Durham High School: The £2 Million Question?

I went to school in Durham. Belmont Comp, then Durham Johnston. Durham High School for Girls was posh. Prim green uniforms.

This will be the first year since the late nineteenth century that there isn’t a new intake at DHS. It closed over the summer, following a takeover by a Chinese education company.

There are two very different explanations for what happened.

The first is the one advanced by the school’s owners and others in the private education sector. Durham High was another casualty of the government’s decision to impose VAT on private-school fees. Higher prices reduced pupil numbers and made an already difficult business unsustainable.

The second is much more serious. When Durham MP Mary Kelly Foy raised the closure in Parliament she said that what had happened bore the “hallmarks of a land grab”. She said that Farewell Hall sat on prime real estate estimated to be worth around £10 million and raised concerns about overseas companies asset-stripping educational institutions.

Those are very different claims. Both of which deserve to be tested.

Fortunately, quite a lot of what happened can be established from accounts, Companies House filings, Land Registry records, the administrators’ proposals and statements made by the people involved.

Nothing I am about to tell you is an accusation. I am not claiming to have found evidence of wrongdoing. Schools fail. Investors lose money. Shareholder loans and charges over property are perfectly normal commercial arrangements.

But there is a puzzling sequence of events, and there are some important questions which remain unanswered.

The first step is to establish what actually happened. If you want to skip to the analysis of both sides’ claims click here.

To understand the closure we need to go back several years.

2020–22: the finances begin to deteriorate

Durham High School for Girls was not financially healthy before its new owners arrived.

In the year to July 2020, the school reported income of approximately £4.80 million and expenditure of £4.80 million. By 2020/21, income had fallen slightly to £4.71 million while expenditure had risen to £5.10 million.

The following year the gap widened again. In 2021/22 the school received £4.54 million and spent £5.16 million — a deficit before investment losses of approximately £621,000.

2022/23: nearly £1 million lost in a year

Things deteriorated sharply in 2022/23. Income fell to £4.39 million. Expenditure increased to £5.38 million.

That produced net expenditure before investment losses of £989,211. After investment losses, the school’s funds fell by just over £1.047 million during the year.

Total funds nevertheless remained substantial at £7.75 million, largely because the school owned valuable property.

But there was an obvious problem. The school wasn’t generating enough income to meet its annual running costs.

2023/24: another £1 million deficit

The pattern continued. In the year ending 31 August 2024, the charity reported income of £4.51 million and expenditure of £5.58 million.

Another £1.07 million had disappeared.

Over the two financial years immediately before the takeover, the school had therefore spent roughly £2 million more than it had received.

That matters when we come to test the VAT explanation.

Whatever effect VAT subsequently had, Durham High had a structural financial problem before VAT was imposed on school fees.

Year	Income	Expenditure	Approx. gap
2019/20	£4.80m	£4.80m	~£0
2020/21	£4.71m	£5.10m	−£0.39m
2021/22	£4.54m	£5.16m	−£0.62m
2022/23	£4.39m	£5.38m	−£0.99m
2023/24	£4.51m	£5.58m	−£1.07m

September 2024: a new company appears

On 3 September 2024 — just three days after the end of the school’s financial year — a new company called Durham Education Limited was incorporated.

Its business was listed as pre-primary, primary and secondary education. Yuchen Xia was initially its person with significant control, holding more than 75% of the shares and voting rights.

For a brief period Surging Investment Limited was also recorded as having significant control, with an interest of more than 25% but no more than 50%. That interest was recorded as beginning and ending on 17 October 2024.

At this stage Durham Education Limited had not yet taken over the school.

4 November 2024: the rescue is announced

The governors wrote to parents with what they described as “exciting news about the future of Durham High School”.

The school was entering what was described as a “strategic partnership with an educational business investor”.

The letter said the move would “secure the future of our school” and allow it to continue providing education “for generations to come”.

The investor was identified as Shangmei Gao, described as an educationalist and philanthropist, founder of the Jiangsu Huai’an Education Group in China and owner of Ruthin School in North Wales.

