Effects of Coronavirus on British Boarding
Education Spending is Robust
One area Chinese families are likely to continue to spend will be education. This along with healthcare are seen as the most robust sectors in any downturn. Families are likely to forgo new cars, holidays and moving home to pay for their children’s education. However, some possible medium term effects might be family’s assets become less liquid as property and investments take a hit. This could potentially leave some families short of tuition and up front payments for a full year’s tuition. We expect this to be short lived, but believe schools need to aware of the pressure being experienced by all families over the next 12 months.
What is it like on the ground?
Tutors in China have teachers and partner schools across the whole of China and the picture is mixed. The majority of cities across the mainland have been impacted by the Novel Coronavirus (nCV) the day to day life although restricted, is very slowly getting back to normal. Most schools have implemented online teaching and learning (with help from central government and private companies) and are delivering the curriculum to their students. Many international staff have been stranded abroad but asked to continue offering their classes online.
However, the most impacted areas by the nCV outbreak have been: travel, restaurants, hotels and luxury retail. The lunar festival would normally represent the busiest period for these groups and many companies are already showing signs of major declines in sales (Burberry, The Hilton Group and C-trip) which will likely remain in the short to medium term. Travel is severely restricted across the country as flights, highways and high speed rail are curtailed or those who have to travel placed under strict controls (especially those from or near Wuhan).
Effects on Education in China
All forms of education from kindergarten to university have been given a return date of March 2nd (likely to be extended in some areas). However, most students have been receiving online classes through their schools and further supplemented by tutoring.
Although not officially announced yet, the government are likely to issue changes to the exam timetable and curtail the summer break by a month to make up for lost time. Students who are enrolled in boarding schools or summer programmes in the UK for 2020, should be prepared for this by recipient schools.
Effects on Student Recruitment
In the short term, decision making by parents and extended family is likely to be delayed. Some families may be directly affected by the economic depression which will likely follow and be less willing or unable to send their children abroad. However, as we have begun to see in the last week or so, students who were considering a 2021 start date or have secured a place in a school, are looking to bring this date forward to 2020. What is very clear from our families and school partners have said, is that an ‘open dialogue on a daily or weekly basis is critical to keeping them informed and positive about their children’s future’.
The negative economic effect of nCV is happening as I write this report. The comparative figures on last year’s first quarter are likely to be drastically down across all sectors as consumers put off or cancel large discretionary spending. Sectors most keenly hit are likely to be travel, retail and housing, which have been key drivers of the recent growth especially in tier 2-4 cities.
Goldman Sachs estimates Chinese growth will slow to +5.5 per cent this year, and has downgraded its forecasts for Hong Kong and Thailand, which are exposed to tourism from the country. The economy expanded 6.1 per cent in 2019. As China fights a new strain of the coronavirus, retailers, restaurants, tourism and mass travel services are all severely affected in an effort to prevent its spread. They expect Chinese GDP growth to be reduced by 0.3 percentage points to 5.6% in 2020. Retail sales in China will drop from 8%YoY to around 3% – 4%YoY.
Meanwhile, global tourism, which relies heavily on Chinese tourists, could experience a negative growth of more than 30%. As the virus spreads, and more casualties are reported, we expect the yuan per dollar to weaken to 7.20. While policy makers and CEOs say it’s too soon to assess the full impact, it’s becoming increasingly clear the blow will be global. Nike Inc. has closed about half of its company-owned stores in China and expects a “material” impact from the virus. Starbucks Corp. has closed about 2,000 of its cafes and Apple Inc. says its supply chain will be affected.
Effects on Hong Kong
Hong Kong retail sales are at -23.6%YoY, and over the coming months we expect them to plummet to -30%YoY, until April when the low base effect kicks in. At this point we might see some less negative numbers, but those will be technical base effects only. They are unlikely to reflect any improvement in the retail sector. We don’t expect the virus to substantially impact GDP growth in Hong Kong. It should marginally change from -5.8% to -5.9%.
Travel Plans in the Region
Unless your school requires admissions staff to travel, adopt a ‘wait and see’ approach for March, April, and May travel to the Greater China region. The situation will continue to worsen for some days or weeks, but eventually the virus will be contained better than when SARS was in 2003–2004. Expect that schools to reopen in early March. Before then, arranging travel, visits, or fairs will be next to impossible because officials will not approve them. Most education event planners are cancelling or postponing March and April events, while others are awaiting more information. If you plan to travel to China in March, we suggest waiting a couple of weeks from now to get a greater sense of the scale of the outbreak. May and June events are less likely to be significantly affected, although they may be more limited in scope and participation as students and families stay away.
What can you do?
As always with epidemics, public panic is one of the most dangerous contributors to the scale of the virus’ impact. Offering students extra supports such as counselling and coronavirus-specific lessons and resources are all excellent steps for helping students, family members, and staff to weather the current outbreak.
Some useful measures to have in place at your school:
- As a part of PSHE or an assembly make the education of all staff and pupils about the nCV a key driver to helping everyone understand what is happening (we have a power point template)
- If Chinese pupils stay in the UK, ensure they have guardianship arrangements in place for this extended period
- Consider keeping the boarding house open and staffed during the holiday or make provision at a school which can do this for your students
- Have a staff member at the school responsible for communicating with pupils and families in Chinese and send out regular messages
- Talk to students and families about whether it’s necessary to go back to China
- In the unlikely event of a student travelling to China, ensure medical staff at the school are trained to spot Coronavirus symptoms on their return
- Ensure children can still study online if they have to enter quarantine and have the necessary support networks in place
Our only major recommendation is to send a “message of solidarity to your Chinese families and stakeholders.” It’s good advice, since like SARS before it, the coronavirus will be controlled and China will be business as usual again. What will linger after the outbreak is over, is the extent to which your school treated their Chinese students and partners with respect and care.
If you wish to speak about any of the above commentary or just in general about student recruitment or how best to prepare students arriving from China please reply to this email to arrange a time.