Nursery World webinar in partnership with Funding Loop: Weighing the impact of the expanded offer on nursery businesses

With the roll-out of the Government’s expanded offer now under way, Nursery World in partnership with Funding Loop brought together an expert panel to explore its impact on nursery businesses.

The panel discussed four key areas relating to the Government’s expanded hours offer:

• Expanding capacity.
• Meeting parent demand – a look at booking trends.
• Making the funded hours pay– do nurseries have to charge for consumables to stay sustainable?
• Managing administration – the operational demands of keeping on top of funded hours; how to cut time spent on it

It is important to note that the webinar took place prior to the announcement of the General Election and before any of the party manifestos were released.

Editor Karen Faux set the scene, stating that according to official figures, nearly 80 per cent of eligible two-year-olds have a place and the Department for Education has acknowledged a need for 40,000 extra staff and 85,000 extra places to deliver the full expanded offer by September 2025.

EXPANDING CAPACITY

The impact of the recruitment crisis on providers’ ability to expand capacity was highlighted as a key barrier to expanding places.

Clare Roberts said, ‘In many areas, nurseries are already full. It’s a bit like a counting-down clock. September 2025, which seemed quite a long time away when this was first announced, is now not.

‘We’re all very well aware it’s been a challenge from a recruitment point of view and many people are finding it a challenge with existing staff needs.’ Referring to the 40,000 extra staff, she added, ‘It’s a worry – where are we supposed to find those colleagues from?’

Neil Dudman added, ‘I’m not sure we’ve had 40,000 extra staff in the past ten to 15 years in the sector, let alone the next 18 months.’

Neil Leitch said, ‘There is nothing statistically at this moment that suggests we’re going to get close. Only one in three local authorities are confident the offer can be delivered in 2024 and only one in ten in 2025. We should be concerned.’

Neil D. said, ‘I know a lot of nurseries are full and brimming with waiting lists. Taking the figure of 85,000 extra places, let’s assume there’s a 50-place nursery with 150 children on roll, roughly double the capacity, that’s 566 nurseries required to fill capacity at 50-place nurseries. Where will they be?’

Clare said, ‘A lot of nurseries have a blend of children accessing full-year childcare and funded-only children.’ She said the reality of this funding being rolled out means nurseries which tend to start with smaller numbers of younger children and build up to larger numbers in pre-school will end up with more evenly split numbers from an earlier age, with fewer places available for children in deprived areas. ‘That’s what really concerns me. We operate a blend that enables nurseries to be fuller and can support the needs of all children, not just working families, and that is important for society.’

Neil D. said his nurseries had seen a big rise in fewer children doing more sessions. ‘We’ve not seen a huge influx of new people. It’s more existing parents.’

Neil L. said, ‘That will be Phase 1 – government words – [which] is a shifting exercise with parents converting from fee-paying to funded places. That will be changing as we go down the line.’

He pointed out the Early Years Alliance had 132 settings four years ago in areas of deprivation and now operates 41 settings. ‘The reason for closure was the majority of children were on funded places only. No-one talks about the best interests of the child from a policy point of view.’

Talking about his nursery’s experience, Khayam Ezzat said he didn’t think the policy would change parental employment until the offer was expanded from 15 to 30 hours. ‘For every one parent that has increased their hours, five have effectively banked their subsidised day. If the Government’s objective is getting more people back into work, I don’t think one day – which is effectively what we’re talking about, one day stretched over 51 weeks – is enough of a nudge factor.’

Karen said that if you look behind those figures, this shows a very different picture from the Government’s claims that the offer would lead to ‘thousands’ more parents returning to work.

MEETING PARENT DEMAND

Clare said it was difficult to know what September 2025 would look like, because ‘some of this media hype about people booking places is causing almost a frenzy. A lot of their needs may not be met’. She added that booking so far in advance could help with staff rotas and deployment, though.

Neil D. said he had an enquiry from someone thinking of planning to have a baby in September 2026, who wanted to register now, which drew surprised laughter from the panel.

The panel said waiting lists were increasing, with Neil L. pointing out parents were always told that the best way to get a place would be by registering early. Neil D. said the waiting list had got longer in some of his settings. ‘In a marketplace, what happens when you get a demand increase and a supply shortage?’ He questioned whether children that needed places would be able to access them. ‘It could end up becoming only accessible to higher middle classes.’

