Soaring costs of childcare sees number of nurseries going bust double in year

The number of nurseries going bust has almost doubled in the past year because of the “soaring costs” of childcare, according to a leading accountancy firm.

The national living wage, high staff-to-child ratios and Government administration costs were cited as factors in 29 nurseries becoming insolvent in England and Wales in 2015/16, compared with 16 in 2014/15 – a rise of 80%, the firm reported.

Accountancy group Moore Stephens said the younger a child is the more expensive the care and warned costs could spiral further as nurseries may have to raise fees.

The average hourly cost of caring for a two-year-old is £5.87 versus £4.25 for three and four-year-olds. Further, the average staff-to-child ratio is approximately 1:3 for two-year-olds and 1:6 for three and four-year-olds, the firm said.

They also claimed some parents are “forced to take” unpaid leave from their jobs because of the closures as it is “hard to find an alternative at short notice”.

Deborah Lawson, general secretary of education union the Voice, said tax credit changes and low levels of nursery funding have led to “a continued over-reliance on the goodwill of the early years and childcare workforce,” whose “caring disposition has been taken advantage of for too long”.

Minimum guidelines for staff-to-child ratios “can compromise the quality of care and education”, and most providers choose to have a healthier balance despite “higher costs” because it is “best for children” and workers, she said.

She added the sector would “struggle” to provide free nursery education and childcare “unless it is properly resourced and recognises and rewards the qualifications, skills and experience of early years professionals”.

Mike Finch, partner at Moore Stephens, said: “The introduction of the national living wage has put additional pressure on nurseries.

“The slim margins these nurseries are operating with and the soaring costs of caring for young children will force more to close.

“The cost of nursery places is also likely to increase for parents as nurseries may have to raise fees in order to provide adequate care for children.

“Rising rents are also an issue for many in the sector and, combined with the increasing staff costs, many nurseries are facing a real struggle to stay afloat.”

The national living wage was introduced on April 1 this year and means over-25s must earn at least £7.20 per hour.

In 2011/12 only one nursery went bust, this rose to 13 in 2012/13 then to 21 in 2013/14 before dropping to 16 in 2014/15 and shooting up again to 29 in 2015/16.

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