COST-OF-LIVING CRISIS: Parents facing soaring early years costs while a third of nurseries, pre-schools and childminders warn of likely closure in the next year, new Alliance survey reveals

Nurseries, pre-schools and childminders in England are warning of substantial increases in parent fees this year as rising costs alongside inadequate government funding puts significant and unsustainable pressure on the early years sector, a new survey by leading membership organisation the Early Years Alliance has found.

The survey which ran online from 10 to 23 January 2023 and received 1,156 responses from early years providers, found that an overwhelming majority of respondents (89%) are probably or definitely increasing their fees this year. Of those who have not yet increased fees, but have a rough or clear with an average planned fee increase of 8%.

In addition, almost seven in ten (69%) are planning to either increase or introduce charges for optional extras, such as meals or trips – more than double the proportion of respondents who said they were planning to do so in an equivalent Alliance survey in 2019 (39%).

The survey also found that more than a third of pre-schools, nurseries and childminders say it is likely that rising costs will force the closure of their setting within the next year, with a quarter (25%) describing this as “somewhat likely” and almost one in ten (9%) stating it would be “very likely”.

Over recent years, government funding for the so-called ‘free childcare’ offers has failed to keep up with sharp increases in the national living and minimum wages, alongside other cost pressures such as rising energy costs and wider inflation. This has put considerable pressure on the sector, with the IFS recently warning that early years providers are set to face an 8% real terms funding drop for the early entitlement offer in 2024/25 compared with last year.

More than four in five (83%) survey respondents stated that the level of government funding they receive for the three-and-four-year-old early entitlement offer is less than the cost of delivering places, while nearly three quarters (73%) said the same about the two-year-old offer. As a result, around half (51%) of settings surveyed recorded a loss in the last year with the mean average loss amounting to nearly £14k in the last 12 months, while around two in ten (22%) broke even and just over a quarter (26%) recorded a profit.

Nearly all of those surveyed (99%) said the government isn’t providing enough financial support to early years settings.

Commenting, Neil Leitch, CEO of the Early Years Alliance, said:

“The early years sector in this country is in crisis. As our survey findings clearly show, current levels of government funding are nowhere near enough to support the delivery of affordable, sustainable quality care and education. As a result, nurseries, pre-schools and childminders are being left with an impossible choice: substantially increase fees for parents and carers or go out of business altogether.

“With inflation still sky-high, and the national living wage set to increase by record levels in just a couple of months, this situation is only going to get worse unless the government takes urgent action.

“The government talks about the importance of education, of giving children the best start in life, of supporting families and of encouraging people back to work. What possible reason, then, do ministers have for continuing to completely ignore the very sector that does precisely that?

“Enough is enough. �°��ϲʹ�� deserve better, parents deserve better and, crucially, children deserve better.

“It is vital, therefore, that the upcoming Spring Budget includes a clear plan for the future of early education and childcare in this country, underpinned by the substantial additional investment needed to ensure the sustainability of the early years. The sector simply won’t survive anything less.”

Survey comments:

“For the first time since the setting opened, we are at risk of closure. I cannot keep paying my staff an appropriate wage when I have to balance increasing bills. I do not want to pass all the costs onto parents, and fear that if I do then their children will not attend so the end result will be the same. I do not understand how any business can be expected to support such a huge percentage increase in salaries. The other options are to reduce how much we spend on food and resources which goes against everything I believe in and the purpose of running the pre-school.”

“The increase in the national minimum wage will increase our outgoings by £58,000 in the 2023/24 financial year. We have no way of covering this other than increasing fees for parents. This will make our daily fee price too expensive for many families using our nursery. This is likely to reduce the number of children attending nursery and therefore we will continue to make a loss. There is no way out of this situation without more financial help from the government.”

“We are a setting that has always paid staff above the minimum wage – this has helped us recruit good practitioners who have continued to be employed with us for a number of years. But we have a shoestring budget and have used all our resources to reduce outgoings. We are situated in a deprived area where our provision is very popular and used by the local community but if we don’t receive additional funding, we will have to make redundancies and will face potential closure. Local supermarkets are paying employees more than we can afford. How are our children supposed to get the best start in life if early years settings are not acknowledged?”

“The pressures are increasing and the hourly rate rising in April puts another nail in the coffin – our rent has also increased by 25% an hour. We have reduced most things and are not replacing staff who have left. It is extremely difficult as we are in a deprived area and are the only lifeline for families who are struggling.”

“As an employer, we understand the need to pay staff a fair wage that is reflective of the current costs of living. However, as a business, this money has to come from somewhere and we are concerned about the pressure this may put on our setting and operating costs … We are reluctant to increase our fees because of the cost-of-living and the pressure that will put on our families, but we feel we have no choice.”

EDITOR NOTES

The survey was carried out online between 10 to 23 January 2023 and received 1,156  responses.
The average fee increase forecast is based on the responses of a sub-section of respondents who had not yet increased their fees, but had a rough or clear idea of what the fee increase would be when implemented.

FULL SURVEY FINDINGS

How would you best describe where you work in the early years? Please choose the option that is closest to describing your provision.

Nursery 24%

Pre-school 47%

Childminding professional 25%

Maintained nursery school 0%

Primary school nursery class 0%

Out of hours club 1%

Children’s centre 0%

Specialist provision 0%

Other (please specify) 2%

How would you best describe your role within your setting?

Both owner and manager 34%

Owner 14%

Manager 30%

Deputy manager 1%

Early years teacher/professional 3%

Room leader 0%

Level 4 or 5 educator 0%

Level 3 educator 3%

Level 2 educator 0%

Level 2 assistant 0%

Unqualified educator 0%

Apprentice 0%

Administrator 6%

Treasurer 3%

Other (please specify) 6%

When does your setting operate?

