Population demographics & long term financial forecasting

Forecasting for the academy sector can be difficult, with no certainty over future income levels and announcements in relation to future pay not always being timely.

Pupil numbers are a fundamental assumption when preparing strategic financial forecasts and sensitivity analysis. Understanding the local catchment demographics and pipeline of new pupils is key.

ONS statistics on pupil numbers can provide an indication of longer term trends, therefore allowing Management to understand the future implications on a Trust’s cost base and make strategic decisions accordingly.

The graph above shows expected number of people at each age (0 – 105) in mid 2020s and mid 2030s. What is clear is that the UK population is ageing, with birth rates expected to reduce at both time points. The ONS downgrading it’s previous assumptions over fertility rates and mortality improvements, contributing to the ageing population and overall slower population growth rate. This will impact school student numbers for a prolonged period of time, as the reduced birth rate will flow through each school year.

The picture is mixed across the UK however, with international migration to England expected to see it’s birth rate exceed other UK nations over the next ten years.

Due diligence reviews of financial forecasts should cover the future pipeline of pupil numbers, with matrix mapping of how those pupils will flow through the year groups and drive income in the future. Population data helps to support the validity of these assumptions.

¹Source: National population projections - Office for National Statistics