Supply agency market - aiming high 2.pdf

Aiming high
Supply agency outlook in a post-pandemic market
November 2023

2
Aiming high – Supply agency outlook in a post-pandemic market
Public
Introduction
Supply agencies play a critical role in the British education system, enabling schools to cover a
variety of teacher and support staff absences / vacancies, and consequently facilitate
successful pupil outcomes.
The supply market was understandably disrupted by Covid-19 and associated school closures.
However, the market has responded robustly, with record levels of spend in AY22 and AY23.
We consider that the market fundamentals remain robust with on-going recruitment and
retention challenges, and recognition of the critical role agencies play in helping schools with
their resourcing requirements more than offsetting headwinds from budgetary pressures and
candidate constraints.
In this paper, we investigate the latest trends in the supply teacher market, the growth outlook
by absence / role type, along with the likely future impact of Crown Commercial Services
framework (“CCS “) and the impact of technology-powered new entrants.
Our paper is based on analysis of market information, interviews with supply agencies and
schools and an online survey with c.1,800 senior teachers at schools in England.
As always, a big thank you to those who gave up their time to contribute to this paper – it is
much appreciated!

3
Public
Market spend on agency supply has
recovered rapidly from Covid-19 and is now
at a record high
Agencies have been highly successful in growing share of spending in the supply market from
c.56% in AY12 to nearly 80% in AY22, supported by academisation and the break-up of LA
supply pools, and by the quality of service and candidates that agencies can provide.
The supply agency market in England is valued at c.£1.1bn in revenue terms and c.£305m in
gross profit (‘GP’) terms. The market was adversely impacted by Covid-19 and school closures
in AY20 and AY21. The market recovered quickly and comfortably exceeded pre-pandemic
levels in AY22, with further GP growth of c.7% in AY23, driven by:
• Strong growth in short term (ST') market with a significant increase in teacher sickness days
• Slight increase in long term (‘LT’) sickness cover and broadly stable maternity requirements
• Strong growth in use of supply to cover unfilled vacancies, driven by teacher shortages
• Increasing use of LT support staff due to recruitment challenges and for Covid-19 catch-up
as well as growth in the number of pupils on EHC plans
Market growth has been supported by increased government funding and cost-savings
achieved by schools during Covid-19, which improved their budgetary positions.
AY23 market GP growth was driven in part by margin enhancements which contributed c.50%
of growth with supply days contributing the remainder.
The market has been partially constrained by candidate shortages across both teachers and
support staff, with schools noting it has become more challenging to find appropriate
candidates, and supply teachers noting it has become easier to obtain regular work.
AY23E
AY18 AY21
AY19 AY20 AY22
ST absences
LT absences
Unfilled vacancies
(Teachers + support staff)
843 821
654
699
979
1,068
Historical supply agency market spend by absence type (£m)
24%
(8%)
Spend Total
CAGR
21-23
19-21
GT adjusted
agency spend

4
Public
Demand for supply remains robust despite
the impact of budgetary pressure and
candidate shortage
Short-term
(sickness,
training
and
paternity)
Long-term
(sickness &
maternity)
Unfilled
teacher
vacancies
LT support
staff
Teacher
absences
Vacancies
and
LT
support
staff
Volume drivers
• Short-term sickness rates have
increased significantly, driven by
Covid-19, and teacher workloads /
stress
• Training days and paternity leave
remained broadly stable
• Long-term sickness rates have
increased, driven by Covid-19 and
teacher workloads / stress
• Maternity days are high driven by
the gender / age profile of the
profession but are broadly stable
• Number of unfilled vacancies has
grown, driven by challenges in
teacher retention and recruitment,
particularly at secondary schools
and in certain subject areas (e.g.
STEM)
• Requirement for LT support staff has
increased, driven by market shift to
having more support staff in
classrooms and increasing diagnosis
of pupils with SEND and use of EHC
plans
• Recent growth also supported by
increased use of support staff to help
pupils catch up after Covid-19
Market constraints
• The market benefits from positive
demand drivers, and schools would
like to increase use of supply teachers
and support staff if not constrained by
budgets / candidates
Budgets
• However, demand is constrained by
practical issues affecting schools,
notably the significant budgetary
pressures that they face
• In real-terms school funding per pupil
declined significantly from AY11-
AY18, although has increased
subsequently
• Whilst supply spend only accounts for
2% of school expenditure, given their
high fixed costs (notably teacher staff
costs which account for c. 60% of
expenditure), it is one of the few levers
schools can use to reduce
expenditure, notably for short-term
absences
Candidate constraints
• The market is somewhat constrained
by the number of available candidates.
The availability of candidates has
tightened during Covid-19, and on-
going issues with teachers / support
staff leaving the profession
Use cases

