Claire Kenyon prides herself on offering “flexible, affordable, play-centred” childcare at her Chichester nursery, but fears she may soon be forced to close her doors.
Busy Lizzie’s, which sits on a council estate and serves mostly deprived families, is now racking up losses of about £11,000 per year.
Only 12 of its 52 children are from fee-paying households, with the rest funded solely by the government’s “free” term-time childcare offer: either 15 hours per week for all three- and four-year-olds in England, or 30 hours for working parents of children in this age group. The nursery loses £1.50 an hour for each funded child.
“The biggest issue for us is the huge jumps in minimum wage over the past few years,” says Kenyon, 36, the nursery’s manager and co-owner.
Soaring energy bills, driven by Russia’s invasion of Ukraine, have compounded matters. The government is due to announce the details of a bailout package for businesses on Wednesday, part of Liz Truss’s £150bn support scheme to cap energy bills, and it cannot come soon enough.
“Every time the minimum wage goes up, so do our outgoings, because the government funding doesn’t match these wage rises.”
While many other nurseries have reacted to the wages bill by charging for extras such as lunch or activities, Kenyon says this is not an option, as children of low-income parents would stay at home.
Without significant state support of the kind promised by Truss, she cannot predict how long she will be able to keep going.
“We’ll simply have to close,” Kenyon says. “We already operate with the help of a very expensive short term loan, to pay staff.”
This summer, Ofsted data showed that between 1 April 2021 and 31 March 2022 there was a net overall decrease of 4,000 childcare providers in England, the largest decline in six years.
Kirsty Lester, who owns two nurseries in Dorset, is also pondering whether to quit her job of nearly three decades.
“In 27 years I have never been so low and ready to walk away from a vocation I have loved,” the 52-year-old says.
“The rising costs, particularly energy and the new living wage, are squeezing us to the brink. The pandemic has wiped out all my reserves, so cashflow is now a problem, for the first time in 20 years.”
Like millions of other small- and medium-sized businesses, childcare providers are caught in a perfect storm of rising overheads, inconsistent demand and a steadily worsening labour shortage.
Lester says she has had no choice but to put up prices to survive, a decision feeding into inflation running at 9.9% nationally.
After paying better-than-average local wages for years, a series of national minimum wage increases made it necessary to cut staffing and pay her supervisors more.
The pandemic, Lester says, has compounded a recruitment crisis in nurseries that has been brewing for years, with few young people applying now and apprentices not turning up.
“I’m working 55-hour weeks to cover the staffing shortfall. We’re all shattered. Many people have left the sector since Covid. Aldi are advertising jobs paying £10.40 an hour, and as the number of children with special needs is rising, the work environment is much more stressful than it used to be.”
Lester is struggling to come to terms with the reality that many parents today simply cannot afford the kind of childcare she and many others want to offer.
In March, almost half (43%) of working mothers responding to a major survey said they were considering leaving their jobs, while 40% were already working fewer hours because childcare fees were unaffordable.
94% of local authorities in England report difficulty in finding staff with the required qualifications and experience for childcare, with most saying 'very difficult'. (Source: Coram Family and Childcare Survey 2022)
“The press is full of parents complaining about rising childcare costs, but parents receive more help now than at any other time,” Lester says. “We providers are underfunded, feel unappreciated and treated like babysitters. The system is broken.”
Neil Leitch, the chief executive of the Early Years Alliance (EYA) charity, which represents 14,000 early-years settings and operates 65 on a not-for-profit basis in mostly disadvantaged communities, says mass closures are on the horizon.
An October 2021 EYA survey of 1,395 nurseries, pre-schools and childminding settings in England revealed that one in six early-years settings believed staff shortages would probably force their setting to close permanently within a year.
Between March 2015 and March 2022, 20,000 early-years providers in England shut up shop.
“This time three years ago we operated 132 settings, but had to close 67, because we don’t charge for lunches and play the games many providers have to play to stay afloat,” Leitch says. “Staff are leaving the sector in droves and parents cannot continue shouldering rising fees.”
There is, he said, “a national recruitment and retention crisis” driven by “gross underfunding” and unaffordable wages.
Abi Mills, a self-employed childminder from Lancaster, has been looking after preschool children in her home for 15 years.
The 52-year-old is one of several childminders who told the Guardian that rising energy costs might force them to quit, despite the government’s energy price guarantee.
“Our fuel bills are already £300 a month, and I worry about how I’ll keep the house warm for the minded kids,” she says. “You can’t tell a baby to wear extra jumpers.”
Mills, who made profits of £8,000 last tax year and says she takes home less than minimum wage, knows that higher overheads will affect the variety of activities she can offer.
“I recently put my fees up to £5 an hour, but I’ll have less spare money for trips to soft play parks. I’ll do anything I can to carry on, but I can’t put my fees up again. I may need to look for different work outside the house, so I won’t need to heat our home as much and have a more secure job.”
Amid fears that a worsening cost of living crisis may make it impossible for many parents to continue paying for some of the most expensive childcare in the world, the government has launched a consultation on whether changing staff-to-child ratios could bring down childcare costs and make struggling early-years businesses viable again – a plan that has angered parents and providers.
However, Tom Filer, 34, who owns six nurseries in Somerset and North Somerset, favours more relaxed staff ratios.
“We are now on the top end of what parents can pay – some have had to reduce hours or take their children out.
“I’m in favour of the Irish model, with better government funding and more relaxed ratios. There’s no evidence that countries like Ireland, Scotland or Germany with less strict ratios have a poorer quality of care.”
Caroline El-Semman, one of two directors at Little Jungle nursery in Peckham, London, is not against relaxed ratios, but believes more skilled early-years workers are needed.
Numbers of adequately qualified staff in the UK have dwindled because of Brexit, the 48-year-old says. “We used to recruit from abroad – France, Portugal, Spain – where early-years staff are well-qualified and have strong family values. Brexit has cut off this tap of skilled workers.
“Just relaxing the ratios won’t necessarily bring the costs down. The better skilled staff you have, the fewer you need, but we can’t even fill all our vacancies, despite spending thousands per month on recruitment and having raised our wages substantially over the past year.”
