On 16 November Clyde & Co hosted its first UK based education roundtable over breakfast at the Duck & Waffle in London’s Heron Tower. The breakfast brought together key stakeholders in the global K-12 sector, including the Department for International Trade, Parthenon EY, Cognition Education, Enso Impact and Education Investor.
The event was an intimate affair with 9 attendees taking part, moderated by Ross Barfoot, partner and head of Clyde & Co’s global education practice, and overlooked breath-taking views of the City skyline from the 40th floor of Heron Tower.
The discussions covered the following topics:
The key challenges facing international school businesses were discussed, and the territories causing the most sleepless nights for operators and investors. These included:
Unexpected changes to regulations with little or no notice
This is a risk in almost every jurisdiction, with the recent developments in China cited as an example (we refer you to our article on these developments on page 6 of this newsletter). The imminent changes to China’s Private Education Law were discussed, with a recognition that as well as a number of challenges due to be introduced, there was some good news as the law now explicitly allows ‘for profit’ private schools teaching pre-school and Grade 10 onwards (UK year 11 onwards), and for international schools enrolling purely foreign passport holders. The recent Shanghai Education Commission position was also discussed, with a potential impact on international curricula being taught.
China was high on everyone’s list of territories currently causing sleepless nights. It was recognised that it was currently too early to determine the full impact on recent developments on the China K-12 sector, but that it was evident that parents of domestic students were very keen to send their children to schools that would prepare them for study abroad, and it was suggested that those parents would do whatever was in their power to secure foreign passports for their children to allow this to happen.
The recent decision by the Government in Uganda to close a number of low cost affordable private schools was also discussed, with the viability of the affordable school model in Africa being questioned.
Expatriate vs domestic demand for school places
With a currently volatile expatriate market in most territories, there is an increasing realisation from operators that growth and sustainability will come from the local population, rather than expatriates. This is evident in China, where opportunities for international schools teaching expatriates is limited to only a number of cities (such as Shanghai and Beijing). Traditional expat markets like Abu Dhabi, Dubai and Qatar have seen an impact recently, with a definite flight to quality as expat numbers dip, and competition increases
Investors and local partners
In many territories, and for many school operators, a local partner is key to the success of the school. Finding the right partner has always been, and still remains, a challenge.
As the number of international schools around the world increases, the number of people qualifying as teachers continues to fall. Schools relying on qualified teachers with UK, Canadian, US or Australian qualifications are competing for resources from an ever increasing pool.
Opportunities in the sector
Opportunities in the sector were discussed, as well as new territories that were on operators and investors radars. This included an in-depth look at Africa, specifically Nigeria, Ghana and Kenya.
The obvious opportunities in many African countries were around affordable low-cost schools that provided quality education, given that the focus over the past decade has been on providing universal primary education. Challenges around balancing profitability and quality for schools made this a difficult segment to break into, given that at the scale required at the low-cost end meant that few school groups could grow to become significantly profitable. Those that did such as Bridge Academy faced serious delivery challenges when scaling up. The rising middle class in countries such as Kenya, Nigeria and Ghana were currently under supplied and this could present an opportunity for school groups.
The Middle East still presented opportunities, but with an increase in competition new entrants need to be prepared to compete on quality, price and differentiation. Again, domestic students, and midlevel fee schools aimed at the rising middle class all presented opportunities. Iran and Saudi were also discussed. Everybody recognised that there were huge potential for both markets, but currently they are difficult markets to enter.
Iran in particular is very exciting, with huge opportunities for international education institutions and businesses. US secondary sanctions are still making it difficult to move money in and out of the country, and there is some political risk flowing from US President-elect Trump’s comments on the Iran deal.
The breakfast wrapped up with a general discussion on Trump and Brexit. The UK K-12 and higher education sectors had definitely been impacted by Brexit and the UK government stance on student visas, and this was leading to an increased interest in international expansion opportunities for UK institutions. On Trump, although a number of concerns were aired, the general consensus was that it was too early to tell what Trump’s position on education would be, and what impact his other policies would have on the global education market.