5
Public
School budget surpluses improved during
Covid-19, and whilst they will remain tight,
budget increases should cover inflation
Budgets
Tight school budgets have historically constrained growth in supply, with real funding per pupil
falling in the period to AY18, before subsequently increasing. Whilst supply spend only
accounts for 2% of school expenditure, given their high fixed costs (notably teacher staff costs
which account for >60% of expenditure), it is one of the few levers schools can use to reduce
expenditure, notably for short-term absences.
Despite the challenges presented by Covid-19, schools were able to make savings during the
pandemic, leading to a significant increase in overall budget surplus, which has supported
recent market growth.
Schools often cite budgets as a key constraint to supply spend. Our survey and interviews
found that schools are increasingly worried about budgetary pressures, particularly given
teacher salaries and broader inflation in the economy.
Our analysis of forecast education spending, teacher salary increases, and economic inflation
suggests that whilst school budgets will remain tight, their overall financial situation should not
worsen. This is supported by the 7% increase in school funding in AY24, and the Government
decision to fund 3% of the 6.5% teacher pay rises, although AY25 budgets are currently being
reworked due to administrative errors at DfE.
AY19 AY20 AY21 AY22
0.3
0.4
1.3
0.4
Total income surplus (£bn) DfE school funding, pre-teacher salary
agreement (cash-terms) (£bn)*
53.8
55.3 56.8
AY23
2.0
AY24
2.0
AY25
57.3 58.8
+7%
+3%
Per 2021 spending review
Additional funding (2022 Autumn statement)
The DfE has recently noted an error in the way funding for AY25 was calculated, which will reduce funding by c.£370m

6
Public
The market has benefited from a spike in
sickness absences post Covid which for ST
absence we expect to slowly normalise
Age and gender profiles of teachers in England in 2018 and 2023
AY18 AY22
AY19 AY21
AY20 AY23E
2.0 2.1 2.0 2.0
3.2 3.1
24% 24%
76% 76%
AY18
Female
AY23
Male
Teacher absence through sickness
and maternity leave
Supply agencies have benefitted from
increased sickness rates resulting from
Covid-19. This has continued with staff
maintaining a cautious approach to
attendance whilst sick.
This has also led to an increased drop-
through to agencies, as schools have
limited internal resources to cover
absences, particularly during periods of
peak sickness.
We expect some normalisation in ST
sickness rates, although drivers of LT
sickness are robust due to increasing
teacher workloads / stress.
Historical teacher sickness days (m)
There are c. 3.1m maternity days for teachers and
c.1.0m maternity days for support staff each year,
driven by the heavily female weighted profile of
teachers and support staff. This has remained broadly
stable in recent years, and will likely continue.
When provided with sufficient notice, schools will
typically advertise directly for maternity cover in the
first instance before turning to supply.
It is becoming increasingly challenging for schools to
recruit direct cover, due to ongoing teacher shortages
(explored in more detail later), which has benefited
supply agencies.
“We definitely saw an immediate spike in demand for ST following Covid-19. Teachers were being super
cautious and absence rates have remained high. The impact for agencies is high as schools only have so
much internal resource to cover ST absences, and so the drop through to agencies is significant. We used to
see a drop-off in the final 2 weeks of term but this has stopped” – Supply agency

