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Demand for children’s nursery services in the UK picked up in 2013/14 with many more children attending nurseries during the year, according to the latest data from healthcare market intelligence provider LaingBuisson.
Findings published in LaingBuisson’s Children’s Nurseries UK Market Report show that the children’s nurseries market in the UK was worth £4.9bn in 2013/14, increasing by 4% in real terms from 2012/13. This boost is attributed to a rise in the number of children attending nurseries (up 6.5%), though held back by a shorter average attendance of children than in the previous period. There was no real growth contribution from prices, however, as nursery fees increased by just below 3% on average in 2013/14, close to economy inflation (RPI) over the period.
The report says stronger economic growth, supporting a continued rise in maternal employment, and a cyclical high for the early years population, helped lift penetration by children’s nurseries to an estimated 15.7% of all under 5s at mid-2014 (June/July). It said: “This is the highest rate since pre-recession at the start of 2008 when it was 16%.” The report highlights that stronger demand from the under 3s, which saw penetration move up from 11.8% to 13.2% between mid-2013 and mid-2014, was driven by the government’s wider funding of places for two year olds.
Higher demand for nursery services was largely absorbed by existing capacity, highlighted by a rise in average occupancy of nurseries by at least two percentage points over the year. However, the total number of nurseries in the UK also increased, the first significant rise since the mid-2000s, as a large number of small to medium-sized nursery businesses have expanded their capacity locally or regionally. Some 425 nursery groups (those with three or more nurseries) operating in the UK accounted for 24.6% of capacity at mid-2014, increasing from 22.7% a year earlier, confirming that further corporatisation within the children’s nursery market is driving capacity growth, says the report.
LaingBuisson is optimistic about future demand for nursery places, but it recognises risks to growth, including a decrease in the under 5s population probably sooner than expected following a recent sharp drop in the UK birth rate, potential over-crowding of capacity in some regions, staffing and skills shortages as capacity expands and increased dependency by nurseries on government subsidies for two, three and four year olds, although subsidies have been falling.
Author of the report economist Philip Blackburn said: “Growth within the children’s nursery sector appears to be building a head of steam in line with economic wellbeing and supported by optimistic expectations of future prosperity from many nursery businesses and investors. Overall, positive demand drivers going forward support market expansion at a reasonable rate, supported by favourable economic and investment conditions, also by progressive government funding policy approaching a general election, but dependent on the availability of additional nursery staff. However, longer term demand drivers for nurseries are less certain, and as a mature market, demand and supply is vulnerable to cyclical shifts. It is also a sector where regular and ongoing political and regulatory changes may have a significant impact on prosperity at any time.”