Education: Sector-specific predictions and implications

Our education team looks ahead to what the Budget might have in store for schools and academies, as well as in higher education. 

With our latest School Leaders Survey, conducted in May 2025, finding that 85% of respondents judge the financial prospects of their organisation negatively, up from 40% in the previous autumn, leaders will have a close eye on the Chancellor’s speech. 

The higher education sector faces its own set of challenges, with the net impact of government policy decisions estimated to be a £2.5bn reduction in funding to higher education providers in England across academic years 2024-25 to 2026-27.

Nick MacKenzie, Head of Education, and Kate Gallagher, Head of Higher Education, offer predictions on what’s in store in the 2025 Budget. 

Schools and academies

SEND funding remains critical

Nine in ten school leaders told our School Leaders Survey they are dissatisfied with government funding for SEND. 

In the Autumn Statement in 2024, the government allocated an additional £1bn for SEND, recognising the immense need in the sector, but this represents only a quarter of the deficit the National Audit Office estimates local authorities have accumulated. 

While the upcoming schools white paper will set out SEND reform, there will clearly be eyes on the Budget for new funding. Although whether it will be sufficient remains doubtful and so the bigger news may be an indication of which spending pressures are prioritised. 

Cost pressures will dominate

After the last Budget, we said the £2.3bn increase to core school funding would quickly get swallowed up by ongoing cost pressures. Bearing in mind the run-up to the Budget, this story is likely to continue as it is hard to see a sizeable rise in funding on the way. 

The education sector will be keen to understand how the government will deliver against its commitment that funding would be provided to public sector bodies – including schools – for increased employer national insurance contributions, and the Budget will need to clarify how this compensation will work in practice. 

The concern on employment costs in the sector is illustrated by our survey, where 87% of school leaders told us six months ago they were reviewing staffing requirements..

Infrastructure investment

The previous Budget committed £1.4bn to ensure the School Rebuilding Programme can continue, with 100 rebuilding projects starting next year, alongside £2.1bn allocated to maintain and improve school buildings – an annual increase of £300m. 

However, teaching unions have warned this remains "woefully unambitious" given the scale of the estate's deterioration. Further capital investment announcements are likely, though transformational change seems unlikely.

Behavioural challenges post-pandemic

Almost half (45%) of school leaders report pupil behaviour has become significantly worse since the pandemic, with the majority reporting behaviour has worsened and have seen an increase in suspensions and exclusions as a result. 

The Budget may include targeted funding for behaviour support and alternative provision, particularly as schools struggle to balance addressing behavioural challenges while remaining inclusive.

Higher education

Tuition fee adjustments

A fee cap of £9,535 for 2025-26 was announced, with an uplift in the fee in line with forecast inflation for 2026-27, providing an estimated increase of £371m in 2025-26 and £480m in 2026-27. The Budget may confirm further details on fee indexation going forward, though this income boost is offset by cost increases.

International student levy concerns

A proposed international student levy could result in a reduction in international fee income of £735m in 2026-27, were a 6% levy to be applied. Universities will be watching closely for confirmation of implementation details, including whether the lesser and more administratively straight-forward flat fee will instead be applied. The effects of this policy are already being seen and felt in the sector, with concern about resulting course closure announcements.

Cost pressures mirror schools' challenges

Like schools, universities face significant cost increases. Employer national insurance contributions represent a cumulative increased cost of £933m compared to 2024-25, while the Teachers' Pension Scheme changes result in a cumulative increased cost of £360m compared to 2023-24. The Budget must clarify whether compensation for these costs will extend to higher education providers.

Research and teaching grants

Cuts in government grants for teaching and research amount to a reduction of £913m across 2025-26 and 2026-27. The sector will be hoping for announcements that reverse this trend, particularly given the government's stated commitment to growth and innovation.

Final thoughts from education ahead of the Budget

The financial backdrop seems to permeate throughout the sector and, without bold action, the Budget risks being another missed opportunity to address the systemic challenges facing UK education. 

School and university leaders will be hoping for more than incremental adjustments – they are calling for a funding settlement that enables them to focus on educational excellence rather than financial survival.