The education landscape enters 2026 in a rare moment of shared constraint. Universities, independent schools, early years providers and EdTech firms are all wrestling with affordability, workforce, and demonstrating evidence of learning and educational impact.

Yet for all the pressure, there’s momentum: leaders are redrawing portfolios, deepening partnerships and creating more digitally enabled core infrastructures.

The next 12 months won’t be about headline growth. They will be about rebuilding the operating spine – financial, pedagogic and digital – so the sector remains both accessible and investable.

“Education is at an inflection point,” says Barrie Davison, our Head of Public Sector. “The institutions that act early – on partnerships, portfolios and digital trust – will set the pace for the next cycle.”

With home fees frozen and costs rising, operating deficits are no longer outliers; for many English institutions they’re baked into 2025–26.

That forces choices: course and campus rationalisation, reprofiling international recruitment risk, and a sharper tilt to industry and region-based partnerships that unlock CPD, micro credentials, applied R&D and housing JVs.

The emerging pattern is pragmatic – fewer marginal programmes, more stackable learning and stronger civic ties.

“Universities that reframe themselves as regional skills and innovation platforms – cocreating with employers and health systems – are more likely to diversify income without diluting mission,” Barrie notes.

VAT at 20% (from 1 January 2025) and the loss of business rates relief are now fully in the system. Roll numbers have already dipped by ~11–13k pupils (≈2–2.4%) – a sharper fall than early estimates – exposing affordability for middle income families.

Expect consolidation, renewed bursary strategies, shared services across groups, and bolder partnership models with academies and MATs. Schools with a clear premium proposition and visible public benefit footprint are proving more resilient.

“Families are value testing in real time,” says Barrie. “Schools that protect bursaries, modernise estates and show genuine community impact are more likely to hold confidence.”

The expanded “free hours” offer continues through 2025–26 with £1.8bn earmarked in England. Demand is strong; viability less so.

Local funding rates often lag NLW/NIC uplifts and SEND complexity, while recruitment of qualified staff remains tight. Expect clustered, multisite models, back-office sharing and closer working with local authorities/ICBs around early intervention and family hubs.

Quality and capacity will be the pressure points to watch.

“Early years is the gateway to life chances,” Barrie argues. “Funding calibration and workforce pipelines will decide whether the expansion lands as promised.”

The pandemic era’s emergency adoption has given way to embedded platforms: VLEs/LMS, assessment suites, AI assisted tutoring, and analytics for student success and wellbeing.

Institutions now ask for proof – impact on retention, attainment and workload – alongside robust data protection and AI governance.

Vendors moving from product-led to outcome-led propositions, with clean interoperability, are winning traction despite longer sales cycles.

“Digital trust will be a differentiator,” says Barrie. “Clear evidence, safe AI and plug and play integration are now table stakes.”

University funding & regulation

Outcomes of the Commons inquiry, any moves on fee caps, teaching grants or number controls – each could materially reset HE models.

Independent school VAT policy

Any guidance tweaks or legal outcomes (e.g., reliefs for small/specialist settings or bursary-linked mechanisms) could reshape the market.

Early years funding calibration

Decisions on uprating 2026–27 rates, especially where evidence shows provider strain, will drive capacity and quality.

AI in education

Guidance for assessment, admissions and teaching will shape risk appetite and the pace of AI adoption across UK nations.

Universities

Deficits, pension and capex backlogs vs. the imperative to show graduate value and civic impact.

The emerging answer: fewer low-demand courses; more CPD, micro credentials and employer-backed pathways; tighter country mix in international recruitment.

Independent schools

Balancing fee rises with retention and bursaries. Growing use of group structures and shared services to lower unit costs while defending quality.

Early years

Wage and SEND costs vs. local funding rates. Providers stabilising via apprenticeship pipelines, leadership development and regional buying groups.

EdTech

Evidence thresholds vs. constrained budgets. Winners present ROI in months not years, align to institutional KPIs and meet rising AI ethics expectations.

Universities

OfS financial health updates and HE finance inquiry milestones (throughout 2026); Spring & Autumn Budgets 2026 for teaching/research signals and international student policy.

Independent schools

VAT/Finance Act implementation milestones and HMRC updates; ISC Annual Census (Spring 2026) as a bellwether for rolls, bursaries and closures.

Early years

Local authority funding confirmations for 2026–27 (early 2026); EYFS/statutory guidance refresh and SEND-related announcements.

EdTech

DfE/OfS and devolved consultations on AI/digital assessment; major procurement windows and DPS renewals across HE and school groups.

• Universities: Put estate decarbonisation and visible ESG leadership on the front page; diversify income beyond two international markets; embed digital pedagogy and analytics with strong governance. 
• Independent schools: Rationalise estates; expand bursary and partnership models; use group digital platforms to relieve workload and protect value. 
• Early years: Optimise occupancy and staffing ratios; build stable training pipelines; invest in graduate-led and SEND capability. 
• EdTech: Align roadmaps to retention, attainment, compliance and workload; strengthen privacy, AI ethics and interoperability. 

“The story of 2026 is not retrenchment; it’s renewal,” Barrie concludes. “The sector’s best leaders are turning constraint into design principles - and that’s how you futureproof.”

Dive into the full set of 2026 sector insights and discover our practical guidance to get your business Future Fit for 2026: Sector Trends