Neil L. suggested that it might lead to more providers deciding to opt out of the funded offer. ‘It’s inevitable that children in deprived areas will be marginalised, if providers are making commercial decisions.’ He said the Government’s recruitment campaign did nothing for retention, because salaries are so low.

MAKING THE FUNDED HOURS PAY

Karen asked about the strategies that providers were implementing to stay financially sustainable, and whether charging for consumables was the only way to do so.

Clare, whose group operates in 30 areas, said every local authority interpreted the offer differently. ‘The rates for two-year-olds are better, but we’ve had underfunded three- and four-year-olds for as long as I’ve been in the sector. It’s a real challenge for providers.’

‘I struggle to see why the rates are so different,’ said Neil D., who added that it should be the same rules everywhere in England. ‘The only major difference is property prices, everyone is paying the same minimum wage, everyone has the same food costs. There’s such a massive disparity. We need to say there is one rate for everyone and get rid of the bureaucracy.’

Clare said, ‘It’s not even a north-south divide. It’s different rates in local authorities that are side by side.’

Neil L. said there should be an independent body that assesses what is a fair funding rate.

Khayam agreed. ‘We need some sort of organisation that will say, “This is the nursery-specific inflation.” We do need that set and independently calculated and far less variation between the councils.’

Neil L. said, ‘It should be an independent body that sets this [the funding rates], full stop.’

Responding to Karen’s question about how LAs are policing additional charges, Neil D. said his LA had asked for their charges. ‘It’s for everything that isn’t in the EYFS, it’s flowers for the children to play with, it’s for sand. I said “sand isn’t in the EYFS, is it?”’

Commenting on childcare costs, Khayam said, ‘Universal Credit would look at your childcare fees and pay 85 per cent. But now when it becomes a consumables charge, or a food charge, they say [the Government] they’re not paying for that, so again that will hit the more disadvantaged parents.’

Our poll showed most nurseries were charging for consumables. Neil D. remarked that would have been much lower a few years ago. ‘The eyes have been opened, it’s a “how to survive” guide,’ he said.

MANAGING ADMINISTRATION

Khayam explained how his experience as a nursery owner had led him to start Funding Loop to make the administrative process easier.

‘People have been talking about how painful the process is. Parents are having to fill in forms. You have to log in to the council website all over again. All the information has to be typed in. It’s a very manual process and extremely dull. When I was doing it manually before I started Funding Loop, I found myself making mistakes. That number of forms and the amount of money we’re talking about is only going north from here. I developed Funding Loop to take care of all that and reduce that burden, to take that all out of your management system and fill in the forms for the parents, 90 per cent beforehand, and type all that information into the portal for you, so that you know it’s accurate.’

Neil D. said, ‘Full disclosure, we use Funding Loop, and it’s a game changer.’

Clare said, ‘The whole system has got so much more complicated. You have to find ways to find the admin less burdensome.’

Neil L. spoke about how the extra workload on top of the day job was driving people out of the sector. ‘We recently conducted our Minds Still Matter survey on the mental health and wellbeing of colleagues in the sector. The number of people that stated the administrative burden was causing them anxiety, stress, etc., predominately said it was because of the pressures in the working environment, which mean they go home and start all over again, doing the administration. Someone from Government needs to explain how it is the funding rate works to pay for people to work 65 hours a week. On our survey for why people were exiting the sector, the first biggest reason was being undervalued, the second reason was exhaustion and the third one was pay It’s not just the financial cost, it’s people’s wellbeing.’

WEBINAR PANEL

• Karen Faux, editor of Nursery World
• Khayam Ezzat, co-founder of Funding Loop and owner of Abeona nursery in Kettering, Northants
• Clare Roberts, CEO and founder of Kids Planet with 191 settings in England and Wales
• Neil Leitch, CEO, the Early Years Alliance, an operator of 41 settings, largely in areas of deprivation
• Neil Dudman, founder and CEO of Naturally Curious Childcare with five nurseries in Hampshire, and owner of Neil Dudman’s Nursery Network