British parents are turning to "no frills" private schools as the recession hits middle-class families

Note that Britain has a very large range of private schools. One guess why

Schools with fees set at a fraction of the national average are reporting increased demand during the economic downturn. Some cheap and mid-market independent chains are even preparing to open new schools despite fears of falling interest elsewhere. It comes just days after a leading headmistress warned the financial slump would result in a "difficult" year for schools. Jill Berry, president of the Girls' Schools Association, said elite schools should abandon the facilities "arms race" to cut costs.

Grammar schools [taxpayer-supported selective schools] are already reporting more interest, with the number of children taking the 11-plus jumping by up to a fifth this year.

Last year, average independent school fees increased by more than six per cent to 11,253 pounds. It is believed the downturn will lead to increased interest in schools with relatively low charges. The New Model School Company - linked to the Civitas think-tank - is opening two new prep schools in London charging around 5,000-a-year. Its one other existing school in West London is also expanding. Robert Whelan, Civitas deputy director, said: "The demand is fantastic. It is a question of finding buildings."

Talks are under way for a school to join the Alpha Schools Group, which has four "affordable" schools in the capital. Other independent schools are also looking to sell to private education companies which often keep fees down by sharing running costs between several institutions.

Sue Fieldman, of the Good Schools Guide, said lower fees were becoming more important to parents in considering which school to choose. She said: "If you have two schools more or less the same, if one is 500 cheaper, they are going for that rather than the flash swimming pool or the expensive theatre."

Chris Woodhead, former head of Ofsted, runs the Cognita chain, which currently charges an average of 8,500. He said the organisation - which has 44 schools - was in negotiation with more schools then ever before as owners consider selling up. Prof Woodhead has been critical in the past of the "frills and frippery" wasted by some independent schools. "I am not saying that facilities are unimportant but I do think that the competition between schools to provide five-star facilities in recent years has driven fees up," he said. "I think it is the case that if you are sending your children to a school like Eton or Millfield at the top end of the market then a few thousand pounds here and there isn't going to make a great difference. But if you have not got much spare cash you are going to shop around to find the best value for money."

But David Lyscom, chief executive of the ISC, insisted the number of pupils at top independent schools was "holding up well" - and branded talk of falling pupil numbers was "scaremongering". "Anecdotal evidence from heads suggests a healthy sector," he said. "Much as we do not wish to play down the seriousness of the economic situation for the UK as a whole, it should not be assumed that the independent schools sector will be badly hit by the downturn."

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British credentialism implodes

Making higher and higher levels of education normal too often leads to overqualification for the available jobs and is very disappointing to kids who have to end up doing jobs that they could have done without a degree

After 12 years of school, four years of university and a degree in business management, Grant Bostock was last week sitting on a factory production line checking the solder on electronic circuit boards. If the solder was not complete, he dabbed an extra bit on. "It isn't exactly what I planned," he said. "I want to do something that gives me opportunities, so that I can work towards something. I am qualified to do all sorts of things, but I am working in a factory."

His hopes of a career that would use the knowledge he spent so much time and money acquiring have faded fast in recent months. "A lot of firms have just pulled their graduate schemes," said Bostock, who lives in Cheadle, Staffordshire. "It feels like hitting your head against a wall. If the jobs are out there, you can try your best; but if they aren't, there isn't anything you can do about it. "I am still living at home, which isn't exactly what I wanted either. I want to move on to the next step of my life, but I am stuck here."

In some ways, however, he is lucky: he has an income even though his job is temporary. Mike Leader, who graduated in English from Birmingham University last summer, is still unemployed despite heading to London in search of a job. "I applied for a few jobs in August and September but I didn't hear back from any of those," said Leader. "Then I decided to go to the Jobcentre and apply for work there. I don't think I've heard back from any job I've applied for there."

He has even struggled to claim benefits amid the bureaucratic maze of Gordon Brown's welfare system. "I'm living with someone who has managed to get a part-time job in a coffee shop so I was turned down," he explained. Despite his degree, Leader remains unemployed. And, yes, his girlfriend, the coffee-shop worker, is also overqualified for her job: she is a graduate, too. They are among an army of graduates emerging from the education system who face the toughest employment prospects for years as the recession deepens. The government, having encouraged youngsters into higher education that has saddled many with large debts, is deeply worried. Graduate numbers are hitting a record high just as the number of jobs is shrinking.

