Majority of childcare businesses making a loss

The National Day Nurseries Association has revealed the shocking landscape in which nurseries and childcare settings are operating, with 95 per cent of respondents saying that government funding for three and four-year-olds doesn’t even cover their costs.

The average nursery has lost more than £26,000 over the past year due to absences or closures due to the coronavirus pandemic. The NDNA says that 39 per cent of nurseries who responded to a new survey expect to make a loss this year. Only 15 per cent expect to make a surplus which is essential for investing in their staff and facilities to offer the best learning opportunities for their children.

Only three years ago these figures were reversed, with 43 per cent expecting to make a surplus and 19 per cent making a loss.

The situation is even worse for nurseries operating in the most deprived areas, where nearly half of providers expect to make a loss. These nurseries have on average a higher proportion of government-funded children (72 per cent compared to 55 per cent national average) so they suffer more from the shortfall between funding and delivery costs.

The NDNA says that the precarious financial instability of the private and voluntary nursery sector in England - which delivers between up to 80 per cent of all funded places – has deteriorated significantly, largely due to government underfunding.

Purnima Tanuku OBE, chief executive of NDNA, said: “The government is now the biggest customer for our nurseries in England so the funding rate has a significant effect on childcare businesses which must be able to remain sustainable in order to deliver places. With 85 per cent of nurseries expecting to make loss or only break even this year this flagship policy risks failing children, working families and businesses if the funding question is not addressed.

“From April 2022, nurseries will be paying full business rates unless they are made exempt – the average nursery would be hit with a bill of £12,640 even though schools offering the same service do not pay this. This will result in almost half the nurseries we surveyed making a loss or being unsustainable. Even more nurseries will be forced to close.

“This spending review period is crucial – it will set levels of early years spending for the next four years affecting millions of children’s early education and development. This is the best time to invest in a child’s future as supporting children now can save £16 billion a year in later interventions. Only by stopping underfunding can we safeguard the future of nurseries as they start building futures for our children.”