Parents were told that Durham High School would join the newly created Durham Education Limited, which would form part of the Ruthin Education Group.

And they were reassured:

“There will be no changes to the way the school operates and, for our students, it will be business as usual.”

The chair of governors said the arrangement would secure the school’s future. Headmistress Michelle Hill said girls would continue to be educated there “for decades to come”.

20 December 2024: the school is transferred

The transaction itself took place on 20 December.

Until then, the school had been operated by Durham High School for Girls, a charitable company.

Afterwards, it was operated by the privately owned Durham Education Limited.

The charity’s subsequent accounts describe what happened in unusually broad terms:

“the assets of the School together with its rights of patents and trademarks were sold to Durham Education Limited.”

The accounts add:

“The operation of the School passed across to Durham Education on the same day.”

This wasn’t therefore simply an investment into the existing charitable school.

The operation of the school and its assets were transferred from a charity to a private company.

And that leaves the first important unanswered question.

What exactly was transferred, how was it valued and what consideration did the charity receive?

The disappearing value of the assets

At 31 August 2023, the charity had reported total funds of approximately £7.75 million. Its own-use assets had a book value of approximately £7.63 million.

But the 2024 accounts were prepared after the December sale had taken place. The trustees therefore adjusted the value of the assets to reflect what they described as their “net realisable value” following the subsequent transaction.

That produced an impairment charge of:

£5,670,363.

Own-use assets fell from approximately £7.63 million to around £1.86 million.

Accounting book values and sale values are different things, so this does not tell us that anything improper happened.

But £5.67 million is a very large impairment.

It leaves an obvious question about exactly what was sold, what professional valuation supported the transaction and why the assets were worth so much less when the sale took place.

January 2025: the bank charges are cleared

The charitable company had two registered charges over its assets.

On 24 January 2025, Companies House recorded both charges as satisfied in full.

There may be a perfectly straightforward explanation. A lender’s charge would normally need to be dealt with as part of a sale or refinancing involving secured property.

But the timing matters because it happened just over a month after the December transfer.

The land

The Land Registry records are particularly important.

The principal school title is DU263596. The school also owned two surrounding plots, DU218620 and DU82483.

The Land Registry records £2 million as the price stated to have been paid for the three titles together.

That creates two separate questions.

Was £2 million an appropriate price for the land?

And what happened to the £2 million?

The school had been operated by Durham High School for Girls, a charitable company registered as charity number 1119995. That company has since been renamed DHS Educational Foundation.

There is also a linked charity called simply Durham High School, governed by a Charity Commission scheme dating from 2007, and a separate older body, the Durham High School (Farewell Hall) General Charitable Trust, which the Charity Commission describes as dormant and says does not own or lease property.

The main charitable company therefore appears to have been the relevant owner when the three school titles were transferred to Durham Education Limited.

That transaction was subject to charity law. Trustees selling charity land generally have to obtain professional advice and satisfy themselves that the terms are the best reasonably obtainable for the charity.

We have not yet seen the professional valuation or adviser’s report obtained by the trustees, their minutes approving the transaction or any Charity Commission correspondence relating to the disposal.

So we do not yet know who valued the land, what value was placed upon it or why £2 million was considered appropriate.

The overage agreement

There is another important feature of the transaction.

The transfer contained an overage provision.

Overage agreements are designed to allow a seller to share in an increase in the value of land following specified events — commonly planning permission or redevelopment.

The Land Registry restriction remains on the title and requires compliance with the December 2024 Deed of Overage before a subsequent disposition can be registered.

We have subsequently learned more about its commercial terms.

Kevin McGorie, a partner at Sanderson Weatherall, the agents currently marketing Farewell Hall, says the overage currently provides for 50% of the uplift in value on obtaining the benefit of planning permission. That steps down to 30% and then 20% over a seven-year period.

That is potentially significant.

If planning permission produces a substantial increase in the value of Farewell Hall, Durham Education Limited — and therefore its creditors and ultimately its shareholders — would not necessarily retain all of that uplift. A potentially substantial proportion could instead flow back under the overage arrangement.