As John Denham, the skills secretary, said in an interview published yesterday: "They [new graduates] will be a very big group: around 400,000. We can't just leave people to fend for themselves." His solution is a scheme to create government-backed graduate internships, paying modest wages, at large firms. Barclays and Microsoft are among those that have agreed to take part, and Denham hopes to have what is being called the national internship scheme running by the summer.

Don't get too excited. Pay will be little more than the current student grant of 2,835 pounds, and it is not clear yet how much, if any, government money would be committed. But Denham hopes that the experience and skills gained by interns will pay dividends. "At the end they will be more employable, and some of them will get jobs," he said. "Employers won't want to let good people go."

However, critics question how many graduates the scheme will be able to help. "Businesses taking on graduate interns is welcome, but this does not match the scale of the crisis facing young people trying to find jobs," said David Willetts, the Conservative spokesman on skills. "This is another one of Gordon Brown's ill-thought-out initiatives that comes apart within 24 hours. It seems pretty clear there's going to be no extra public money for it."

Contemplating his unemployment prospects, Leader also welcomed the idea of internships, but he, too, pointed out one simple drawback. "The bar will be raised for everyone," he said. "When you go for a job, you'll be up against people who have had three months' internship."

So what are the prospects and what can be done? The looming crisis stems from two broad trends heading in opposite directions: more graduates and fewer jobs. Since Labour came to power, it has encouraged more school leavers to apply for university, with Tony Blair originally setting a target of 50% of all school leavers going on to higher education. As a result the number of graduates emerging from the university system each year has risen by more than 70%, from 206,000 in 1997 to 358,000 in 2007 (the latest confirmed annual figure). Even before the credit crunch struck, some graduates were finding it hard to obtain jobs commensurate with their qualifications. At institutions such as Plymouth, Thames Valley and Lancaster universities about 40% of graduates remained in "non-degree-level" jobs six months after leaving university, according to a study published last year. The proportion of graduates still in non-graduate jobs five years after university has also risen: up from 22% for male students in 1992 to 33%.

While students at the top end have seen huge rewards from their investment in education, overall the financial benefits have declined. The extra lifetime earnings generated by having a degree were estimated in 2004 to be an average of 400,000; that has now fallen to 100,000, as even one vice-chancellor, Deian Hopkin of London South Bank University, admitted recently. At the same time higher education fees and student debts have risen.

Coming the other way is the recession, which started in financial services and the City, the source of many graduate opportunities in recent years. Student boasts of fat starting salaries at City banks have been replaced with ruthless competition for a declining number of openings, even for high fliers.

Paul Kavanagh, 20, in his final year of an economics and management degree at Oxford, has experienced a sea-change in the recruitment process. "Every other year the banks handed out jobs to people on my course, but not this year," he said. Despite a predicted first-class degree, he has been turned down for seven investment banking posts. Boutique firms are taking on one graduate this year, compared with up to 10 previously, he said. "All the deadlines are now gone and a lot of my friends are in the same position," he said. "I'm really panicked about it. It's just really bad timing." He is applying to do a masters degree, though he fears the course fees will put him a further 20,000 in debt. "Doing the masters is going to be a real financial struggle and there's only bits of funding available," he said. "Doing a paid internship is definitely something I would consider." ...

A spokeswoman for the skills department said Denham's scheme was at a "very early stage" and the department was still making initial approaches to companies. No detail beyond what Denham had said was available. It could give no estimate for the number of internships that would be created. As the government tries to flesh out the scheme, economic assessments remain gloomy. "While the recession began in May, the rate of recession increased sharply in the autumn," said the National Institute of Economic and Social Research in a report yesterday. The way it has hit new graduates is reflected in the latest labour market figures: of the 137,000 rise in people unemployed in the three months to October, 55,000 were in the 18-24 age group.

Whether or not Denham's scheme succeeds, students are likely to think harder whether university is worth the cost and commitment it now entails.

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