & Reserves: A Worsening Picture
The financial situation for many Trusts is becoming more precarious. The report reveals an £8 million net deficit on free reserves, signalling a growing challenge for financial sustainability. Alarmingly, 31% of Trusts now hold less than 5% in reserves, a stark increase from 17% in 2022—a threshold considered high-risk by the Education and Skills Funding Agency (ESFA). This decline in financial security is particularly concerning for smaller Trusts, which often lack the financial flexibility of larger MATs.
The cost per pupil has risen by 8% in 2023/24, a continuation of the inflationary pressures seen across the education sector. This increase far outstrips any core funding increases provided by the government, pushing many Trusts to operate on tight margins. Furthermore, the percentage of Trusts reporting in-year deficits has tripled since 2021, rising from under 20% to nearly 60%, demonstrating a widespread challenge in balancing budgets.
Trust Finances: Bigger is Stronger
The trend towards larger, centralised MATs continues, with 90% of all academies now part of a MAT, and the average MAT size growing to 11.7 schools. Centralisation is also accelerating, as 81% of MATs now operate fully centralised structures, compared to 61% last year. This move is driven by the need for greater financial efficiency and shared resources.
The adoption of General Annual Grant (GAG) pooling is also rising. 37% of MATs are now pooling budgets, up from 32% last year, with 28% considering the transition. This model generally enables stronger financial control, but smaller MATs still struggle to maintain financial stability. The figures are telling—small MATs saw their average surplus drop from £203k in 2022 to just £1k in 2023/24, while large MAT surpluses fell from £1.56m to £99k. These numbers highlight a clear need for financial restructuring to ensure long-term viability.
School Funding & Policy Changes Impacting Trust Finances
Government School Funding Updates
Despite the government announcing an additional £2.3 billion in core school funding for 2024/25, many Trust finances remain constrained due to rising costs. Capital funding has been set at £6.7 billion, including £1.4 billion for school rebuilding projects, with an aim to renovate 50 schools per year.
Policy changes are also shaping the financial outlook for Trusts; the Children’s Wellbeing and Schools Bill proposes greater local authority involvement in academy oversight, which could reshape governance and funding dynamics. The government’s removal of Trust Capacity Fund (TCaF) and start-up grants in 2024 has already slowed MAT expansion. More than 50% of Trusts surveyed stated that the loss of these grants directly impacted their growth plans.
Furthermore, the removal of academisation conversion support grants in January 2025 created financial hurdles for schools looking to convert, potentially slowing the Department for Education’s (DfE) previous academisation strategy.
SEND Funding & Demand Continue to Rise
The landscape for Special Educational Needs and Disabilities (SEND) funding is evolving rapidly, with the much reported crisis showing no signs of slowing. The government has allocated £740 million for SEND capital funding, aimed at improving school infrastructure to support students with additional needs. However, demand continues to rise, with 4.8% of pupils (434,354 students) now holding an Education, Health, and Care (EHC) Plan—an 11.6% increase from 2023.
The financial burden on Trusts is evident, as a staggering £10.7 billion is now spent annually on SEND, representing a 58% rise over the past decade. Meanwhile, mainstream schools are being encouraged to take on more SEND pupils, with 55% of students with EHC plans now enrolled in mainstream education, up from 48% in 2019.
Teacher Pay & Recruitment Challenges
Trust Teacher Recruitment & Retention
Teacher pay continues to be a major factor in Trust finances. The 5.5% teacher pay rise in September 2024 adds an average of £2,500 per teacher, contributing to ongoing financial strain. While the government provided £1.2 billion in additional funding, the real cost is estimated at £1.65 billion, leaving a significant shortfall that Trusts must bridge.
Recruitment remains an ongoing challenge. Teacher vacancy rates have skyrocketed, increasing by over 150% since 2020, creating serious concerns about staffing shortages. The Labour Party’s pledge to recruit 6,500 new teachers remains ambiguous in terms of execution, and the 2025 teacher pay review remains unfunded, adding further financial uncertainty for Trusts.
Energy Costs & Sustainability in Schools
Trust Sustainability & Future Planning
The concerns around energy costs have lessened, with only 12% of Trusts listing it as a top financial concern, compared to previous years when energy inflation was a major issue. However, Trusts continue to focus on sustainability, with many adopting Public Sector Decarbonisation Scheme projects to reduce carbon footprints. CO2 emissions per pupil have decreased by 0.027 tonnes over the past year, reflecting the impact of energy efficiency measures.
Despite these improvements, environmental challenges persist. 10,710 schools are at risk of flooding, with projections suggesting a 27% increase in flood risk by 2050, adding another layer of future planning concerns for Trust leaders.
The Financial Outlook for Academies in 2025/26
The Kreston Reeves Academies Benchmarking Report paints a picture of a sector under clear financial strain, and the combined pressures of rising costs, funding challenges, and policy shifts will require Trusts to think proactively about financial strategy.
Larger MATs are better positioned to weather the storm, but smaller Trusts face significant challenges in maintaining reserves and managing operational costs. SEND funding remains an urgent priority, and governance frameworks must evolve to keep pace with the changing landscape.
PAG's experience working with Trusts is second to none. If you're concerned about anything mentioned above, want to get ahead of any trends, or simply want to assess your options to ensure you're set up for the year ahead, speak to us today via our Contact Page.