Nurseries in Wales are struggling to stay afloat due to low funding rates and rising business costs

The National Day Nurseries Association (NDNA) Annual Nursery Survey for Wales has found Wales has the most fragile daycare sector in Great Britain at a time when the Welsh Government is planning the most ambitious childcare reforms of all three nations.

Only about a third of nursery respondents to NDNA’s annual nursery survey said they were confident about their future, a significant drop since last year.

And a staggering 65% expected to only break even or make a loss this year.

As a result, NDNA warns that thousands of families in Wales could struggle to find a nursery offering the promised 30 funded hours’ entitlement unless the Government listens to childcare providers and acts now.

Politicians have pledged the biggest free childcare deal in the UK to working parents – 30 ‘free’ hours over 48 weeks of the year for three and four-year-olds from 2020.

But almost half of nurseries are uncertain or unlikely to offer the hours because they are worried that Government funding won’t cover their costs.

NDNA warned the scheme will need better investment to guarantee enough places to meet demand, as it launches its Annual Nursery Survey for Wales.

The report, featuring the views of owners and managers at 122 nurseries, reveals Wales currently has the lowest hourly rates for funded childcare in Great Britain.

Purnima Tanuku OBE, Chief Executive of NDNA, said:

Nurseries really want to be able to offer families the help with funded childcare that the Government is promising them.

But they cannot do this if accepting children for 30 ‘free’ hours causes them to make a loss that could put them out of business.

Fewer than half of nurseries we asked were currently making a profit or surplus, with average loses on each three and four-year-old funded place of £958 per year.

More ‘free’ childcare could make this situation worse if the funding isn’t sufficient.

Average occupancy in private nurseries in Wales is still very low at 68% which is not high enough for the sector to thrive.

Unless this situation is reversed, there’s a real danger they won’t be a private nursery sector in Wales, ready to offer the high-quality flexible childcare that parents need.

The NDNA Annual Nursery Survey found:

• Hourly funding rates for Foundation Phase are currently the lowest in Great Britain at £3.15 per hour compared with £3.94 in England, resulting in an average loss of £958 per child per year
• 45% of respondents are uncertain about or unlikely to offer 30 funded hours from 2020
• Just 35% are confident about the future of their nursery compared with 41% in the 2016 survey
• 65% expect to break even (44%) or make a loss (21%)
• 77% of nurseries plan to increase fees this year, by an average of 4.3%, to try to offset other rising business costs
• A lack of choice of flexible childcare for working parents with children forced to move settings to take up funded hours or miss out
• National Living Wage increases and rising Business Rates all putting additional pressure on nursery businesses
• 23% of nurseries reporting rises in Business Rates
• Losing staff to schools where they are better paid is a challenging problem for 54% of nurseries who responded

Mrs Tanuku continued:

As things stand there is no such thing as a ‘free’ nursery hour. Three quarters of responding nurseries plan to increase their fees for paying parents to help bridge the funding gap. This isn’t fair on families or childcare providers.

The good news is that with three years to go before full roll-out of 30 hours, the Government has time to listen to the nursery sector and put together a robust plan and the right funding to make sure it works.

This is a perfect opportunity for the Government to ensure they can meet parents needs by enabling private and voluntary sector nurseries to participate fully in the transformation of the quality, flexibility and choice of childcare in Wales.

Responding to the report, Darren Millar AM, Welsh Conservative Shadow Secretary for Children, said:

The report casts serious doubt over the Welsh Labour Government’s ability to fulfil its manifesto commitment to deliver free childcare.

It’s clear that the nurseries across the sector are suffering from inadequate levels of funding and Labour ministers’ poor handling of the new business rates revaluation, with many providers running to a significant annual loss as a consequence.

Throwing around attractive pledges during election campaigns without a delivery plan just isn’t good enough.

He added:

Hardworking families across the country will be looking anxiously to the Welsh Government for some reassurance that the 30-hour free childcare promise can and will be upheld.