We have not yet seen the deed itself.

So while we now know considerably more about the commercial terms, we still do not know precisely how the uplift is calculated, when each step-down occurs, what deductions are allowed or all of the circumstances in which payment becomes due.

That could become extremely important if Farewell Hall is redeveloped.

Where did the £2 million go?

Part of the consideration may have been used to repay HSBC and release its security.

But the published accounts suggest the outstanding secured bank borrowing was much smaller than £2 million. The latest detailed accounts we can inspect show long-term bank borrowing of £174,434 at August 2023.

Even allowing for amounts falling due within one year, the secured debt appears to have been measured in hundreds of thousands rather than millions.

Repaying the bank therefore cannot, on the evidence currently available, explain most of the stated £2 million consideration.

The accounts which should help answer that question — those of DHS Educational Foundation for the year to August 2025 — are overdue and have not yet been filed.

Until they appear, we cannot follow the consideration through the charity’s finances.

2025: the rescue continues

On 15 January 2025 the members of the old charitable company resolved to change its name. That change was formally registered at Companies House on 3 June.

Durham High School for Girls became DHS Educational Foundation Limited.

The school itself continued under Durham Education Limited.

From this point onwards there were therefore two very different organisations: the old charitable company and the private company operating the school.

Publicly, meanwhile, everything remained optimistic.

By June 2025 Durham High was describing itself as part of Galaxy Global Education Group. A recruitment advertisement said Durham had become the second school to join Galaxy Global and that the group was “committed to expanding its presence in the UK education sector”.

The school was recruiting a new Business Manager.

On 20 June parents were invited to a presentation by Galaxy Global.

And on 27 June 2025, according to Mary Kelly Foy’s subsequent account to Parliament, parents were told that there would be investment in Durham High School for at least five years to make the school financially viable.

September 2025: boys arrive

Galaxy decided that the historic girls’ school would become co-educational from September 2025.

The argument was straightforward. Admitting boys should increase pupil numbers and improve financial viability.

The school became simply Durham High School.

Kelly Foy later told Parliament that parents had not been properly consulted and that promised investment required to make the change work did not materialise.

She gave one particularly striking example. According to information provided to her, the school’s leadership developed a co-educational integration plan requiring only around £3,000 of additional investment.

She said Galaxy refused to fund it.

October 2025–March 2026: ownership changes and Companies House problems

Yuchen Xia ceased to be a director on 19 October 2025. Shangqin Gao was appointed.

Companies House subsequently recorded Gao as the person with significant control of Durham Education Limited from 31 December 2025, owning 75% or more of its shares.

Then, on 3 March 2026, Companies House published a First Gazette notice for compulsory strike-off against Durham Education Limited.

Yet the company was very obviously still trading. It was running a school with hundreds of pupils.

A confirmation statement was filed and the strike-off action was discontinued the following day.

Again, this does not prove financial distress or wrongdoing.

But a company operating a 142-year-old school getting as far as a compulsory strike-off notice is hardly evidence of immaculate corporate administration.

On 10 March the company changed its registered office from Farewell Hall to 124 Finchley Road in London.

Early 2026: business as usual

Parents were still being encouraged to plan for the future.

In February 2026 they were invited to pay deposits for an art trip to New York scheduled for 2027, including payments continuing into September 2026.

According to Kelly Foy, pupil enrolment was still being offered at the beginning of June.

Parents were therefore still being asked to make payments relating to future activities only weeks before closure.

June 2026: the final weeks

The final weeks are perhaps the strangest part of the story.

According to Laura Middleton, who was acting head teacher during the school’s final days, staff repeatedly sought reassurance about whether Durham High would reopen in September.

On 23 June she says she was told in writing that a message would be issued at the end of the week confirming that the school would reopen.

On 24 June, Middleton says, the school was asked to pay a £250,000 management fee to Galaxy Global Education.

She says the school refused.

On the same day, she says she was again told that it was important to reinforce the message that the school would open in September.

Two days later she was told that an update from the owners had been delayed until the following week.

Then, on 29 June, she received a telephone call.

