Coronavirus: Nurseries and childminders face huge financial losses, analysis finds
Catherine Gaunt
Thursday, June 25, 2020
Parents returning to work in the wake of the lockdown may struggle to find childcare places, as a new report reveals the impact of the pandemic on nurseries, pre-schools and childminders.
The Early Years Alliance, which commissioned the research from early years analyst Ceeda, is warning of mass nursery closures, without urgent Government intervention.
New modelling data from Ceeda shows that childcare providers are facing significant financial losses as a result of both Government underfunding and reduced demand for places during the coronavirus pandemic.
Nurseries in England were told to close to all but vulnerable and keyworker children on 23 March, at the start of the lockdown, and have been able to open to more children since the beginning of June.
However, significantly reduced parental demand for places and limits on how many children providers are able to care for has placed huge financial pressure on settings.
Many parents have not sent their children back to nursery, and at the same time, new bookings for September are down.
Ceeda data reveals that, as of 8 June, early years providers in England were operating at average occupancy levels of just 37 per cent, compared to 77 per cent in spring 2019 (more details below).
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 per cent), and
- £2.53 per funded three- and four-year-old child per hour (a funding shortfall of 55 per cent).
The Forgotten Sector report from the Alliance - published today to accompany the data - details the financial impact of the coronavirus outbreak and highlights the various areas in which the early years has been overlooked during the pandemic.
The most recent snub was the exclusion of early years and childcare providers from the £1billion extra 'catch-up' funding awarded to schools, announced last week.
Early years settings have also not received any extra funding to help them with costs linked to Covid-19, such as extra cleansing and PPE.
Meanwhile, Government guidance changes to how providers should calculate claims for furlough funding earlier on in the lockdown left many providers unable to claim for staff they had already furloughed in good faith that they would be able to claim for their wages.
This has left many settings with the difficult choice of making staff redundant or closing down completely
The Alliance is campaigning for the Government to commit to urgent transitional funding to support the childcare sector through this period.
Toby Arnold, director of Teatimers Childcare in Buckinghamshire, said, ‘It is like the death of a thousand cuts. There is no one thing that will finish us off because there are no clear scenarios for what September might look like. I could need all my staff, I could find that waiting and paying them has drained resources and I still have to make redundancies. It's just a case that one day we will reach the point we realise we should already have thrown the towel in.’
Mary Elia, manager of Little Berries Pre-school in Southampton, said, ‘We have suffered a loss of income private fee-paying parents, the cancellation of all fundraising activities, staff shortages meaning we cannot accept more children back and the cost of having to purchase additional items such as PPE and contactless thermometers.
‘Our intake for the next academic year is the lowest it’s ever been as I cannot show prospective families round the setting. If it doesn't increase significantly by January, we will have to close.’
Susan Lister, head of Playlanders Playgroup and Pre-school in Cambridge, said, 'We’re very concerned about the future, particularly the medium- to long-term. Almost all our children are moving to Reception in September, and we have been unable to do any recruiting because of the lockdown. We are likely to face serious financial pressures from September onwards, possibly leading to staff redundancies.'
Childminder Rose Dias of Cygnets Childcare in Redhill, Surrey, said, 'I’m not confident about the future. Some parents have sadly lost their job and so have reduced their contracted days, causing loss of revenue. In addition, I will need to pay the staff after [the] Job Retention Scheme ends, despite my low income.
'Under the current Government guidelines, I also can’t bring new customers to view the setting and not many people want to leave their children without actually visiting the setting. This is all going to be hard and I’m not currently sure what the future holds.'
Funding losses
Even if more children return and nurseries are just over half full, an average occupancy level of 55 per cent would mean that a childcare provider would face average hourly losses of:
- £2.59 per funded two-year-old (a shortfall of 48 per cent)
- £1.48 per funded three- and four-year-old (a shortfall of 32 per cent.
And if occupancy levels were at an average of 77 per cent, as they were last spring, inadequate Government funding levels mean that childcare providers would still lose an estimated:
- £2.01 per funded two-year-old (a shortfall of 37 per cent)
- £0.90 per funded three-and four-year-old (a shortfall of 20 per cent).
Shortfall estimates are based on Ceeda modelling on a range of childcare occupancy models, and have been obtained by comparing current delivery costs for private and voluntary pre-schools and nurseries (using data collected in Ceeda's April 2019 About Early Years study data adjusted for CPI inflation and statutory wage rises) to current early years funding rates.
The Alliance is calling on the Government to:
- extend the financial support with costs such as extra cleaning being provided to schools to early years settings;
- 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, as was initially announced.
Neil Leitch, chief executive of the Early Years Alliance, said, ‘As we have long warned would be the case, the joint pressures of inadequate Government funding and reduced parental demand for places means that many nurseries, pre-schools and childminders are losing money on every childcare place they offer. This is simply not sustainable.
‘Even in areas where parental demand for childcare places remains high, providers are currently restricted on how many children they are able to care for under government guidance, which is going to place even more financial pressure on them over the coming months.
‘The fact is that the early years sector is at a crunch point, and unless urgent action is taken, we are going to see many, many more settings forced to close their doors over the coming months. This could mean chaos for parents – and particularly mothers – trying to access childcare in order to return to work at a time when the Government is desperately trying to restart the economy.
‘Ministers must now commit to providing the financial support that childcare providers need to remain sustainable throughout this crisis and beyond. Anything less puts the long-term viability of the sector as a whole at risk.’
Jo Verrill, managing director of Ceeda, said, ‘The coronavirus pandemic has delivered a powerful reminder of the importance of early education and childcare in all its facets, from the base need to keep vulnerable children safe from immediate harm, to giving every child and adult the opportunity to reach their full potential in education and work.
‘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.’
Deborah Lawson, general Secretary of Voice, the union for education professionals, said, 'We welcome the publication of these figures, but not what they highlight.
'We already had grave concerns about an economically fragile sector and the dedicated but low paid staff who work in it.
'The loss of childcare provision, and the skilled professionals in those settings who support parents, will impact those in unskilled and low paid employment most, which will be a huge blow to economic recovery, even if families are now able to provide informal care.
'Quality early education, and the preparation of children for school to enable them to fully develop the skills they need to succeed in school, are also best met in formal provision.
'The Government must act now with both immediate financial support and long-term investment to save the childcare sector.'
Shadow education secretary Rebecca Long Bailey said, ‘Childcare will be necessary for families to get back to work and for the economy to recover but the sector is at risk of collapse with many providers facing huge losses.
‘Labour has been calling for better financial support for childcare providers to cope with significantly reduced demand and additional safety costs in this crisis. The government needs to think long term and take action prevent catastrophic collapse now.’
The Department for Education has been asked for a comment.
