English private schools are rushing to open lucrative satellite academies abroad, including in some of the world’s poorest countries, to funnel back millions of pounds in profits to pay for their charitable obligations.
Cambodia, Bangladesh and Vietnam are among the latest targets for English private schools aiming to expand overseas, in many cases in partnership with property developers looking to build luxury developments or even entire cities.
Some private schools say they are motivated to increase their revenues by fears that an incoming Labour government will add VAT to school fees and strip them of charitable status, creating financial difficulties for them.
Research by the Private Education Policy Forum (PEPF) has found that private schools with charitable status are making record-breaking profits from their overseas subsidiaries and satellites, with 40 British schools taking in £29m in 2020-21, compared with £1.6m in 2011-12.
A spokesperson for PEPF said: “This research shows that private schools are using their profits from operating in mainly developing countries to maintain their status in England. Given that only 1% of places in private schools are free for poorer pupils, and the average fee is now around £17,000 a year, the ethics of such a model may be seriously questioned by policymakers.”
Julie Robinson, the chief executive of the Independent Schools Council (ISC), said: “As schools look for ways to reduce their reliance on fee-based income, some have taken up opportunities to establish international campuses and partnerships. The money generated is invested back in education in the UK, usually through bursaries and scholarships.”
But Francis Green, a professor of work and education economics at University College London who has studied the operations of private schools, said: “The ethical implications of returning large profits to Britain from developing countries may come to be questioned, and the practice resented, by foreign governments and their peoples.”
Tom Fryer, a researcher at the University of Manchester’s institute of education and lead author of the report, said revenues from overseas satellites had rocketed in the last decade, and showed no signs of slowing as more new branches were announced and more schools joined in.
In the last five years, the number of overseas satellites operated by English charitable private schools has doubled to more than 100, and Fryer estimated there were advanced plans for at least 28 new satellites to open soon.
While more than half of the current satellite schools are concentrated in the UAE, China and Hong Kong, the competition for new markets has seen English schools opening branches in Kenya, Indonesia and Cambodia, while India and Vietnam are seeing a rush of interest.
Brighton College, which has associated schools in Thailand, Singapore and the UAE, will this year open a school in Hanoi, the first of a chain of seven it plans to run in partnership with the local company Vincorp, the operator of 39 private schools in Vietnam.
Haileybury, the boarding school in Hertfordshire, has two “partner schools” in Kazakhstan and in August will open a satellite in Bhaluka, Bangladesh, followed by a fourth satellite, in Malta, in 2024.
The Bhaluka satellite, billed by its website as “the finest school in Asia”, will charge senior school fees of £29,000 a year – more than 10 times Bangladesh’s per capita income of £2,300. Haileybury’s charitable accounts note: “The process has been so successful that a second school in Bangladesh is being considered.”
Profits from the satellites are often generated by taking a percentage of the fees paid by students, or by the English schools charging fees for consultancy and use of their brand by a local partner.
The earnings are then repatriated using subsidiary companies, which donate the funds to the parent school in England, using gift aid to avoid paying UK corporation tax on the profits the subsidiaries would otherwise have reported.
Fryer estimated that the 40 private schools – 37 in England and three in Scotland – used gift aid transfers to benefit from tax breaks worth more than £5m in 2020-21, with several schools raising more from their overseas satellites than they gave out in means-tested bursaries.
Keir Starmer, the Labour leader, has confirmed that the party’s next election manifesto will pledge to add VAT to mainstream private school fees in England and end their charitable status, with the revenue to be used to hire 6,500 teachers for state schools.
Private schools have been drawing up strategies to respond to a Labour victory. Haileybury’s most recent accounts state that “political risk such as the imposition of VAT or the removal of rates relief have been considered and contingency plans are in place to allow the school to offer the same standard of education”.
Tristan Bunnell, a senior lecturer in international education at the University of Bath, said there was surge in satellite school openings after the last Labour government’s attempt to change private schools’ charitable status in 2006.
“There may be a fear that an incoming Labour government might ignite that debate again,” Bunnell said. “There might be an urgency to create alternative revenue streams as a means to get ready for paying more taxes. This is clearly ironic, with Labour putting pressure on private schools in Britain and inadvertently increasing their presence in countries such as Vietnam.”
The ISC attributed the growth in satellite schools to international demand for British education and the success of earlier ventures. “It takes years to plan and set up satellite schools, so the idea that this is a kneejerk reaction to Labour’s policy is definitely wide of the mark,