Durham High School was closing.

On 30 June she says she was told that nobody from Galaxy would speak directly to staff. She had to tell them herself.

These are Middleton’s own published recollections. They are important allegations about the final days, but they should be understood as her account rather than independently established facts.

There was movement within the old charitable company too.

John Christopher Eynon ceased to be a director on 29 June. Annabel Beattie left on 2 July. Katherine Barker left on 3 July. Mohammed Azfar Hyder left on 14 July.

Those resignations were not filed at Companies House until 20 August.

3 July 2026: the school closes

On Friday 3 July, pupils, parents and staff protested outside the school gates.

The school closed at the end of term.

It had 281 pupils.

The official government school record now gives 3 July 2026 as its closure date.

A school founded in 1884 had ceased to exist.

6 July: the administrators arrive

Three days later Durham Education Limited entered administration.

Philip Watkins and Mark Hodgett of FRP Advisory were appointed joint administrators.

FRP did not cause the collapse. They arrived after the decision to close and were appointed to administer the insolvent operating company.

Durham Education Limited had existed for less than two years.

It had never filed a full set of statutory annual accounts.

We now have the administrators’ proposals, and they fill in some important gaps.

They confirm that Durham High continued to lose money after the takeover and that those losses were supported by shareholder funding.

In other words, the new owners did put additional money into the school.

That matters.

The story cannot simply be that someone bought the property for £2 million, spent nothing on the school and waited for it to collapse.

But the administrators do not yet tell us exactly how much shareholder money was introduced.

More importantly, at the time their proposals were prepared, they were still awaiting the shareholder/GGE proof of debt.

So we do not currently know how much GGE says Durham Education Limited owes it.

Claim one: did VAT close Durham High?

I have written previously about the impact of VAT rises on private education.

The drift back into state education has been very small. There have been closures and mergers of private schools, but many reflect longstanding problems within the sector rather than simply the impact of VAT.

Essentially, this is a question of price elasticity of demand: how much did demand for private schooling fall as a result of the VAT-driven price rise?

The answer appears to be: not much.

Demand was relatively inelastic, because parents paying for private education generally don’t regard local state schools as straightforward substitutes.

Durham should have been an unusually good place to test this.

The academic performance of state schools such as Durham Johnston has often matched or exceeded that of their private-sector rivals. Every year a regular stream of pupils left DHS after GCSEs to do their A levels at Johnston because of its record of getting pupils into top universities.

If VAT was going to make parents switch sectors, Durham ought to have been ground zero.

Galaxy subsequently pointed to VAT on private-school fees as one of the financial pressures affecting its schools.

But the numbers at Durham are awkward.

Mary Kelly Foy told Parliament that the school roll fell from 288 to 281 following the VAT changes.

Seven pupils.

She also said the school’s physical capacity was around 650 and its financial break-even point approximately 350 pupils.

If those figures are right, Durham High was already substantially below its break-even pupil number before VAT could have driven seven pupils away.

And we have the accounts.

The school had already been losing close to £1 million a year.

The direction of travel began several years before the tax change:

£390,000 deficit.

£620,000.

£990,000.

£1.07 million.

VAT may have made the position worse. Increased National Insurance and other costs may have done the same.

But the simple claim that VAT transformed a financially viable school into a failed one is very difficult to reconcile with the evidence.

Durham High was already in serious financial trouble.

That does not answer why the rescue failed.

It simply tells us that the problem the new owners inherited was much older than VAT.

Claim two: was it a land grab?

This is the much more serious allegation.

When Mary Kelly Foy raised Durham High in Parliament on 7 July she went considerably further than criticising the management of the school.

She questioned the relationship between the parent company and Durham Education Limited and the position GGE might occupy as a creditor in the administration.

She said that the whole affair bore the “hallmarks of a land grab”.

And she put a number on the land.

She said the prime real estate on which Farewell Hall sits was estimated to be worth around £10 million.

She asked what could be done to prevent overseas companies “asset-stripping our educational institutions” and treating children’s futures as real-estate speculation.

Those are serious allegations.

