The Laing and Buisson nursery market report said it was now worth 3.4 billion, slowing from 17 per cent growth in 2004 and 12 per cent in 2003, 'as the market started to adjust to several years of capacity outpacing demand'.
Ominously for private sector providers, it said that while children's centres and extended schools were a major driving force for nursery market expansion, they remained 'a competitive threat to the private/voluntary sector'.
The report said that market growth was also held back 'by the lowest annual nursery fee inflation on record' - just 1.1 per cent and, in reality, a fall when adjusted to inflation in the rest of the economy.
Author of the report Philip Blackburn warned that private providers 'may no longer be able to increase nursery fees by any significant amount, despite ongoing upward pressure of increasing staff costs'.
Neil Taylor, co-director of the Merseyside-based Wind in the Willows chain, said, 'Last year was extremely difficult for us and all the other nurseries in our area that I have spoken to.' He cited the increasing costs of fuel, national insurance and the minimum wage, coupled with competition from schools establishing their own subsidised childcare services charging parents 'silly money' as key threats to private providers.
The report said that UK parents spent an estimated 2.6 billion - 77 per cent of total market income - on daycare nursery services in 2005, paying average full-time fees of 135.50 a week. Employers, either through workplace nurseries or childcare vouchers, spent 420m - 12.5 per cent of market share.
Central Government subsidised nursery education for three- and four-year-olds by about 260m and parents received 325m through the childcare element of the Working Tax Credit.
Day nurseries employed 205,960 staff in January this year, with two-thirds working full-time, and just under 75 per cent were qualified. The average wage for a qualified employee was 6.94 per hour.
Children's Nurseries UK Market Report 2006 costs 525 from www.laingbuisson.co.uk.
