InterHigh – Market and Competitors

Welcome to my series covering Wey Education. My articles on the subject consist of:

• Wey Education – History This covers the company’s history, which is hopefully useful for context, but not strictly necessary to follow the other articles.
• Wey Education – Present and Future – Which contains the core of my analysis.
• The article you are reading now, which discusses the market place and competitors of InterHigh, the largest division of Wey Education plc.

Market size / opportunity

InterHigh initially served parents whose children could not go to a physical UK school, either because they have special needs (typically in the autistic spectrum, but also if they need to spend long periods in hospital), or because they have an sporting / acting career, or because their parents travelled as part of their job. However as increasing scale has allowed InterHigh to offer a more complete education and online schooling becomes ever more mainstream they have been able to increasingly extend their reach.

UK Home Schooled

All UK children at InterHigh are technically categorised as home-schooled and so this could be considered the market place that they operate in.

Parents choose to home-school for a wide variety of reasons and some of these are highly compatible with online schooling while others parents would never contemplate even the limited structure of an online school.

Using figures from the 2017/18 ADCS survey and performing various adjustments I calculate a UK home-schooled market size of 74,000 possible students. There are good reasons to believe this is an underestimate.

Of InterHigh 1600 pupils, around 1350 are UK based, giving a market penetration of 1.8%. This market is growing at around 25% a year.

Of course the presence of good value, high-quality online schooling has the potential to increase the size of this market, for example for parents who are inclined towards home schooling but do recognised the value that professional teaching can add, or who are not confident enough to assist at GCSE level and above.

UK privately schooled

InterHigh does of course charge fees and so they could be considered to operate in the private school marketplace.

Most, but not all (and no online) private schools are members of the ISC who in their 2019 census reports 420,000 privately educated pupils aged 8-19, with average fees of around £15,000 per year (vs £3300 for a basic 8 GCSE course at InterHigh). Of these around 69,000 are boarders, often because parents live remotely from the school, with average fees of £34,000 a year.

Here InterHigh has a market penetration of around 0.04%.

The private education market is currently in a mild uptrend and at an all time high, but is somewhat affected by the economic cycle – ISC numbers fell 1.5% between 2009 and 2011. Private schools have been working hard to keep down their costs, but fees have consistently risen above the cost of living and current Labour party policy is to remove their VAT exemption which would increase fees significantly.

UK state schooled

Given that InterHigh’s fees are around a quarter that of a physical private school, their marketplace extends far beyond parents that could afford UK private school fees.

The total number of UK schooled children (including privately schooled, but not including online / home schooled) was 6.5 million in 2016/17. At secondary level forecasts suggest this is likely to increase over the next few years, although of course this is highly dependent on levels of net immigration.

International

InterHigh’s reach extends far beyond even the UK school sector. There are UK-based parents who travel for work (who are covered by UK law but may not be included within the UK figures given above), ex-pats who wish their children to continue a British education and in fact any child anywhere in the world where local laws allow home education.

Home education is broadly allowed in more liberal democratic countries including the US, Canada, India, Australia, New Zealand and much of Europe. Of course, where restrictions exist, structured online education is more likely to be acceptable than unstructured home education.

Summary

The size of their market is virtually unbounded in comparison to their current size and is generally growing.

Principal Competitors

UK State Sector

InterHigh’s largest UK competitor is undoubtedly the state funded school system. This has the fundamental advantage of providing both education and (limited) childcare that is completely free to parents. The attractiveness of the free childcare has been increasing for decades as fewer parents and other relatives are available to provide it themselves (e.g. the female employment rate has risen from 53% in 1971 to 72% today) and childcare costs have risen far faster than average earnings.

Yet the fact that ever more parents choose (or feel forced) to home-educate or pay for private schooling demonstrates that the state school system is performing badly and losing market share. The drivers behind this are contentious, but I believe the principal reasons are: 1) attempts by successive government to raise standards have led to increasingly illiberal policies that can impair education and drive parents away, 2) special needs and issues such as bullying are increasing in awareness if not frequency far more quickly than a rigid system can accommodate them.