There is currently no evidence that Durham High’s collapse was deliberately engineered to extract the value of the property. The administrators have not made such a finding.

So we need to break Kelly Foy’s argument down into things we can actually test.

Is £10 million remotely credible as a value for Farewell Hall?

And could proceeds from the sale of the property ultimately return to GGE or its owners?

Is the land really worth £10 million?

£10 million sounds like an extraordinary amount for a school site.

It is also five times the £2 million consideration recorded when the land was transferred in December 2024.

Fortunately, we have something against which to test it.

As part of the work supporting the County Durham Plan, Durham County Council examined residential land transactions.

It found that land in Durham City with residential planning permission commanded a substantial premium over land elsewhere in the county.

The average in the council’s sample was around £1.65 million per hectare, equivalent to approximately £670,000 per gross acre.

So what happens if we use the council’s own evidence as a benchmark?

Multiplying all 13.77 acres by £670,000 produces £9.23 million.

Possible developable area	At £670,000 per acre
6 acres	£4.02m
7 acres	£4.69m
8 acres	£5.36m
9 acres	£6.03m
10 acres	£6.70m
11 acres	£7.37m
13.77 acres	£9.23m

That emphatically does not mean Durham High is worth £9.23 million, but it does on the face of it give some credibility to the MP’s claims.

The council figures are historic. Durham High does not currently have planning permission for a large housing development. And it would be absurd to assume that every square metre of the site could be covered in houses.

We can now put a rough number on that qualification. The Farewell Hall site now being marketed by Sanderson Weatherall extends to 13.77 acres and includes around 85,000 square feet of buildings, playing fields, parking and woodland. The agents explicitly advertise not only continued educational use but the possibility of alternative uses, including redevelopment, subject to planning permission.

Sanderson Weatherall have also provided a much more useful benchmark for the potential value of the site, they say it had previously been valued at circa £5 million on a subject-to-planning basis. That is not the same thing as saying Farewell Hall is currently worth £5 million. Indeed, Sanderson Weatherall say that pricing an unconditional sale is difficult, which is why they are not marketing the site with a guide price.

But it is significant. It means that a professional valuation of around £5 million has previously been placed on the site assuming the planning condition was satisfied. That is already two and a half times the £2 million consideration recorded when the property was transferred in December 2024. Sanderson Wetherall also say that although the full site is around 13 acres, the woods are protected wildlife land and estimates that only around 60% is net developable.

Apply that 60% assumption to the 13.77 acres being marketed and the potentially developable area falls to around 8.3 acres. Apply the council’s historic £670,000-per-acre benchmark to that rather than the entire site and the illustrative figure falls from £9.23 million to roughly £5.5 million.

Interestingly, that lands remarkably close to Sanderson Weatherall’s own statement that the site had previously been valued at circa £5 million on a subject-to-planning basis.

And there is another reason to take the development value seriously. You only need to look over the fence.Durham High sits beside Mount Oswald, where substantial residential development has already been permitted and built.

So we are not speculating about whether planners might conceivably allow housing in this part of Durham. They already have. And they aren’t cheap houses. Recent Land Registry recorded transactions on Fowler Wynd include detached houses selling for around £562,500 in 2024, £550,000 in December 2025 and £467,500 in April 2026.

Larger houses have been marketed for considerably more. That matters because developers do not value land by simply counting the acres. They work backwards from what they believe they can sell the completed houses for. Suppose, purely for illustration, that a future scheme accommodated 150 homes with an average selling price of £500,000. The gross development value would be £75 million.

Two hundred homes would produce £100 million.

That isn’t the value of the land. Not remotely. A developer still has to build the houses, demolish or convert existing buildings, construct roads and utilities, pay professional and financing costs, meet affordable-housing and other planning obligations and make a sufficient profit to justify taking the risk. But it demonstrates why a large development site next to Mount Oswald could be worth many millions of pounds.

So is £10 million credible? There are substantial caveats.

