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Managing Contracted Revenue and Costs in the Face of the Coronavirus

on Wednesday, 25 March 2020.

Many schools and academy trusts (or their trading subsidiaries) are able to secure revenue from facility lettings arrangements, and from services such as breakfast and after-school clubs.

With the outbreak of the coronavirus (also known as COVID-19) causing school closures and preventing many social activities, that additional revenue is very much at risk.

In terms of costs, many services on which schools and academy trusts rely for their operation - for example catering and cleaning services - are provided by third party providers. Schools and academy trusts will have ongoing payment obligations to those providers, and in some cases those payment obligations will continue even during school closure.

For both categories of contract - whether they represent school revenue or costs - those arrangements may not automatically be suspended as a result of a school closure. Schools and academy trusts may, or may not, remain entitled to contracted revenue even where they are unable to provide their services or facilities.  By the same token, schools and academy trusts may, or may not, remain obliged to pay service providers even though for a period of time) they are not enjoying the benefit of the contracted services.

We strongly recommend that all schools and academy trusts should urgently review their key revenue generating contracts, and those which represent material expenditure for them, to understand the risks to which they are exposed. With that understanding, they should then engage proactively with their counterparties to agree how they can most effectively ease the pressures which all parties - both schools and academy trusts and their customers and suppliers - will be facing.

The above reflects guidance as at 20 March 2020. We will continue to update this as the situation develops.


We can help with that process, and have already been doing so with many of our clients. Please get in touch with Matthew Wolton, if you would like to discuss this further, or complete the form below.

 

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