Term-time only 54%

All year round 46%

How many places is your setting normally able to offer?

10 or less 22%

11-20 10%

21-40 38%

41-60 18%

61-80 7%

81-100 4%

More than 100 2%

Do you currently offer any of the early entitlement offers for three- and four-year-olds?

30 hour offer for three- and four-year-olds from working families 4%

15 hour offer for all three- and four-year-olds 5%

Yes, both 86%

No 5%

[The following question was asked to respondents offering the three- and four-year-old offer only] Is your current funding rate for three- and four-year-olds:

Less than the cost of delivering a place 87%

The same as the cost of delivering a place 10%

More than the cost of delivering a place 3%

Do you currently offer any two-year-old funded places?

Yes 82%

No 18%

[The following question was asked to respondents offering the two-year-old offer only] Is your current funding rate for two-year-olds:

Less than the cost of delivering a place 73%

The same as the cost of delivering a place 17%

More than the cost of delivering a place 9%

Over the past 12 months, has your setting operated at:

A significant loss 20%

A moderate loss 19%

A slight loss 12%

Break-even 22%

A slight profit 20%

A moderate profit 6%

A significant profit 0%

[The following question was asked to respondents operating at a loss only] What are your setting’s total losses over the past 12 months?

Mean average = £13,818&�Բ��;

Median = £8,000&�Բ��;

Is your setting a charity?

Yes 40%

No 60%

[The following question was asked to charities only] Over the past 12 months, have you ever had to use your setting’s reserves to cover your day-to-day running costs?

Yes, regularly 32%

Yes, sometimes 28%

Yes, rarely 14%

No, never 25%

Not sure 2%

[The following question was asked to ncharities only] Has your use of your setting’s financial reserves to cover day-to-day running costs increased in comparison to last year?

Yes 67%

No 24%

Not sure 9%

[The following question was asked to charities only] Approximately what level of financial reserves does your setting have in total now?

Mean average = £32,725&�Բ��;

Median = £20,000&�Բ��;

[The following question was asked to charities only] Have you used any of the following to help meet the costs of running your early years provision over the past 12 months?  

An overdraft facility 5%

A credit card 7%

A loan 5%

Other sources (please describe below) 85%

[The following question was asked to non-charities only] Have you used any of the following to help meet the costs of running your early years provision over the past 12 months?

An overdraft facility on your personal bank account 29%

A personal credit card 13%

Re-mortgaged your home 1%

A personal loan 13%

A payday loan 1%

A loan from friends or family 9%

Other personal sources (please describe below) 33%

Have there been any occasions where you have been unable to pay any of your setting(s) suppliers within agreed terms and conditions over the past 12 months?

Yes 13%

No 83%

Not sure 3%

Did you increase fees at your setting in 2022?

Yes 72%

No 28%

[The following question was asked to respondents who increased fees only] Approximately what percentage did you increase fees by?

Mean average: 6.9%

Median: 5%

Did you introduce or increase charges for any optional extras (e.g. meals and snacks, consumables, trips) in 2022?

Yes 39%

No 61%

Will you be increasing fees at your setting in 2023?

Yes, definitely 62%

Yes, probably 27%

No, probably not 10%

No, definitely not 1%

[The following question was asked to respondents definitely or probably increasing fees only] Have you confirmed what your new fees will be?

The new fees are already in effect 11%

I / we have confirmed the new fees to parents and carers, but they are yet to come into effect 6%

I / we know what the new fees will be but have not yet informed parents and carers 17%

I / we have a broad idea of what the new fees will be but this is not yet certain 42%

I / we have no clear idea of what the new fees might be 24%

The following question excluded respondents who have already implemented new fees or have no idea. When are you expecting your new fees to come into effect?

Later in January 2023 1%

February 2023 4%

March 2023 5%

April 2023 56%

May 2023 1%

June 2023 1%

July 2023 0%

August 2023 1%

September 2023 30%

October 2023 0%

November 2023 0%

December 2023 0%

Unsure 2%

[The following question excluded respondents who have already implemented new fees or have no idea] What percentage are fees at your setting increasing by (or likely to increase by, if not yet confirmed) in 2023?

Mean average: 7.9%

Median: 8%

Which, if any, of the following changes are you planning on in 2023? Please select all that apply.

Reduce the number of early entitlement places on offer at your setting 21%

Introduce or increase restrictions on when early entitlement funding can be claimed (e.g. maximum hours per day, limited to term-time-only etc) 26%

Introduce or increase charges for optional extras (e.g. meals, consumables, trips) 69%

Withdraw from the two-year-old funding offer (if applicable) completely 7%

Withdraw from the three- and four-year-old funding offer (if applicable) completely 6%

Other (please specify) 23%

How likely do you think it is that your setting could close permanently in the next 12 months?

Very likely 9%

Somewhat likely 25%

Somewhat unlikely 36%

Very unlikely 29%

We have already confirmed we will be closing 0%

We have already closed 0%

Approximately what percentage increase in two-year-old funding do you estimate would be necessary to keep your setting financially viable over the next 12 months, compared to your 2022/23 funding rate.

Mean average: 20.4%

Median: 15%

Approximately what percentage increase in three- and four-year-old funding do you estimate would be necessary to keep your setting financially viable over the next 12 months, compared to your 2022/23 funding rate.

Mean average: 24.5%

Skipped: 20%

Which of the following statements most matches your view on the level of support that government is providing to early year providers?

The government is providing more than enough financial support to early years providers 0%

The government is providing enough financial support to early years providers 1%

The government is not providing enough financial support to early years providers 99%

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COST-OF-LIVING CRISIS: Parents facing soaring early years costs while a third of nurseries, pre-schools and childminders warn of likely closure in the next year, new Alliance survey reveals

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