Parents lose up to £30,000 as St Margaret's school goes to the wall

• A consortium of families had made a valiant bid to save the 120-year-old school. Picture: TSPL

Some families face losing up to 30,000 after deciding to pay St Margaret's School, in Edinburgh, in advance for annual fees.

Parents who paid out hundreds of pounds for deposits on planned school trips overseas are also expected to be left empty-handed after St Margaret's governors called in liquidators KPMG last week.

The Newington-based school dating back to 1890 is thought to be at least 2 million in debt after struggling for around five years to cope with the impact of dwindling pupil numbers.

Parents launching a bid to take over the school were told last night they had three to find the 2m to secure the takeover.

The school, which charges up to 2,628 a term, had allowed parents to pay a full year in advance at a discounted rate.

One parent, who asked not to be named, said: "This money was paid in good faith and we are almost at the end of the current term.

"It's now becoming obvious that the school's financial problems have been known for some time. Why was the school continuing to take money from parents for the next year?

"We have two pupils in the secondary school and are looking at having to write off 20,000, as well as find the money for fees at another school."

One leading liquidation expert told The Scotsman that the school's governors would have known for months how serious its finances were.

"This would not have been decided overnight. The governors have clearly been working on this for months."

Planned school trips to Italy and Florida are among those thrown into doubt by last week's move by the governors. Parents have been asked to stump up several hundred pounds in deposits to reserve places.

Another parent said: "It's looking very unlikely we are going to see any of this money back, as everything in the school's bank account is now in the hands of the liquidators. The Scotsman revealed last week the school's governors had decided St Margaret's was no longer viable as enrolment dropped from around 800 to less than 400.

Last night, parents who are battling to rescue the school held 11th-hour talks with KPMG.

Valery Devlin, spokeswoman for the parents' business consortium, described the outcome as "extremely positive".

"They told us we have two to three weeks to raise approximately 2m to purchase the school's assets. As of tomorrow afternoon, we will have an accountants' department which will accept donations which will be protected.

"We have a concentrated core of people who are giving 100 per cent effort and will be manning the phones and knocking on doors to get the money. We've already had offers of cash donations but we will now be in a position to accept them."

Dr Devlin, a former GP and chair of the St Margaret's Parents and Friends Association, said: "Part of the problem is we don't know exactly what the debts are and who is owed money as yet.

"We don't believe RBS will want to see a school like this close for a number of reasons, but we know we have to put forward a serious, viable and sustainable proposition to take things forward.

Banking giant RBS is thought to be the main creditor, along with the Inland Revenue, after the school ran up an annual deficit of around 500,000 over the past five years.

Teachers at the school have offered to take a pay cut under a series of rescue package deals put forward by parents fighting to keep the school open. But job losses among the 140 staff – including 86 teachers – are almost inevitableeven if it is rescued.

Meanwhile, campaigners have issued an appeal for a "white knight" with links to the school to come forward to help them realise the rescue plan. The appeal is headed by Peter Cochrane, an economist with the Royal Bank of Scotland.

The school would continue as a not-for-profit charitable trust, and maintain the tax incentives this provides.

It would change the terms of the trust, however, to ensure that the board of governors is always made up of parents of pupils at the school.

There is growing anger at the handling of the school's financial affairs by the governors, as well as a decision not to alert parents to the prospect of closure if its plight was not resolved. The Scotsman has revealed how independent schools in Edinburgh were privately contacted about a merger with St Margaret's, but none was receptive.

Meanwhile, parents leading the rescue bid said a range of options had been put forward in a bit to keep the school open after this month.

KPMG last week insisted the school's governors had been "left with no alternative" but to put St Margaret's into provisional liquidation. Efforts to sell off various property assets held by the school had not been as successful as hoped due to the economic downturn, the firm said.

Although parents claim to have been kept in the dark about the school's financial problems, it emerged last month that Scotland's largest teaching union, the EIS, had called in lawyers after St Margaret's said it would be freezing teachers' pay for the next two years.

• Tears and anger – but fight to save St Margaret's starts