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Early Years Sector face big financial problems due to lack of funding

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The Early Years sector faced big financial problems before the pandemic, now funding needs a complete re-think to ensure vital nursery staff can continue to teach the nation’s youngest citizens. Stop children being left behind before they even start at school.

Cheryl Hadland, Managing Director and CEO of Tops Day Nurseries has raised concerns over under-funding of the Early Years sector again this week following a report shared by the IFS and Nuffield Health.

A number of childcare providers across the country are worried they may have to close their doors for good after a study conducted by the IFS shows that more than double the amount of nurseries are running at a significant loss now compared to before lockdown.

While childcare settings were allowed to open to all children from the start of June, by the start of summer holidays demand for childcare places remained 70% below pre-crisis levels. There is a risk that some childcare providers will close, creating a shortage of places once demand returns to “normal” levels.

Even by mid-July, after lockdown ended, childcare use was only around 30% of its pre-crisis level. Over the coming year, the key question will be how much – and how quickly – demand for childcare recovers. Assuming no further government support, we estimate that, for every 5-percentage point drop in fee income from pre-crisis levels, an additional 3-4% of settings risk tipping into significant deficit.

Cheryl is calling for supporting early years education providers give all children a fighting chance to develop well, even if they have had a tough start, by funding staff properly to be trained, and paid enough to be able to stay in the sector.  90% of the human brain develops in the first 5 years so if children miss out on the opportunities that well qualified early years educators can provide in the early years they will never catch up, and all of society will never benefit from these children succeeding and contributing as much as they could.  The best investment the whole of society can make is in early years children, the return is at least 8:1, all adults need to help and all will benefit when the children mature.  Its not fair to expect nursery staff to subsidise early years education through accepting very low wages

Cheryl Hadland, Managing Director of one of the South’s most prestigious, Eco-sustainable family of nurseries said “Tops Day Nurseries have remained open throughout the pandemic at our hospital based nurseries. Although all 30 day nurseries have now re-opened.  We have survived the pandemic so far thanks to furlough, no business rates, cutting all our costs to the bone, and receiving local authority funding for children not in attendance, but we still made a loss in August.  Rates paid by the government/local authorities for funded hours are at least 20% under the cost to provide these, so the fundamentals of the sector is currently not sustainable, significantly limiting our ability to pay staff anything like what their responsibilities, skills and qualifications should be rewarded with.  It is time that the vital education and care provided by early years professionals is rewarded fairly. 

Cheryl said “There is a misconception that the ‘Free childcare’ advertised by the government and councils for many years is actually free.  It is not free, it is subsidised by low paid staff and struggling employers. Of the funding provided by the Government, Local Authorities provide nurseries with around £4 per hour per funded child, but it costs at least £5-£6 per hour to provide childcare and education, and more in high property value areas. 

‘As time goes by, the sector is running into more and more financial difficulty. Some funding rates have been held for 5 years and in some cases such as Bournemouth we have even suffered a drop in the amount of funding we receive. Funding must reflect staff costs, the biggest cost for any childcare provider.  For example in 2015 minimum wage was £6.70, it has now gone up to £8.72 yet funding rates have been frozen.  This simply doesn’t add up.

‘The lack of investment from the government into the sector means the staff are underpaid for the exceptional work they do in educating the next generation. We desperately need society and the government to recognise that early years education should not be funded on extremely low rates but must recognise how valuable the entire sector really is.”

The Nuffield Foundation and researchers at the Institute for Fiscal Studies, the University of Birmingham, Frontier Economics, Coram Family and Childcare, and the University of Surrey have analysed how childcare providers’ finances are likely to have been affected by the lockdown, and how they might look going forward, and are warning of more closures in the sector. Cheryl summarises this as “Parents needing childcare next year are likely to find that a significant number of their local nurseries and childminders have closed and that only those neighbourhoods where parents are able pay more themselves will be able to access early years education leaving those from less privileged circumstances with nothing.  This can’t be allowed to happen, so government needs to step in.”

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