7
Public
Teacher vacancies are at an all-time high
and schools are increasingly worried about
resourcing
Unfilled vacancies
Teacher vacancies are at a record high, due to ongoing recruitment and retention challenges
in the industry. There were c.3,300 vacancies covered by temporary staff in English schools
in November 2023.
Ongoing challenges with teacher recruitment and retention, will see continued strong
demand to place supply teachers for unfilled vacancies, with survey data showing that
schools are increasingly worried about resourcing.
1.2
3.2
AY19
1.1
2.8
AY20
1.1
2.1
AY21
1.6
2.2
AY22
2.3
3.3
AY23
Unfilled vacancies +19%
Temporarily filled posts +1%
4.4
3.9
3.2
3.8
5.6
+6%
Historical total unfilled vacancies and temporary filled positions as per DfE survey in
November of each year (000)
CAGR
AY19-23
Compared to last year, how worried are you that you won’t have a school of
sufficiently qualified teachers in September?
16%
67%
17%
2020
18%
65%
17%
2021
16%
58%
26%
2022
11%
55%
34%
2023
16%
59%
25%
2020
17%
61%
22%
2021
9%
51%
40%
2022
8%
28%
64%
2023
More worried No more or less worried Less worried
Primary
Secondary

8
Public
Schools have systemic staffing issues due
to DfE failures to meet ITT targets and high
teacher / support staff churn
ITT training target failures
The DfE has failed to meet its ITT recruitment
targets, fuelling teacher shortages and
demand for long-term supply staff.
The government has successfully met its
primary school targets but has consistently
failed to meet secondary targets, where
shortages are most acute.
Shortages vary by subject, with particular
challenges in recruiting teachers for STEM
subjects, whilst regional challenges also
exist.
Initial Teacher Training (ITT) recruits as a
percentage of annual targets according
to the DfE’s TWM (Teacher Workforce
Model)
0%
20%
40%
60%
80%
100%
120%
140%
AY19 AY20 AY21 AY22 AY23
100%
Primary
Secondary
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
0 1 2 3 4 5 6 7 8 9
2013
2015
2017
2019
2020
2021
Percentage of FTE teachers by year of
gaining qualification still working as
teachers in years post-qualification
High teacher churn rates
Teacher churn is high with c.25% of ECTs
leaving the profession after three years. This
figure increases to 35% after 6 years. Market
surveys suggest that retention rates will
worsen, with the number of teachers expecting
to still be in the profession in 3 years' time
dropping from 77% (2018) to 59% (2023).
AY22 saw a five-year high of 44,000 teachers
leaving the profession. There was a low level
of natural churn, with less than 10% of leavers
retiring, with most leavers moving to work in
other sectors.
English state schools face systemic resourcing issues driven in part by DfE’s failure to meet
teacher training recruitment targets and continued high churn of teachers and leaving the
profession.

9
Public
The market has been constrained by
candidate shortages, which worsened
through Covid, but have started to ease
34%
30%
12%
6%
57%
30%
9%
4%
Able to get work almost
every day via agencies
Able to get work about half
of the time via agencies
Sometimes unable to get
work for a week at a time
Offered no work
for weeks at a time
2021 2022
Higher ease of getting work
implies a more candidate
constrained market
Historical availability of work for supply teachers (n = 2,700 in 2022)
“There are candidate constraints out there and these were somewhat amplified by Covid-19. These
peaked during Covid-19 and there are still challenges here, although it has eased slightly (but will still be a
factor going forward). I tend to find candidate constraints operate in 5-year cycles and we are midway
through one.” – Supply agency
We estimate that there are c.35k supply teachers and c.48k supply support staff operating in
the market in England.
The market was constrained by candidate shortages, which peaked in March 2022 before
somewhat easing. This was in part driven by Covid-19, a reluctance to work in the immediate
aftermath of the pandemic and the record levels of market demand.
These shortages were consistent cross both teachers and support staff, with rises of
minimum wage and increasing workload contributing to the challenges.
Supply agencies have pivoted consultant focus to sourcing candidates in order to meet
demand and assist schools with their resourcing.
Several innovative agencies have also developed ‘recruit, train, deploy’ models for support
staff, given they often have limited educational experience.

