Features

Market View: Recruitment problems and reduced parental demand impacting occupancy

Management Business
Arun Kanwar, managing partner at Cairneagle, finds occupancy is still down post-Covid
Arun Kanwar
Arun Kanwar

We ran our regular survey of UK nursery operators in February this year, focused on performance in the current climate and key operating themes. Our responses were weighted towards group operators.

The full results can be found on our website, but here are some of the key headlines:

  • Occupancy has crept up above the same point last year but is still more than 2 percentage points below pre-Covid levels.
  • The most major contributing factor to reduced occupancy is recruitment and retention of staff – 60 per cent of respondents reported that the situation had worsened since February 2022 (and recruitment was already a major issue before Covid). We are hearing, however, that we may be ‘post-peak’, with the current situation better than the second half of last year – this is backed up by an increase in the number of job searchers in the general UK economy (c.220,000 more people were looking for employment between December and February than in the three months before).
  • Reduced demand from parents as a result of economic uncertainty and the cost-of-living crisis is also a major theme impacting occupancy. As such, solving the staffing crisis wouldn’t currently result in full occupancy recovery to pre-pandemic levels.
  • Given inflation, operators are having to pursue aggressive fee increases, at an average of 7.5 per cent and with a quarter over 9.5 per cent. Despite this, the majority are experiencing margin erosion, with almost a quarter stating that their margins have reduced by more than 10 per cent. Insufficient rates for funded hours are clearly a major contributing factor.

This of course paints a picture before the big budget announcement to extend funded childcare entitlement for under-threes. While this will stimulate underlying parental demand, the above results confirm that the ability to serve that demand will be constrained by staffing, and reiterates that the system needs to be properly funded to allow providers to be deliver the offer.