Cognita Faces Major Losses Due to VAT Changes in UK Private School Sector

One of the largest private school operators in the UK has recently reported significant financial challenges following the introduction of a new VAT regime. Cognita, which operates various schools including Surrey’s Downsend and Southbank International in London, disclosed a pre-tax loss of £130 million. A primary factor contributing to this loss was an impairment charge of over £90 million associated with their UK schools.

The government’s decision to apply VAT to private school fees, which took effect in January last year, has made education less affordable for many families. This market shift has compelled Cognita to reassess its UK operations, ultimately leading the company to close or sell several institutions outside London. The number of schools operated by Cognita in the UK has been halved, with a stronger focus on the Greater London area.

As part of this strategic refocus, Cognita has sold 17 schools to rival operators and closed four, including well-known institutions such as Oakleigh House School in Swansea and St Clare’s in Mid Glamorgan. The UK private school market appears to have softened as a result of these VAT changes, prompting Cognita to seek expansion opportunities in regions like Asia and the Middle East, particularly India and the United Arab Emirates.

The financial reports indicate that Cognita registered £62 million in impairment charges across its UK portfolio, alongside £31 million on a business in Oman where demand for school places did not meet expectations. Despite these losses, Cognita’s underlying business performance remains strong, with adjusted earnings before interest, tax, depreciation, and amortisation of £305 million.

Jacobs Holding, Cognita’s parent company, previously attempted to sell the business for £5 billion, highlighting its scale and market presence. The company currently manages approximately 108 schools worldwide, serving around 100,000 students. A spokesperson for Cognita maintains confidence in the long-term prospects of its UK operations, emphasising ongoing investment in the remaining schools.