Renewed investment in school estates but financial pressures persist in higher and further education

The education sector currently presents a mixed picture. Opportunities still exist in the sector, but it is becoming increasingly polarised.

In higher education (HE), nearly half (45%) of English universities are projected to be in deficit in 2025/26. Domestic tuition fees no longer cover teaching costs and universities have become reliant on international student income. This revenue stream has become volatile due to visa policy shifts and global competition and is now likely to be subject to a 6% government levy.

The further education (FE) sector in England is undergoing a period of high policy ambition but acute financial pressure. The government has placed more importance on FE with Skills England refocused on co-ordinating national workforce needs and skills supply. Investment is being targeted toward skills-led capital projects, for example, specialist T Levels and teaching spaces specialising in skills for the green economy, IT and engineering. This ambition is not yet matched by funding, however, with colleges relying on targeted capital pots and localised skills budgets but without the systemic uplift required to reverse a decade of cuts.

The government has declared a renewed focus on addressing the long-term deterioration of school estates with the release of the Department for Education’s 10-year Education Estates Strategy in February, which included a headline figure of £38bn of capital funding through to 2029/30. As part of this, the DfE announced the replacement of the current Condition Improvement Fund process with a new digital system, enabling responsible bodies to capture detailed condition data and receive funding tailored to the needs of the school. The strategy also places greater priority on SEND provision, improving climate resilience and reaching net zero. The School Rebuilding Programme will continue to run alongside.

Investment in the school estate marks meaningful progress, yet HE and FE continue to face widening funding gaps. As a result, construction pipeline in the sector will be led by a sustained investment in the school estate, driven by a major shift toward rebuilding, renewal and proactive maintenance. FE work will grow more selectively, while HE construction is likely to become increasingly polarised with those institutions in deficit scaling back capital plans due to financial pressures.