Analysis shows nurseries on course for big losses

Large numbers of nurseries could close due to financial losses sustained as a result of the coronavirus pandemic, according to a new analysis.

According to independent research analysts Ceeda childcare providers in England are currently facing significant losses as a result of a combination of government underfunding and reduced parental demand for places.

Ceeda data reveals that, as of 8 June, early years providers in England, including childminders, were operating at average occupancy levels of just 37%, compared to 77% in spring 2019. Ceeda says that, if the take-up of childcare places continued at this level on average over the next 12 months, providers would face average losses of:

£3.63 per funded two-year-old child per hour (a funding shortfall of 68%), and

£2.53 per funded three- and four-year-old child per hour (a funding shortfall of 55%).

The modelling also shows that even if slightly more parents start taking up childcare places, providers will still face significant losses. According to Ceeda, over the next 12 months an average occupancy level of 45% would mean that a childcare provider would face average hourly losses of:

£3.06 per funded two-year-old (a shortfall of 57%)

£1.96 per funded three- and four-year-old (a shortfall of 43%)

while an average occupancy level of 55% would mean that a childcare provider would face average hourly losses of:

£2.59 per funded two-year-old (a shortfall of 48%)

£1.48 per funded three- and four-year-old (a shortfall of 32%).

An average occupancy level of 65% would mean that a childcare provider would face average hourly losses of:

£2.26 per funded two-year-old (a shortfall of 42%)

£1.15 per funded three- and four-year-old (a shortfall of 25%).

The modelling shows that, even if occupancy levels were at an average of 77% as they were in spring 2019,  nurseries face losses due to the mismatch between government funding for free hours for two, three and four year olds and the actual costs of funding places.

A previous survey by the Early Years Alliance found that 69% of nurseries, pre-schools and childminders expect to operate at a loss over the next six months, while 25% said that it is “likely” that they will be forced to close within the year.

The Alliance has published a report, The Forgotten Sector, which calls on the government to commit to urgent transitional funding to support the childcare sector through this period to fund the cost of extra cleaning, to extend businesses grants currently available to retail, hospital and leisure businesses to childcare providers; and extend the £1 billion ‘Covid-19’ catch-up fund for schools to the early years sector.

Jo Verrill, managing director of Ceeda, said: “There is much rhetoric on the importance of a child’s early years. Now more than ever, this must be matched by investment, if we are to protect the country’s vital early years infrastructure.”

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