Nursery market is on the up, new survey shows

Figures show that businesses suffered the greatest recessionary impact in 2009, although towards the end of that year occupancy had started to improve as 'poor performers' exited the market.

Speaking at a conference in London to launch the survey, economist Philip Blackburn said, 'While closures peaked in 2009, expansion in children's centres and other areas balanced this out. Further gradual supply contraction is expected, but occupancy is set for gradual improvement over the next five years.'

Mr Blackburn concluded that overall, the impact of the recession had been quite 'mild'.

'Cautious, small-scale expansion is anticipated, but the threat of closures is still high,' he said. 'There is a question mark over whether the funding for the free entitlement can match cost pressures, but staffing remains the biggest challenge.'

Alan Bentley, chief executive of the Childcare Corporation, said that the nursery sector was facing a very mixed picture regionally.

'The problem is one of regionality of unemployment, with areas such as the north-east suffering far more than the south-east,' he said. 'Income spending on mortgage payments is the lowest in six years and this is providing a buffer in terms of how the recession has hit many people. Where both parents are in a position to work, nurseries in certain areas are benefiting.'

Mr Bentley said that all but two of his chain's 20 nurseries, which are largely based in the south-east, have seen year-on-year growth.

While praising many Government initiatives such as the free entitlement, childcare vouchers and children's centres, he called implementation 'appalling'.

Mr Bentley said he believes the greatest challenge to the sector is the nursery education grant. 'There is a danger that 20 to 30 per cent of private operators could go out of business because of it,' he said.

The Major Providers Group to which Mr Bentley belongs is preparing a booklet that will clarify legalities of the requirements in the new Code of Practice.

Also at the conference, the need for nurseries to maintain close links with their local authorities was stressed by Raymond Whyte, business support office for Brent Early Years Service.

He said, 'Brent is currently restructuring its early years service. The focus will be on birth to 19 years and delivering a holistic family service on a locality basis. Nurseries will need to find out what changes there may be on the ground, because it will affect their business.'