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The early years and childcare sector in England is set to lose around a quarter of a billion pounds over the spring term due to the withdrawal of vital government funding, new analysis has found.

Analysis of a recent joint survey carried out by the Early Years Alliance and independent sector analysts Ceeda, shows almost two thirds of nurseries and pre-schools (65%) and four in 10 (42%) childminders had fewer children taking up so-called ‘free childcare’ places this January compared to the same time last year.

The government’s recent decision to base funding for funded early years places for two-, three- and four-year-olds on the number of children currently registered at early years settings during the spring term, rather than on pre-pandemic attendance levels means that:

• Nurseries and pre-schools with lower headcounts will lose an estimated average of £13,390 funding in the spring term;
• Childminders with lower headcounts will lose an estimated average of £2,485 funding in the spring term.

This means that the sector is currently facing total losses of £247 million over this period.

Withdrawal of vital funding support

During the summer and autumn of 2020, the government continued to fund early entitlement places for two-, three- and four-old based on pre-pandemic attendance levels. However, this support was retracted in January, with funding instead based on the number of children on roll. 

The Department for Education’s own latest statistics on early years attendance levels show that the number of children attending nurseries, pre-schools and childminders during the latest national lockdown is just 62% of normal daily levels (compared to November 2020 when it was 85%).

The impact of furlough support

The government has claimed that early years providers can recover their funding losses through furlough support. However, as wage costs account for around three-quarters of nurseries’ and pre-schools’ overall costs, and the Job Retention Scheme only provides funding for 80% of wage costs, even if a setting was able to claim maximum furlough support, this would still only equate to around 59% of what they had lost for an unoccupied funded place.

The joint Alliance/Ceeda survey also found that only a minority of providers (45% of nurseries and pre-schools and 19% of childminders employing assistants) had any members of staff on furlough at the time of the survey, with many only able to receive limited support from the Job Retention team, for a number of reasons:

• 40% of nurseries and pre-schools said occupancy was fluctuating rapidly, making it hard to plan ahead for required staffing levels.
• Almost a third (31%) said they still needed their staff despite falling demand, to manage increased cleaning (77%),  cover high Covid-related staff absence (66%) and manage the higher staff-child ratios required by ‘bubbles’. 
• A quarter (24%) said the additional criteria for furlough claims in early years provision meant it was not possible to claim support for a post only partly paid by funded income.

In addition, the majority of childminders (85%) do not employ staff and are therefore not eligible for furlough support. While most are eligible for the Self-employed Income Support Scheme (SEISS), the decision to calculate this support based on profits rather than income has meant that for childminders, many of whom have made little profit over recent years, the financial support offered by the scheme is limited. Newly-employed childminders, who fall outside of the eligibility criteria, have received no support at all from SEISS.

Dr Jo Verrill, managing director at CEEDA, commented:

“The pandemic has thrown into sharp relief how vital the country’s early education and childcare infrastructure is for children, parents and employers. It seems this point has yet to be fully understood by the Treasury. The retraction of funding support at this crucial time is the latest example in a long, well-evidenced, history of short-sighted under-investment in children’s futures, and parent’s capacity to work.” 

Commenting, Neil Leitch, chief executive of the Early Years Alliance, said:

"Nurseries, pre-schools and childminders have been on the frontline throughout this pandemic. It beggars belief, therefore, that at a time when early years providers need the most help to ensure that they can remain sustainable, the government has inexplicably chosen to reduce the level of financial support it is willing to offer.

“With the sector facing spring term funding losses of nearly a quarter of a billion pounds, it is absolutely critical that the government reverts back to basing early years funding on pre-pandemic attendance levels, as it did during the summer and autumn term last year.

“We urge the Treasury to use this week’s Budget to commit to providing the support that our vital sector needs during this incredibly difficult period, so that settings can continue to deliver quality education and care, both now and in the long term.”

NOTES TO EDITORS

• Data on overall attendance in early years settings is sourced from the Department for Education series: Attendance in education and early years settings during the coronavirus (COVID-19) outbreak.
• Funding losses have been modelled to illustrate the potential financial impact for providers of the government’s decision to base spring term early years funding on current child registrations rather than pre-pandemic attendance levels.
  • The joint Alliance/Ceeda survey captured provider headcounts of children on roll for funded places at January 2020 and at the time of the survey (field period 15 to 19 January 2021). The variance in child numbers (+ and - ) is calculated for each offer, multiplied by the relevant number of hours a child would take in the spring term, and the local funding rate paid to the provider. Calculations assume entitlements are taken in full. The summed total represents the provider’s net difference in funded income across all offers.
• Modelling of potential recovery of lost funding through the furlough scheme uses data on payroll as a proportion of all costs (74%), sourced from , and consistent with the  which reported a figure of 73%. Estimates are illustrative only. The quoted figure of 59% funding recovery assumes payroll costs are 74% of all costs and the cost of delivering a place is the same as the funding paid – a breakeven scenario. The estimate rises to 62% if a provider makes a 5% loss on funded places and payroll is 74% of all costs. The figure falls to 56% if a provider makes a 5% profit on funded places and payroll is 74% of all costs.