Market update: British curriculum schools in the UAE

Although British nationals account for only 4% of the United Arab Emirates' population, the British curriculum is among the top three most popular curricula offered by schools in the country.

A report by Colliers International states that out of a total 255,000 private school students, some 85,000 students are enrolled in British curriculum schools, accounting for approximately 33% of total students in Dubai, followed by the Indian curriculum (31%) and US curriculum (18%).

In Abu Dhabi, the British curriculum is the third most popular, with 22% of students (accounting for 50,000 out of 223,000 students) in private schools enrolled in British curriculum schools, trailing behind the US curriculum (24%) and Ministry of Education curriculum (23%).

Colliers International director, healthcare, education and PPP Mansoor Ahmed attributes this demand to a number of factors. He explains: "The popularity rests not only on the large presence of British nationals in the UAE, but because it is also favoured by a number of other nationalities such as, Indian, Pakistani, nationals from different Arab and Commonwealth countries. There is also the demand from non-UK nationals to attend higher education in the UK with the British curriculum seen as at least a proponent and sometimes a prerequisite to entry."

Ahmed also believes that the transient nature of the UAE's population has resulted in an apparent preference for international curricula due to their transferable nature.

The report also points to high returns on private education investments — high quality, efficient international schools can achieve 15-20% net profit margins after initial stabilisation years, according to Colliers.





















DEMOGRAPHIC DEMAND

The population of the UAE and especially Abu Dhabi and Dubai predominantly consists of expatriates, with the majority of the population falling between Generation X (1965–1980), Generation Y (1981–2000) and Generation Z (2001–present). This translates into a wide base of young parents and school attending population. The rise of Generation X and their dependents from Generations Y & Z, continues to dictate the trends incorporated within the private education sector in the UAE, which reflects the high percentage of the school-aged population.

According to Colliers data, the population of Dubai is expected to reach 4.6 million by 2025, while Abu Dhabi's population is expected to reach 5.9 million by 2025, subject to it maintaining the current growth rate patterns. Based on the current population growth rate in the UAE and share of British curriculum schools in Dubai and Abu Dhabi, by 2025, Dubai will require an additional 166,000 private school seats, of which approximately 55,000 will be for British curriculum schools. Abu Dhabi will require an additional 101,000 seats in private schools sector, out which approximately 23,200 will be for British curriculum schools.

With an average size of 1,500 students per school, Dubai requires an estimated 37 new British curriculum schools by 2025, or roughly three schools every year. Abu Dhabi, with an average size of 1,300 students per school, will requires an estimated 18 new British curriculum schools by 2025 or roughly two schools every year.





















CHALLENGES

Despite significant demand, the British schools market in the UAE is not without its challenges. One of the key challenges facing operators is the ability to attract and retain quality staff in order to deliver on the promise of quality educational services. Colliers states that "operators desperate to recruit appropriate specialised staff have prompted a trend of poaching teachers and management staff from competitors".

Consequently, salaries have also witnessed considerable growth in Dubai and the UAE, which indicates that an effective international recruitment process is imperative in order to achieve operational success.

Another major problem is the funding required to set up a British curriculum school in the UAE.

The typical cost of setting up a 2,000-seat school can range from GBP 47 million ($62 million) to GBP 60 million ($79 million) if the land is purchased; costs can range from GBP 35 million ($46 million) to GBP 42 million ($55 million) if the land is leased. The report also highlights that although banks are actively seeking investments within the education sector, they are limiting their investments to established players with proven track records. British school operators entering the education sector in the UAE with greenfield projects struggle to find project finance unless there is recourse to alternative cash flows. Further difficulties arise with the terms offered. Education investments are typically long-term investments contradicting banks' risk appetite which typically extends to terms between five to seven years.






















"First time entrants in the UAE market who do not have sufficient financial resources, or are hesitant to make financial commitments, ultimately look for an investor from the UAE to fund their projects. In this case, operators enter into a licensing and operating agreement with the investor and receive a management fee," Ahmed says.

However, some of the other options include operators forming and owning the operating company (OpCo) and the investor investing in the land and property (PropCo), or creating a Joint Venture (JV) with an investor.

The report also states that while several British curriculum schools target the high income segment with a premium offering and fees ranging from GBP 8,000 ($10,000) to GBP 20,000 ($25,811), future supply should target the mid-market with affordable fees between GBP 6,000 ($7,743) to GBP 12,000 ($15,500) per annum.

Ahmed notes: "Based on a number of studies conducted by Colliers, the operators/investors still can achieve more or less the same returns as premium British schools by targeting the affordable segment of the market, as a result of less capital and operating investment required to set-up and operate such schools, faster ramp-up and higher occupancy rates, and relatively higher number of students.

"In fact, in this case the market will not be restricted to just Dubai and Abu Dhabi, the main cities of the UAE, but the operators/investors can target other emirates which require more affordable schools."