The Federation of Small Businesses (FSB) has urged the Government to introduce a new 100 per cent business rate relief scheme and review 30 hours funding to reflect the increasing cost pressures faced by the 89,000 providers of childcare in England – the majority of which are small, single-site suppliers who have limited opportunities to benefit from economies of scale.
To help nurseries cope with escalating costs the FSB believes that the Government should create and fully-fund a new 100 per cent business rate relief scheme for childcare providers in England. The Scottish Government has already recognised the challenge and since 1 April 2018 nurseries in Scotland have been exempt from paying business rates, in advance of their Governments planned expansion to 1140 hours of funded childcare per child per year.
From September 2017 working parents of three and four year olds in England became entitled to 30 hours’ free childcare a week – doubling the universal entitlement of 15 hours’ free childcare, available for all three and four year olds. Under the scheme nursery providers are reimbursed from Local Authority budgets for this free childcare however it is at an hourly level below National Minimum Wage. Nursery providers previously made up the shortfall by charging for additional hours used at a higher rate and charging for ‘extras’ such as food and nappies. Extending the provision to 30 hours has reduced the opportunity to charge for extra hours whilst the gap in funding to support the new requirements has further increased.
The new FSB report entitled ‘Handle with Care’ carried out detailed interviews with nursery providers throughout England to gauge the impact of the 30 hours scheme on their businesses and found that many are struggling with rising and unsustainable business costs as a result of the scheme, further exacerbated by recent increases to the National Minimum Wage and employer contributions to pensions auto-enrolment.
Many nursery owners are left reconsidering their future as the viability of the sector continues to be undermined. If nothing is done to review funding levels or help reduce costs many small providers may be forced into insolvency.
ReSolve has previous experience in this sector, including having been appointed administrators for a high profile nursery chain in Chelsea, which was successfully rescued saving over 200 child places and 70 jobs.