So for the moment InterHigh are in the advantageous situation of being in a market with a very large incumbent that is on a long-term weakening trend. There are no signs this is about to reverse. Even the structural “free childcare” advantage may be starting to abate with increasing amounts of home and flexible working.

In the long term, perhaps the biggest risk to InterHigh must be that the state sector gets its act in order, for example improving teaching effectiveness and special needs provision, perhaps through some move to online schooling themselves. Of course this is where Wey’s Academy21 and Teaching Online qualification come into play.

Online private schools

Briteschool has been around the longest having been founded in 2006 (the year after InterHigh), however it seems that they decided to stay small and today are under the VAT turnover threshold, implying less than 35 pupils.

Net School is possibly the largest and for me the most convincing competitor. It was founded by Susan Reed in 2013 after leaving Briteschool where she worked as a teacher and administrator. They have a little over 100 students but still manage to offer a fairly complete range of subjects. For a full IGCSE syllabus the headline cost is about twice that of InterHigh for what is generally a very comparable service but with class sizes around half as big. They allow subjects to be chosen a-la-carte rather having a package with add-ons and so in some cases they price differential will be considerably less. They are starting to take A-Level students from 2019. They do not have an office that you can telephone, instead relying on an answering service and emails, although they respond very quickly to enquiries.

Company house filings show that Susan Reed has moved her address between various European countries and now resides in Canada, and that her husband was recently removed as a shareholder and director.

My Online Schooling started teaching in 2017 and was founded by Tom Crombie who is also the head teacher / principal. Prices are similar to InterHigh and they appear to be targeting the same market. On a technical point, they are in a small minority of schools that do not give more teaching time to Maths than other subjects at IGCSE and this may reflect a lack of experience. Their website and social media comes across as highly promotional. Despite claims to the contrary on LinkedIn, I suspect their pupil numbers are currently below 100. I cannot see why a prospective parent would choose this new entrant over InterHigh given the similarity of the offering, especially as other online schools have closed at short notice, but as a direct price competitor and active advertiser they are worth keeping an eye on. They are opening an Australian office to target the Asia Pacific market / timezone.

Cambridge Home School appeared to start teaching in 2016 and was founded by Troy Page. They are positioned upmarket from InterHigh, trading heavily on the “Cambridge” name and address. Their fees are cheaper than Net School with smaller class sizes and they imply more qualified teachers, but they do not provide the same flexibility of paying for subjects individually. They are significantly more expensive than InterHigh for someone taking combined science, but for someone taking all there sciences separately they are broadly competitive.

LIVESchool is part of Pembrokshire college which may provide more stability and substance than some of the other recent entrants. They do not offer anything pre-GCSE. They do not offer a full range of IGCSE courses, only offer 1 hour a week of teaching time (vs 2 hours elsewhere and generally more for Maths) and nor are they especially cheap. They are only really an option for someone who needed a top-up for self study in some of the courses they offered and in this respect their offer is between that of a true online school and the many paid-for resources available aimed at home schooled and other children pass their exams. As you would expect as part of a college, their A-level offering is much more convincing.

Online homeschooling assistance

Wolsey Hall offer IGCSE online courses with textbooks, access to third resources and tutor support suitable for supporting home education rather than live lessons or a school-type experience. They grew out of an correspondence college mostly offering degree level programmes via the University of London. In 2010 they started offering IGCSE courses, later expanding into A-Level and KS3. While they offer a very different service, for comparison they charge about half what InterHigh do for a full IGCSE suite.

MyTutor – Online one-one tutoring in addition to a physical school, or to assist home schooled children. Over 100,000 reviews. £18 to £40/hour (which compares to under £6/hour of contact time, plus free marking etc. when taking the full core syllabus at InterHigh). B2B offering to schools, with 300 on board.

Summary

There is currently no significant direct competition to InterHigh, although there are a number of recent entrants that could become competitive over time and there are alternative models than the full school experience. In my main analysis I discuss why I believe InterHigh have a moat that makes it hard for new entrants.