10
Public
Schools will continue to rely on LT support
staff supply, for one-to-one provision and
due to recruitment challenges
Long term support staff
Schools increasingly use long-term support staff supply due to increased SEN diagnoses,
Covid catch-up, and support staff recruitment challenges. We estimate there are c.15k support
staff on long term supply at any point during the year.
We expect to see continued strong demand for long-term support staff. This is driven by
challenges in recruiting permanent support staff (particularly with previous education
experience), which is driving the adoption of the supply model.
Recruitment of
permanent
support staff
is challenging
There are
robust drivers
for one-to-one
provision
Schools value
using the
supply model
Agencies
Driver
• “Challenges for schools in recruiting permanent support staff have really
increased in recent years. Pre-Covid, it wasn’t that challenging but now it is
harder. This was initially due to health-concerns but is also driven by minimum
wage and increases in the responsibility and toughness of support work. With
the minimum wage increases, there are a greater number of jobs that a person
can do for the same wage as working as support staff, and with less pressure
(albeit less reward).” – Supply agency
• “Recruitment of support staff is hard, driven in part by minimum wage
increases, Brexit and low-skilled people leaving.” – Supply agency
• “The number of pupils on EHC plans has been increasing, driving the need for
one-to-one support” – Supply agency
• “The number of pupils on EHC plans continues to increase. The boundaries
between social care and education are shifting, and schools are being
encouraged to take on some of the responsibility of social care. This combined
with support staff vacancies, continued churn, and beneficial costs of support
being cheaper than QTs, is driving demand.” – Supply agency
• “The funding schools receive for EHC plans is school specific and so many
schools favour supply as they cancel the support staff, should the pupil leave the
school.” – Supply agency
• “Schools do like the flexibility of support staff on supply, particularly in SEND.
This model enables schools to avoid the cost of recruiting permanent staff, such
as advertising costs” – Supply agency

11
Public
Labour are planning to increase school
funding and agencies think this will be
broadly positive for the market
• Examples of labour party proposed
spends:
- £181m a year spent on incentivising
people into teaching is attracting and
retaining teaching staff
- £347m teacher recruitment fund to fill
more than 6,500 vacancies
- £210 million to give teachers
continuing professional development
and time out to do it
- £47 million in “excellence in
leadership” programme for new head
teachers
- £2,400 retention payments for
teachers who complete the 2 year
early career framework, costing £50m
• Other priorities include:
- Reforming Ofsted to drive changes in
education e.g. higher quality teaching
- Introducing a requirement that all
teachers working in schools must hold
or be working towards their teacher
qualification to ensure all children are
being taught by qualified teachers
• Plans for VAT to be charged on school
fees, although no longer intends to
remove charitable status of schools
Policies Implications
• A more positive school funding
environment should ease budgetary
pressures, which should drive spending
on supply
• Increase in CPD funding may increase the
number of training days that will require
cover
• Funding support for recruitment of
teachers for ITT and retention bonuses
may start to ease teacher shortages and
the recruitment challenges faced by
schools. In the long-term, this could
reduce demand for supply for unfilled
vacancies. However, given the scale of
teacher shortages and challenges faced
by the industry, this is unlikely to impact
the market in the short-term
• There are several potential scenarios
resulting from the decision to charge VAT
on private school fees:
- May increase pupil numbers at state
schools and increase the number of
students required
- Independent school budgets may be
tighter if unable to pass on full fee
increases to parents, reducing their
spend on supply
“I think overall a Labour Government will be positive for the sector. Under the previous leadership, there was a
risk that they might look to nationalise areas of teacher recruitment, but we are confident this isn’t the case
now. I think they will put more money into the sector, which will help schools resource more effectively in terms
of supply. It won’t be easy to solve teacher shortages as this will take significant time, and it's not just the case
that you throw more money at it and it goes away, as it is a complex issue.” – Supply agency

