September 2017 will herald the beginning of volatile times for some children’s nursery providers as the government’s flagship scheme to extend free early years childcare comes into force. Working parents who earn less than £100k pa each will be entitled to claim 30 hours of free childcare per week for 3-4yr old children; double the 15 hours per week currently on offer.

Whilst the 30 hour scheme is hailed as a major boost for working parents, many nursery providers are less receptive. They fear that government funding for the initiative is inadequate and that the extra hours will place an unsustainable burden on staff, resources and space that are already stretched to breaking point. Many nurseries are already struggling to keep pace with the rising cost of overheads resulting from increases to the minimum wage, changes in pension legislation and huge hikes in business rates.

30 hours Pilot Study reveals challenges for Children’s Nurseries

The recently published results of a pilot study to evaluate the 30 hours scheme, commissioned by the Department for Education (DfE) last September, do little to boost nursery providers’ confidence. The study, which took place in 8 early implementer areas (Hertfordshire, Newham, Northumberland, Portsmouth, Staffordshire, Swindon, Wigan and York), found that whilst most nurseries in the pilot ‘required few if any adjustments to deliver the extended hours, and experienced no difficulties meeting parental demand’, 40% of those piloted said their profits had gone down directly as a result of the increased delivery costs associated with offering extended hours, and around 14% said they had had to introduce, or increase, extra charges for parents to make the 30 hour scheme viable.

In addition, full implementation of the scheme this autumn will differ markedly from the pilot study in that there will be discrepancies in the level of funding offered to nursery providers by different local authorities (LAs). Whilst the government will provide LAs with a flat hourly rate, it is for each LA administering the scheme to decide whether, and by how much, to supplement this.

Is it a good time to buy a Children’s Nursery?

For some children’s nurseries, including Fidgety Fingers pre-school in Essex which has just announced its closure, the 30 hours scheme has already been judged unworkable. More nurseries are likely to follow suit, either shutting down or selling up as the weeks progress, leaving business dreams in tatters for many.

However, as is the way of the world, for others the difficult market conditions will create business opportunity. Some nursery providers hope to weather the storm and grow stronger by adopting measures that include limiting the number of 30 hour places they will accept, making additional charges for food and activities, increasing charges for non-eligible children and/or asking parents for voluntary contributions.

Such measures won’t sit well with everyone but, for astute entrepreneurs with creative ideas, good commercial acumen and a passion for providing early years childcare, there just might be scope for buying a failing nursery business in the coming months and implementing steps to successfully turn it around.

There will, after all, always be a demand for first class pre-school childcare.

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