Durham High has no residential planning permission. Only around 60% of the site may be net developable. There are existing buildings, playing fields, mature trees and protected woodland. Access and highways may constrain development. Demolition and site preparation may be expensive. Planning obligations and affordable housing requirements would also reduce the price a developer could pay. And then there is the overage agreement. Depending upon its precise terms, a substantial part of any increase in development value may ultimately be payable under the overage rather than remaining with Durham Education Limited.

So we cannot say that Farewell Hall is worth £10 million. What we can say is that £10 million looks high on the evidence we now have, but the underlying point that Farewell Hall has substantial development value is well founded.

Neither figure tells us what Farewell Hall will actually sell for. But both suggest that its potential development value could be substantially higher than the £2 million consideration recorded when it changed hands in December 2024.

That brings us to the second part of the argument. If Farewell Hall is sold for substantially more than £2 million, who gets the money?

Follow the money

The administrators’ proposals tell us that Durham continued to lose money after the takeover. Those losses were supported by shareholder funding. A rough estimate is possible. If the school was losing approximately £75,000 a month during private ownership, eighteen months of losses would require somewhere around £1.35–£1.4 million of additional funding. Add that to the £2 million acquisition price and something like £3.4 million may have gone into Durham High.

But that is only a working estimate. We do not know whether the whole £2 million acquisition consideration ultimately came from Gao or GGE. More importantly, we do not know the actual amount of the shareholder loans. The administrators were still waiting for GGE’s proof of debt when their proposals were prepared.

That means one of the most important numbers in this story has not yet been disclosed even to the administrators. How much does GGE say Durham Education Limited owes it? Until we know that, any calculation of what the owners might recover remains provisional.

But the mechanism is straightforward. GGE/Gao can potentially receive value from the administration in two different ways.

The first is as a creditor. If shareholder loans are proved and admitted, they can receive whatever distribution is available to unsecured creditors.

But there is a second route which is easily overlooked. Shareholders own the residual value of a company. If Farewell Hall and the company’s other assets are sold, the costs of the administration are paid and all creditors are paid in full, any surplus does not vanish. It ultimately belongs to the shareholders.

That matters enormously if Farewell Hall proves to be worth several million pounds. The known liabilities other than the GGE/shareholder claim appear relatively modest compared with the potential value of the property. There will be preferential and unsecured creditors, administrators’ fees, legal and professional costs, security, insurance and the cost of maintaining Farewell Hall until it is sold.

But once those liabilities and the admitted GGE loan claim have been met, any remaining money is equity value. So the absence of a charge in Gao’s favour over Durham’s property does not mean that she or GGE cannot ultimately benefit from a high sale price. They could potentially recover money as creditors and then receive any remaining surplus as owners.

There is an important distinction here. Receiving money back is not the same thing as making money. If Gao and GGE put £5 million into buying and supporting Durham High and ultimately receive £4 million from the administration, they have lost £1 million. If they put in £3 million and ultimately receive £7 million, the result looks very different.

So the calculation we ultimately need is:

How much went in?

Against:

How much came back out?

At present we don’t have either side with sufficient precision.

The overage agreement also materially alters the calculation as well. We can, however, illustrate how important that could be.

For the purposes of this exercise, assume that the current 50% overage applies to the increase in value above the £2 million December 2024 consideration. Assume another £500,000 for the costs of the administration, legal fees, agents, security and selling the property, and £500,000 of claims from other creditors.

Those numbers are illustrative. In particular, we have not yet seen the Deed of Overage, so its actual calculation may be considerably more complicated.

But they show how the economics might work.

Sale price	Uplift over £2m	Illustrative 50% overage	Administration and sale costs	Other creditors	Potentially remaining for GGE
£5.5m	£3.5m	£1.75m	£0.50m	£0.50m	£2.75m
£7.5m	£5.5m	£2.75m	£0.50m	£0.50m	£3.75m
£10m	£8.0m	£4.00m	£0.50m	£0.50m	£5.00m

These figures also show why the size of GGE’s eventual shareholder-loan claim does not necessarily determine how much value might ultimately return to GGE. If there is enough money to repay all creditors in full, GGE could receive part of the money as repayment of its shareholder loans and the remainder as shareholder value. What matters is the total amount ultimately returned to GGE compared with the total amount it originally put into Durham High.