12
Public
We expect the market to grow at 4% p.a.,
with an equal contribution from supply day
volumes and rates / margin (‘MPD’) growth
Demand drivers will remain robust…
The market will continue to experience robust
demand drivers, although we expect some
normalisation following Covid-19.
We expect a moderate reduction in short term
sickness absences following the Covid-19 spike.
Long-term supply for sickness is forecast to
increase at c.3% p.a. driven by increasing teacher
stress / workload with maternity cover broadly
stable.
Given the ongoing challenges with teacher
recruitment and retention, the market will continue
to see strong demand to place supply teachers for
unfilled vacancies, which have been growing
historically at 8% p.a..
We also expect continued strong demand for long
term support staff. This is driven by challenges in
recruiting permanent support staff (particularly with
previous education experience), which is driving
adoption of the supply model. We anticipate that
requirements for one-to-one SEND support will
continue to grow, as will the use of support staff to
help pupils who are falling behind.
Overall, we are forecasting a 2% p.a. increase in
supply day volumes, with growth in long-term /
vacancies more than offsetting the short-term
decline.
Rates and margins are likely to grow at an
inflationary rate….
Given inflation and candidate constraints, we are
forecasting day rates will increase at c.3% p.a. in
AY24 and 2% p.a. thereafter. We also anticipate
moderate growth in MPD of c.2% p.a.. This is
supported by our interviews which suggest that
whilst schools will pay a premium for high-quality
candidates, they have to offset this against the
desire to build LT partnerships with their key
clients.
School budgets will remain tight but will
ultimately be able to cover the overall market
growth of 4% p.a….
Our analysis of forecast education spending,
teacher salary increases, and economic inflation
suggests that whilst school budgets will remain
tight, their overall financial situation should not
worsen. This is supported by the proposed 7%
increase in school funding in AY24, and the
Government’s decision to fund 3% of the 6.5%
teacher pay rises (with funding above the 7%
referenced above).
Supply agency market growth (AY23-27
CAGR) “There are positive drivers for both teachers and
support staff. I think growth will be slightly higher
amongst support staff, as they play an
increasingly important role at schools, including
with catch-up from Covid-19” – Supply agency
“We expect strong growth across both teachers
and support staff, as recruitment challenges are
prevalent for both.” – Supply agency
2% 2%
4%
Volume Value Total

13
Public
We expect further industry consolidation
while CCS and Tech-entrants are expected to
have only a moderate impact
The supply agency market remains relatively fragmented and comprises c.10-15 scaled
specialist education recruiters, generalist recruiters (e.g. Reed, Randstad), a limited pool of
niche providers (e.g. SEND or technology disruptors) and a long-tail of small local providers.
The top 10 scaled education specialist contribute c.50% of market GP, and whilst financial
information is not available, we estimate that the generalist recruiters (e.g. Reed) contribute a
further c.15%, with the balance serviced by smaller regional, niche and local providers.
Competitors have pursued multiple strategies for growth including organic roll-out of new
offices, regional buy-and-builds, service diversification, managed services, international
candidate sourcing, and technology disruption. The leading agencies have been successful in
growing market share with the top 10 specialist agencies increasing share from c.48% in AY19
to c.52% in AY22.
We consider that larger agencies are well placed to continue to grow at an accelerated rate
versus the wider market given increasing use of Preferred Supplier Lists (“PSLs”) by MATs,
their efficient operating models enabling them to source high-quality candidates in a
constrained market, and investments being made in back-office technology.
Over the last 10 years, several technology companies (e.g., Zen, Humly, Opogo,
TeacherBooker and AirSupply) have entered the market, with a view to disrupting it. Whilst
these businesses may have carved out attractive niches for themselves it has not led to
widespread industry disruption.
However, we do consider there are opportunities for agencies to further enhance their
operations through investment in technology, notably with candidate facing solutions.
The Crown Commercial Service (“CCS”) was launched in
2019, with the intention to make the booking of supply
teachers more transparent, compliant and cost effective
Schools can book directly through the c.115 registered agencies
or appoint one of the 8 Managed Service Provider (“MSP”) to
manage their spend, through Lot 2.
The framework has had limited uptake so far, and currently only
accounts for c.4% of market spend. There is currently low
awareness of the framework amongst schools, with our survey
finding that 71% of schools not using the framework unaware
that it exists. CCS are targeting a c.12.5% share of spend in 3
years-time and have budgeted expenditure of c.£60m in AY24.
Agencies highlighted that their margins have not been
significantly impacted by the introduction of CCS and can on
occasion be higher as they often increase daily rates to off-set
the loss of the ability to charge temp-to-perm fees. However, the
1% fee charged by CCS is typically unrecoverable for agencies.
Total agency supply
spend via CCS (£m),
and as share of overall
agency supply spend
(%)
3%
4%
AY22
32
8
23
42
31
AY23
10
% share of agency spend
Lot 2
Lot 1

