Cost-of-living crisis: Childcare settings forced to increase fees and a third warning of closure

The Early Years Alliance poll, which ran from 10 to 23 January and received 1,156 responses from pre-schools, nurseries and childminders, found that respondents planned an average fee increase of 8 per cent.

Other key findings include:

• Almost seven in ten (69 per cent) are planning to either increase or introduce charges for optional extras, such as meal or trips – more than double the proportion of respondents who said they were planning to do so in an Alliance survey in 2019 (39 per cent).
• More than a third of pre-schools, nurseries and childminders say it is ‘likely’ that rising costs will force the closure of their setting in the next year, with a quarter (25 per cent) describing this as ‘somewhat likely’ and almost one in ten (9 per cent) stating it would be ‘very likely’.  
• Over half (51 per cent) of respondents recorded a loss in the last year with the mean average loss amounting to nearly £14k in the last 12 months. Around two in ten (22 per cent) broke even. Just over a quarter (26 per cent) recorded a profit.

'I cannot keep paying my staff an appropriate wage when I have to balance increasing bills.'

One respondent said, ‘For the first time since the setting opened, we are at risk of closure. I cannot keep paying my staff an appropriate wage when I have to balance increasing bills. I do not want to pass all the costs onto parents, and fear that if I do then their children will not attend so the end result will be the same. I do not understand how any business can be expected to support such a huge percentage increase in salaries. The other options are to reduce how much we spend on food and resources which goes against everything I believe in and the purpose of running the pre-school.’

Another commented, ‘The increase in the national minimum wage will increase our outgoings by £58,000 in the 2023/24 financial year. We have no way of covering this other than increasing fees for parents. This will make our daily fee price too expensive for many families using our nursery. This is likely to reduce the number of children attending nursery and therefore we will continue to make a loss. There is no way out of this situation without more financial help from the Government.’

'Things are only going to get worse'.

The Alliance’s chief executive Neil Leitch warned that things are ‘only going to get worse without urgent action’ with inflation still ‘sky-high- and the national living wage set to increase by record levels in April.

He explained, ‘Nurseries, pre-schools and childminders are being left with an impossible choice: substantially increase fees for parents and carers or go out of business altogether. 

‘The Government talks about the importance of education, of giving children the best start in life, of supporting families and of encouraging people back to work. What possible reason, then, do ministers have for continuing to completely ignore the very sector that does precisely that? 

‘It is vital that the upcoming Spring Budget includes a clear plan for the future of early education and childcare in this country, underpinned by the substantial additional investment needed to ensure the sustainability of the early years. The sector simply won’t survive anything less.’

A Department for Education spokesperson said, 'We recognise that families and early years providers across the country are facing financial pressures and we are currently looking into options to improve the cost, flexibility, and availability of childcare.

'We have spent more than £20 billion over the past five years to support families with the cost of childcare and the number of places available in England has remained stable since 2015, with thousands of parents benefitting from this.'