A new report from the Institute for Fiscal Studies has revealed the extent of financial pressures felt by childcare providers in England as a result of the pandemic.
The report shows that the total loss of income from parent fees has put a quarter of private-sector nurseries at risk of running a significant deficit during lockdown, with less than £4 of income for every £5 of costs. It also reveals that childminders have been particularly badly hit, with almost 30% of childminders now earning less than £4 of income for every £5 of costs.
The research, funded by the Nuffield Foundation and carried out by a team of researchers at the Institute for Fiscal Studies, the University of Birmingham, Frontier Economics, Coram Family and Childcare, and the University of Surrey, analysed how childcare providers’ finances are likely to have been affected by the lockdown, and how they might look going forward.
It found that demand for childcare places has fallen with demand remaining 70% below pre-crisis levels at the start of the summer holidays.
Those providers that rely mostly on public funding have been more likely to see their income protected. For providers with income from parent fees, support through the furlough scheme and self-employment grants was a significant help but provided far from full protection. Researchers estimate that the median furlough payment was worth 55p for every £1 of lost fee income, and self-employment grants covered 64% of baseline fee income at the median.
The report offers several options for supporting the childcare market, including focusing financial support on viable businesses that have slipped into significant deficit during the lockdown, helping them to adjust to the new post-crisis landscape; and prioritising support through the funded entitlement.
Responding to the findings, PACEY Chief Executive Liz Bayram said:
“The Covid-19 pandemic has thrown into stark relief the crisis affecting the childcare sector. Years of underfunding and a lack of a coherent Government strategy have left childcare practitioners at breaking point.
"It is sadly not surprising to see the report highlight the particularly devastating impact the pandemic has had on childminders. Our research has shown that at least one in five childminders were unlikely to receive help from the government’s self-employment support scheme. 40% of childminders have told us they are not confident that their businesses will survive. Without immediate action there will be a devastating loss of flexible, high quality childcare places that will be vital to support parents once they return to work.
"We need immediate transitional support and a visionary long-term funding plan so that all childcare practitioners can continue to support the wellbeing and education of our youngest children, particularly helping the most disadvantaged to catch up from the time they have lost through the pandemic.”