And that brings us back to the number we still don’t know: how much did GGE actually put in? If the rough £3.4 million estimate is somewhere close to the truth, a £5.5 million sale could still leave GGE losing money after overage and other costs. At £7.5 million, it might recover approximately what it had invested and perhaps make a modest return. At £10 million, a more substantial return becomes possible.

But none of those calculations establishes a profit because the £3.4 million itself is only an estimate. The actual shareholder funding could be substantially higher. That is why GGE’s proof of debt matters so much.

The eventual sale price matters too. A £5.5 million sale tells one story. £7.5 million tells another. A sale approaching the £10 million figure quoted in Parliament potentially tells a very different one.

Ruthin: an important comparison

Durham wasn’t the only Galaxy school to fail. Ruthin School also closed and its operating company entered administration. Malvern St James had already announced its closure. What had recently been presented as an expanding international education group was rapidly unravelling.

Ruthin provides an important comparison because the financial arrangements were different.

Galaxy acquired Ruthin for £6.8 million in 2023. The administrators say the money was used, among other things, to repay bank borrowing and other liabilities and clear the old charity’s pension deficit. Ruthin then continued losing money.

The administrators record losses of £2.45 million in the year to August 2024 and £1.69 million in the following year. They say £5.4 million was subsequently introduced through the director’s loan account to support those losses.

Again, this is important evidence. Galaxy did put substantial sums into loss-making schools after acquiring them. But unlike Durham, Gao had security over Ruthin’s property. A charge over eight freehold titles associated with Ruthin School was created in her favour shortly after the 2023 acquisition.

Then something rather more unusual happened. FRP say they were formally engaged on 26 June 2026 to prepare for an administration. Four days later, on 30 June, another charge was created in Gao’s favour. The following day parents and pupils were told that Ruthin would close. Six days later the company entered administration.

The charge secured lending by Gao to Ruthin Education Limited. The administrators say the company’s books record approximately £5.6 million as owed to her. FRP have not simply accepted the position. Their proposals say lawyers were instructed to review the validity of the security arrangements and that this work was continuing.

None of that means the charge was improper. Gao may have provided additional emergency funding to an already distressed company and reasonably required security in return. But it leaves an obvious question. What new money or other consideration was provided in return for a charge granted four days after insolvency advisers had been instructed?

And there is a second question. Durham and Ruthin were both loss-making schools within the same wider group. Both were supported by shareholder funding. Both closed within days of each other. At Ruthin, Gao took security over the property. At Durham, she did not.

Why?

Malvern St James

Malvern St James was another historic girls’ school. Galaxy acquired it in 2025 and, as at Durham, subsequently moved towards co-education in an attempt to increase pupil numbers. On 23 April 2026 the school announced that it was proposing to close at the end of the academic year. Declining pupil numbers and an increasingly unsustainable business model were cited, along with VAT and increased employment costs.

There was, however, one important difference. Malvern families received several months’ notice. Durham and Ruthin families did not. Indeed, Malvern’s closure was already public knowledge while Durham High continued recruiting pupils and reassuring parents about its future.

What we still don’t know

The administrators’ proposals answer some of the questions I had when I began looking at this. They also make others more important. We don’t know precisely what professional valuation supported the £2 million transfer of Farewell Hall and the surrounding land in December 2024.

We now know that Sanderson Weatherall say the site had previously been valued at around £5 million on a subject-to-planning basis. But that is not necessarily the valuation relied upon by the trustees when they agreed the December 2024 transaction. We don’t know exactly what consideration the old charity received or what happened to the proceeds.

We don’t know what advice the trustees obtained before transferring the assets and operation of a 140-year-old charitable school to a private company. We don’t know what due diligence was undertaken on Galaxy, Gao and the companies involved or what evidence was provided that the new owners had the resources to honour the promises made to parents.

