Childcare funding crisis puts quarter of settings at risk, Labour analysis shows

Up to a quarter of childcare settings could be forced to close over the next year without extra support from the government, latest analysis suggests.

Labour's shadow education secretary Kate Green said the childcare sector was facing a 'perfect storm' of rising costs and falling income
Labour's shadow education secretary Kate Green said the childcare sector was facing a 'perfect storm' of rising costs and falling income

Analysis of Early Years Alliance data by the Labour Party found that 19,000 of the 75,000 childcare providers in England felt it was “somewhat” or “very” unlikely that they would be open in 12 months’ time.

The party said this is the result of rising costs and insufficient financial support from the government to mitigate the impact of the the Covid-19 pandemic.

Labour has previously warned that the childcare funding crisis could hamper the economic recovery from the pandemic.

Kate Green MP, shadow education secretary, said the government had created a “perfect storm” with the crisis “locking children out of early education and making it impossible for many parents to return to work”.

She urged the government to urgently provide targeted support to the childcare sector, so that “parents can access the childcare that they need”.

Commenting on the analysis findings, alliance chief executive Neil Leitch said: "Years of underinvestment into the sector had already left nurseries, pre-schools and childminders struggling to stay afloat, and so it's no surprise that the additional impact of the coronavirus outbreak has meant that many are now reaching breaking point.

"With a quarter of nurseries, pre-schools and childminders fearing permanent closure within the year, rising to as much as a third in some regions, it is simply unacceptable for the government to remain silent on this critical issue. The reality is that the support the government has provided to the early years sector so far is simply not enough to ensure that childcare providers are able to survive this crisis.

"Failure to provide the funding the sector needs in the short- and long-term could mean the closure of thousands more providers, leaving parents without the childcare they need to return to work."

Last month, the alliance published data suggesting that since reopening nurseries have only been operating at 37 per cent of their capacity, creating financial pressure for providers.

Purnima Tanuku, chief executive of National Day Nurseries Association (NDNA), said the pandemic had deepened the financial pressures the sector had been facing for a number of years.

“Since lockdown, nurseries have had to absorb additional operating costs such as installing more handwashing stations and extra cleaning, but as costs have increased, their income has dropped due to low numbers of children,” Tanuku said.

“The government has given most local authorities an extra 8p this year per hour per child, but this won’t even cover inflation, let alone take account of above-inflation national minimum and living wage rises.

“NDNA’s own research shows that 71 per cent of nurseries expect to operate at a loss over the coming months. That situation is clearly not sustainable, putting childcare places at risk and threatening childcare businesses.”

A Department for Education spokesperson said: “Nurseries, childminders and pre-schools have provided crucial support throughout the pandemic and are now more vital than ever as hard working parents return to work.

“This important sector has received significant financial support over the past months to provide stability and reassurance. We are continuing to provide extra security to nurseries and childminders that are open by ‘block-buying’ childcare places for the rest of this year at the level we would have funded before coronavirus – regardless of how many children are attending.

“Early years providers will benefit from a planned £3.6 billion funding in 2020/21 for free early education and childcare places. From next year we will also be investing £1 billion to create more, affordable wraparound and holiday childcare places.”

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