14
Public
Key strategic issues and
recommendations
Growth strategy
• The supply market is large and highly resilient, with supply agencies providing critical
support to address schools’ resourcing challenges
• We anticipate that the market will continue to perform strongly and grow at c.4% p.a. in
the coming years. This provides supply agencies with a strong base to their business,
although several agencies intend to grow at an accelerated rate to achieve their
strategic / investor objectives
• Supply agencies have pursued multiple growth strategies including organic roll-out of
new offices / geographic expansion from hubs, regional buy-and-builds, expansion into
other resourcing areas (e.g. perm), service diversification (e.g. training, tutoring, CPD,
back-office services, technology), managed services, new business models (e.g.
recruit, train, deploy), international candidate sourcing, and technology disruption /
investment to gain share and grow at an accelerated rate versus the market
• We consider that there is merit in each strategy and success will be determined by
successful execution which will depend on their operational set-up, risk appetite, and
funding / investment situation
Candidates
• The market has been constrained by candidates for both supply teacher and support
staff roles. Given DfE failures to meet ITT targets and continued high churn in the
industry, we anticipate that this will continue to act as a constraint in the coming years
• We consider that agencies which are most effectively able to recruit and retain
candidates will be best placed to win share in the market and grow at the fastest rate
• We recommend that agencies continue to explore ways to improve recruitment and
retention of candidates, whether through their operational set-up (e.g. 180 vs 360
consultants), the use of technology, effective communication/networks, training / CPD
offered to candidates, referral schemes, mental health initiatives, or use of incentives
Area Comments
Technology
• We do not anticipate that technology disruptors will gain significant market share in the
short-to-mid-term, although they will continue to carve-out an attractive niche
• However, we do consider that strategic technology investment both in the back-office
and in candidate and client facing solutions, has potential to deliver tangible operational
efficiencies to agencies, and support above market growth
MAT relationships
• The rate of academisation has slowed in recent years but we anticipate that
consolidation amongst Trusts will continue in the coming years
• Whilst MATs have a range of strategic priorities and approaches to supply, we are
seeing an increased use of PSLs in the market. This should be favourable for leading
agencies that are able provide MATs with the highest quality candidates across multiple
local and regional schools
• We recommend that agencies continue to refine their go-to-market, account
management, and approach to supplying management information / data to MATs to
best position themselves to gain share

15
Public
Contacts
Andrew Hawkins
Director | Strategy Group
T +44 (0)20 7184 4622
E andrew.p.hawkins@uk.gt.com
Tom Eskell
Associate Director | Strategy Group
T +44 (0)207 728 2598
E tom.eskell@uk.gt.com
Jack Hogan
Assistant Manager | Strategy Group
T +44 (0)207 728 3321
E jack.hogan@uk.gt.com
The Grant Thornton Strategy team comprises highly experienced strategy consultants and specialises in providing
strategy and commercial due diligence support to management teams, private equity and lender banks. If you
would like to discuss any of the matters raised in the paper or more widely then please do not hesitate to reach
out to Andrew and the team.
The Grant Thornton Strategy team:
• Dedicated strategy and commercial due diligence practitioners
• UK team leveraging Grant Thornton’s transaction and CDD specialists across the globe
• Mid-market, private equity and B2B/B2B2C focus
• Sectors: Business Services, Education & Training, Industrials, Automotive, Technology, Media & Telecoms,
Financial Services, Healthcare

grantthornton.co.uk
© 2023 Grant Thornton UK LLP.
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and
advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant
Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are
not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by
the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and
do not obligate, one another and are not liable for one another’s acts or omissions.

Supply agency market - aiming high 2.pdf

Recommended

Recommended

More Related Content

Similar to Supply agency market - aiming high 2.pdf

Similar to Supply agency market - aiming high 2.pdf (20)

Recently uploaded

Recently uploaded (20)

Supply agency market - aiming high 2.pdf