There has been great excitement as the childcare sector continued to mature in 2004. However, in some areas a level of anxiety has set in amid fears over increased competition, particularly from Neighbourhood Nurseries. The ongoing issue of staff recruitment and retention has been further compounded by the sheer volume of new provision that has been created.
In my view, while the outlook for 2005 appears very positive, the sector can no longer be viewed through rose-tinted glasses. Many nurseries are coming under increasing operational pressures due to competition from subsidised nurseries.
Few would criticise the objectives and ethos of subsidised nurseries. But a number of subsidised nurseries will not survive after receipt of their third year of revenue funding, and I have concerns about how many private nurseries severely affected by the subsidised nurseries will be able to weather the storm.
Demand for well-established nurseries with established levels of trade and good returns is still high and appears set to continue well into 2005. Many operators continue to seek appropriate properties to convert and sites that are suitable for development, and numerous multiple operators have structured development and acquisition programmes planned.
While the proposed merger of Asquith Court and Kids Unlimited to form the Nursery Years Group was not successful, I expect that during 2005 we will witness significant consolidation through acquisitions and mergers among both the corporate and smaller regional providers. Undoubtedly the sector will continue to grow during 2005, albeit at a more measured rate.
And with a general election anticipated in May, the sector is likely to be the subject of much debate as 'family support and childcare' will be a focus in the parties' election manifestos.
