In the United Kingdom, the day nursery sector has undergone significant changes in recent years. A growing number of parents are now choosing to return to work after having children, and this has created a demand for reliable and affordable childcare. In response, many nurseries have extended their opening hours and offer flexible booking options.
They have also started to offer a wider range of services, such as drop-off and pick-up times that suit working parents. In addition, there has been a shift towards providing Nursery Education for all children aged three and four. This is in line with the government’s ambition to improve educational outcomes for all children. As a result of these trends, the day nursery sector in the UK is now more diverse and responsive to the needs of parents than ever before.
What are the main challenges facing the day nursery sector?
Over the last few years, there has been a steady increase in demand for childcare providers in the UK, for a number of reasons:
- Both parents work in more households
- After having a child, women often want to return to their well-established careers
- A growing number of households are headed by a single parent
- Fewer people have a large extended family nearby to offer childcare support due to changing lifestyles
- There has generally been an increase in affluence, although many parents still have difficulty finding affordable childcare
- People have been able to afford childcare thanks to a number of government initiatives – such as Child Tax Credits (currently included in Universal Credit) and an employer-funded childcare scheme that allows employers to provide employees with childcare for £55 per week free of tax and NICs. Note that this was only available to basic rate taxpayers who joined an employer’s scheme after April 2011. The government is launching a new program – Tax-Free Childcare – to help working parents cover the cost of childcare for up to £2,000 per year per child
- In England, the government has recently doubled the entitlement to 30 hours of nursery education totwo-, three-, and four-year-olds, with Wales and Scotland introducing the same by 2020. The profit margins of many independent day care providers are affected because they are not reimbursed the full cost of providing these services.
Despite this, the childcare sector remains highly competitive – there are several vacancies in nurseries in some areas due to increased demand. As household incomes were squeezed by the economic downturn that began at the end of the 2000s, the situation became worse.
Working parents turned to family and friends for childcare in the early 2010s, leading to falling occupancy rates at day nurseries. Nurseries are sometimes only used by parents as part of the free early years education entitlement. In many nurseries, local authority reimbursements are too low and haven’t been increased to cover rising costs – particularly staff costs have increased since the National Living Wage was introduced for 25 and older. Since the funding available does not cover the costs of offering 30 hours of free early education and childcare, many nurseries will not be able to offer it.
There will likely be a reasonable demand for day care nurseries in the future, but you will need to determine if:
- It is possible to support your proposed business in your area if there is sufficient demand
- Childminders and playgroups will be your competitors, as well as existing day nurseries
- If you offer many free funded early years places, you will be able to run a viable business
Additionally, you should consider:
- Locating a suitable location
- Recruiting and retaining high-quality, suitable employees
- Keeping the doors open longer and offering parents more choice
- All registered early years providers in England must comply with the Early Years Foundation Stage (EYFS) framework. Visit Gov.uk for more information. The Foundation Phase framework is used in Wales by day care providers to deliver early childhood education. Visit the Welsh Government website for more information. National guidance for early years practitioners can be found on the Education Scotland website. The Learning to Learn Framework can be found on the website of the Department of Education Northern Ireland.
Vetting and Barring Scheme
People who work with children need to be vetted and barred under the Vetting and Barring Scheme, which was introduced in October 2009 this legal issue for nursery staff is mandatory. Disclosure and Barring Service (DBS) maintains a list of individuals barred from working with children and vulnerable adults in England, Wales and Northern Ireland. Disclosure Scotland runs a similar scheme – the Protecting Vulnerable Groups Scheme. People who are barred from employment are considered criminals.
Keeping up to date with developments
The best way to stay current in your industry is to join a trade association.
Day nurseries are represented by the National Day Nurseries Association (NDNA). The National Early Years Enterprise Centre is located at Longbow Close, Huddersfield, West Yorkshire HD2 1GQ, or you can visit their website for more information.
It is required by law that day care providers register with their local regulator. You can reach them at:
- Ofsted, Piccadilly Gate, Store Street, Manchester M1 2WD
- The Care Inspectorate, Solway House, Dumfries Enterprise Park, Tinwald Downs Road, Dumfries DG1 3SJ
- The Care and Social Services Inspectorate Wales (CSSIW), Welsh Government Office, Rhydycar Business Park, Merthyr Tydfil CF48 1UZ
- The Early Years Teams of Health and Social Care Trusts in Northern Ireland. You can find contact details on the NI Direct website
The Family and Childcare Trust – the national childcare charity – can also provide you with more information on the childcare sector. An annual summary of average day care fees is also published along with information on government childcare initiatives. 81 Southwark Bridge Road, London SE1 0NQ is the address of the Family and Childcare Trust.
It provides information to all those involved in childcare, including providers, through Early Years – the organisation for young children in Northern Ireland.
You can also keep up with developments and sector trends in your industry by reading industry journals. Nursery World and Practical Pre-School are industry journals.
Read more: Business finance for day nurseries
Lee Jones is a seasoned Business Finance Specialist with over two decades of invaluable experience in the financial sector. With a keen eye for market trends and a passion for helping businesses thrive, Lee has become a trusted advisor to countless organizations seeking to navigate the complexities of finance.