The 2025 Spending Review reaffirmed the government’s commitment to renewing and expanding England’s education estate, placing capital delivery at the centre of long-term policy. Despite substantial allocations, new developments, including the appointment of contractors to the Construction Framework 2025 (CF25) and the decision to fully fund special educational needs and disabilities (SEND) from 2028, are reshaping the capital landscape. These changes come at a time when rising construction costs, supply chain pressures and delivery capacity constraints continue to limit progress across the sector.
Schools: Ambition meets structural constraint
Schools remain the primary focus of education capital investment. The School Rebuilding Programme (SRP) continues to drive estate renewal, supported by £2.4 billion per year to 2029. With over 500 rebuilding and major refurbishment projects confirmed, SRP targets some of the most deteriorated estates nationwide. Alongside this, maintenance funding will rise to £2.3 billion by 2029–30, helping schools address compliance requirements, urgent repairs and essential condition works.
However, the scale of the challenge dwarfs available funding. England’s 29,000 schools collectively face a £13.8 billion backlog of high-priority repairs, reflecting decades of underinvestment. Even with increased allocations, inflation in construction materials and labour continues to erode purchasing power, slowing the pace at which the estate can be modernised.
CF25: A reset for delivery capacity
One of the most significant developments of 2025 is the announcement of appointed suppliers to the £15.4 billion Construction Framework 2025 (CF25), which replaces CF21 from November 2025. The framework is designed to strengthen delivery capacity, diversify the contractor base and reduce procurement bottlenecks that have historically delayed projects. This diversification aims to mitigate delivery risk by reducing reliance on a narrow pool of major contractors. With inflation, labour shortages and unpredictable supply chains still affecting project timelines and budgets, CF25 represents a strategic investment in the system’s long-term ability to deliver capital works at scale.
Early years: Expansion under strain
Early years capital funding remains a rapidly expanding area of policy. The government plans to open 200 school-based nurseries in September 2025, with a further 100 to follow, contributing to a £370 million programme delivering 6,000 new childcare places. Yet delivery remains complex. Many school sites require modifications, including outdoor learning areas, safeguarding adjustments and EYFS-compliant layouts, placing additional pressure on budgets and local authority planning capacity.
Higher education: Levy impacts
The Autumn 2025 budget has seen some impact on the HE sector, most notably on the levy on fees from international students, which will go towards maintenance grants for disadvantaged students studying eligible courses. Universities will have to pay £925 per international student per year starting in August 2028 if its intake passes 220 overseas students a year. This represents a 4.9% levy on the average annual fee of £19,000 for an international student; the government had originally proposed a 6% levy. With many universities already struggling with the drop in international students impacting their financial position, the levy may result in raising international fees still further, which has the potential to drive down international numbers even further.
Higher education: PBSA demand still strong in certain regions
Analysts estimate a national shortfall of hundreds of thousands of student beds, with some sources citing a long-term gap of as many as 580,000 beds. The projection suggests that the UK PBSA sector will continue to grow over the next several years. Cities with large student populations (e.g. London, Nottingham, Leeds, Manchester, Birmingham) currently dominate supply pipelines and investor attention.
However, growth will likely be modest and incremental, focused on major student cities and high-quality “premium or mid-market” stock, rather than a broad wave of over-supply nationwide.
Decarbonisation: A growing capital gap
The closure of the Public Sector Decarbonisation Scheme and Low Carbon Skills Fund has removed vital funding streams for heating replacements and energy-efficiency work. This leaves many schools unable to progress essential decarbonisation projects, creating a widening gap between policy ambitions and available capital.
SEND Reform: Capital Implications from 2028
The government’s commitment to fully fund SEND from 2028, ending the need for local authorities to cover deficits from general reserves, holds significant implications for capital planning. Though primarily a revenue reform, it provides councils with greater certainty to invest in special school expansions, resource bases and inclusive mainstream adaptations. With demand for specialist places continuing to rise, the reform strengthens long-term planning conditions, though broader SEND system reform remains necessary.
Conclusion
CF25 offers a major reset for delivery capacity, SRP and early years expansion continue to progress, and SEND funding reform promises improved stability for future planning. Yet inflation, supply chain fragility and historic estate pressures continue to slow progress. The extent to which current commitments translate into lasting improvements will depend not only on funding but on the sector’s ability to navigate these persistent structural challenges.
Read more in the Q4 2025 market report.