We now know considerably more about the overage agreement. Sanderson Weatherall say it currently captures 50% of the uplift in value on obtaining the benefit of planning, stepping down to 30% and then 20% over seven years. But without the deed itself, we still don’t know precisely how that uplift is calculated or exactly how much of any future development value might return under the agreement.

We don’t know the amount of GGE’s shareholder loan claim against Durham Education because, when the administrators reported, that claim had still not been submitted. We don’t know what management fees, interest or other group charges were made during private ownership. Laura Middleton says Durham was asked to pay a £250,000 management fee only days before closure. Was that an isolated request or part of a wider arrangement? We don’t know when the owners actually decided that Durham High would close.

Parents were reportedly promised at least five years of investment. The school was still recruiting pupils in June. Middleton says she was being instructed on 24 June to reassure people that Durham would reopen in September. And at Ruthin, we still don’t know what new consideration supported the charge granted to Gao on 30 June, days before administration.

VAT or land grab?

So where does all of this leave the two competing explanations?

The VAT story is difficult to sustain in its simplest form. Durham High was not a financially healthy school suddenly destroyed by VAT. Its finances had been deteriorating for years. It lost close to £1 million in 2022/23 and more than £1 million again in 2023/24.

The reported fall in pupil numbers after VAT was seven. On the figures presented to Parliament, Durham was already around 60 pupils short of break-even before that.

VAT may have made an already difficult problem worse. But it didn’t create the problem. And crucially the new owners knew about the VAT changes before they bought the schools.

What about the much more serious allegation of a land grab? The evidence does not currently establish that either. We have no evidence that Durham High’s failure was deliberately engineered so that the owners could profit from its land. Indeed, the administrators confirm that shareholder money was used to support the school’s continuing losses.

That matters.

The overage agreement matters too. If Sanderson Weatherall’s description of its terms is applied to a future development, a substantial proportion of the planning uplift could be captured by the overage rather than remaining within Durham Education Limited. That makes the simple version of the land-grab argument more difficult as well.

But some of the propositions underlying Mary Kelly Foy’s concerns stand up rather better to scrutiny than might initially be expected. Farewell Hall really is potentially extremely valuable. £10 million looks high on the evidence we now have. But Sanderson Weatherall say the site has previously been valued at around £5 million on a subject-to-planning basis. Using their estimate that around 60% of the site is net developable and Durham County Council’s historic evidence for consented residential land produces a remarkably similar figure of around £5.5 million.

The site was transferred for a stated £2 million less than two years before the school collapsed. We have not yet seen the professional valuation supporting that sale. The administrators have not yet disclosed the amount GGE claims to be owed because they were still awaiting its proof of debt.

And if the sale of Farewell Hall produces substantially more than is required to meet the overage, administration costs and outside creditors, the remaining value could ultimately return to GGE, either through repayment of its admitted shareholder loans or as residual shareholder value.

None of that proves wrongdoing. The final financial outcome may show that Gao and Galaxy lost millions attempting to rescue schools which were already structurally unviable.

But it could show something else. We will only know when we can compare the total amount Gao and GGE put into Durham High with the total amount they eventually receive through creditor repayments and any residual shareholder value.

That is why the sale of Farewell Hall matters so much. I have asked DHS Educational Foundation and the Charity Commission for further information. I have also sought comment from Galaxy Global Education and the Gao family. The selling agents have confirmed that Farewell Hall is being marketed for offers rather than at a published asking price, preferably on an unconditional basis.

So why did Durham High School close?

The simple answer is economics. When the Government put VAT on private school fees the number of pupils shifting into the state sector was small. This was because the parents didn’t see state schools as a close enough substitute for private education. Demand was price inelastic.

But Durham is different – here state schools perform at least as well, sometimes better, than private schools. Which means that the market for private education isn’t big enough to support 2 private schools in a small city, with a much more vibrant public school sector up the road in Newcastle.

But when Farewell Hall is finally sold, we may get much closer to knowing which explanation fits what happened — and whether the people who bought Durham High ultimately lost money trying to save it, or made money from the land it left behind.

VAT and the demand for Private Schooling

UK Private School Fees Jumped 22% — But Parents Still Paid

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