Small childcare providers are struggling to make ends meet, with some considering closing their doors for good, due to a shortfall in Government funding for the 30 hours free scheme, according to a report from the Federation of Small Businesses.
The report shows increases in business rates, operating costs and staff wages are weighing particularly heavily on small childcare providers.
Businesses interviewed reported a significant shortfall between the amount of local authority funding received for the 30 hours free scheme, and the fees the provider recoups from parents, forcing many to supplement by introducing or increasing the cost of ‘extras’ like nappies or a cooked lunch, or per session of un-funded hours.
Recent increases to the National Living Wage and employer contributions to pensions auto-enrolment is further exacerbating this shortfall, halting investment and leaving many nursery owners reconsidering their future, says the Handle with Care report.
The FSB is calling on the Government to commit to increasing the hourly rate paid to local authorities for the 30 hours free entitlement and to an annual review of funding and calls for a new 100 per cent business rates relief scheme for childcare providers in England similar to the one in Scotland.
Mike Cherry, FSB National Chairman, said: “The success of the 30 hours free entitlement depends on small childcare providers, which make up the majority of the marketplace, being able to provide an affordable, high-quality offer to parents.
“The Government must urgently commit to reviewing funding levels given to local authorities for the 30 hours scheme. If action is not taken soon, the situation will only get worse. This lack of proper funding is currently forcing small providers to pass on the cost to parents by charging for optional activities or extras.”
He added: “Like all small firms, many childcare providers are still reeling from last April’s business rates revaluation. On top of utilities, rent and staffing costs, these businesses are trying to deal with huge business rate hikes placing significant pressure on their costs.
“The Scottish Government has already recognised this and introduced much needed rates relief for the sector. It is time for the UK Government to step up and alleviate the pressure on England’s nurseries and pre-schools, so they can deliver high-quality childcare.”
In addition, the FSB is calling for a reduction in the cost of mandatory training for sector professionals, making sure it is available outside of core hours.