Parents already feeling the squeeze from higher food and energy bills could soon be facing higher childcare costs as nurseries struggle to stay open amid their own surging energy bills and higher staff costs.
Research by the National Day Nurseries Association (NDNA) found that 95% of nurseries in England did not have enough funding to cover their basic costs after the impact of the Covid-19 pandemic on their incomes, while 85% said they would run at a loss or break even this year.
In April, nursery finances will be squeezed even further by a 6.6% rise in the national living wage, a 1.25-percentage-point rise in national insurance, and a sharp rise in the cost of heating and electricity bills.
More than 11,000 childcare places were lost during the Covid-19 pandemic, according to the NDNA, as 232 nurseries closed between April 2020 and March 2022. Separate data released by the Early Years Alliance found a fall in registered childcare providers of 2,595 in just five months between December 2020 and May 2021.
Government funding for help covering childcare costs for eligible two- to four-year-olds will rise in April, but at less than the rate of inflation. According to providers, it falls far below what is needed to keep nurseries running.
Emma White is the owner of two private nurseries in Suffolk: Small World Kindergarten in Ipswich and Woodlands Nursery in Kersey Mill near Hadleigh. She said she might have to raise fees in the coming months to cover increasing costs or face closure in the future.
While funding is going up by 4%, roughly £6,000 a year across the two nurseries, her annual wage bill is going up by £15,000 from April.
“Most of our staff are on minimum wage or above. And these payment increases are so well deserved – they have worked all the way through Covid. What makes it difficult for us is that they are not being mirrored in the amount the government give us and they are expecting nurseries to take the hit personally when there is very little left to pay themselves.”
And there are other costs to contend with. “We have to keep doors and windows open in the nursery for ventilation because of Covid, which means the heating has to be kept on,” she said. “Within months, our heating bill has gone up by a third and will go up again in April.”
Rising interest rates mean repayments on a loan to cover the nursery’s loss of income during the pandemic have gone up from £854.16 to £935.95 in two months.
White recently had to cut a management role to help balance the books, and while that will help to postpone putting up fees imminently, it is still ultimately the only option. More flexible working patterns for parents since Covid mean that reduced nursery opening times may also have to be a consideration in the long run.
“Ultimately, it will become unaffordable for parents to go back to work, which means I will have even less private income coming back to the nursery, and I won’t be able to support an 8am to 6pm day,” she said. “What is going to happen next winter, when income is lower, if we can’t make any money over the summer? What will be left to carry the business on?”
It is not just nursery owners who are feeling the pinch. Degree-holding early years practitioners, such as Kelly Barclay, are also struggling. Barclay works at the Shotley Bridge nursery school in Derwentside, County Durham and is looking for a second job to relieve the financial strain she is facing due to the increase in the cost of living.
“We are on the national living wage, our bills are going up, there’s a lot of sickness among the staff, and once my bills come out, I am in my overdraft again,” she said.
“People think we go to work and just play with the kids, but we don’t, we are getting them ready to go to school, teaching them respect, and it’s incredibly important for the rest of their lives. The living wage is not reflective of how important the job we do is – we are worth a lot more.
“I’m trying to get a cleaning job a couple of nights a week, but I’m struggling to find something to fit with my hours.
“Currently, I am paying £173 for my gas and electricity, which I think is unreal. There is only me and my son at home. I took a Covid break on my rent, so I’m paying back that. So we are wrapping up warm and keeping the heating down. I fear I’m never going to get out of my overdraft, and have to keep paying the fees, even when wages go up in April.”
Jonathan Broadbery, the director of policy at NDNA, said that nursery providers were “very conscious” of what a rise in nursery fees would mean, not just for parents but for the development of the children in their care, too.
“Every nursery works to the early years foundation stage, and are providing educational opportunities and focusing on child development. Especially for disadvantaged children, being in early education is one of the most important things you can do to close the gap. Lower-income parents will be forced to withdraw their children, who have the most to gain from not being a year behind their peers when they start school.”
Joeli Brearley, the chief executive and founder of the campaign Pregnant Then Screwed, said thousands of mothers were already struggling to get back to work because of childcare costs and availability of places – and thousands more could be pushed into the red if fees rose.
“With costs due to rise, and even more childcare facilities set to close their doors, we are heading for a crisis among families with young children,” she said.
“The government’s lack of investment in this sector is forcing parents, mainly mothers, out of work and into poverty.”
Dr Mary-Ann Stephenson, the director of the Women’s Budget Group, said that single parents – the majority of whom are women – would be most affected by any further rises in childcare costs.
“We’ve heard plenty in recent weeks about how to get parents off benefits and into work, but very little about why that is so hard to do,” she added. “In its current form, parents on universal credit need to come up with hundreds of pounds in childcare fees before they’ve even gone out to work and earned a penny. A really simple thing that the government could do right now would be to start paying the childcare element of universal credit upfront instead of in arrears.”
Neil Leitch, the chief executive of the Early Years Alliance, believes that parents and providers both deserve more.
“We would urge the government to support early years settings to meet the rising cost of operating, to ensure that settings remain financially viable and that vital early education and care remains affordable and accessible for the children and parents that need it,” he said.
A government spokesperson said: “The early years of a child’s life are the most crucial, which is why we have invested more than £3.5bn in each of the last three years to deliver the free childcare offers, including the 30 hours a week for working parents. We are also investing millions in family hubs – where families can access important support services.
“To support working families more widely, we also recently announced the biggest ever increase in the national living wage since its introduction from April 2022 and thanks to the action we’ve taken, unemployment continues to fall with more employees on payrolls than ever before.”
