Between 2008 and 2010, demand for nursery places fell by just over 6 per cent, due to the recession and people cutting back on non-essential services. The market remained weak post-recession as household spending grew only marginally in 2010, and unemployment was at a high level.
Supply mirrored demand, as the total number of UK nursery places fell by an estimated 6.5 per cent, caused by a drop in nursery stock as the number of operating nurseries decreased by an estimated 7.3 per cent between 2008 and 2010, equivalent to a net loss of 1,150 sites.
The report says that although nursery closures peaked in 2009, a weak economy post-recession, and the start of large scale public sector cuts, contributed to a further significant loss of settings.
Occupancy also fell, with UK nurseries on average operating with a vacancy rate of 18.25 per cent in March 2011, compared with 17.5 per cent the previous year. However, this is an improvement from vacancy rates in the midst of the recession at the start of 2009 when they were 20.5 per cent.
Meanwhile, nursery fees, which the report says have not grown significantly in real terms in the last six years, have increased by 3.5 per cent in the last 12 months against inflation.
According to the report, 39 per cent of nursery operators feel optimistic that business conditions will improve in the next 12 months, however, 31 per cent said they expected things to get worse, and just under a quarter of anticipated no change in conditions.
Author of the report, Philip Blackburn, (pictured), said, ‘The children’s nurseries market looks to be in fair shape post-recession, as recent contraction appears to have levelled off, and average occupancy is currently in the low 80s. However, a number of economic risks have the potential to dampen demand for children’s nursery care going forward, not least very weak economic growth in 2011, and heaving fiscal restraints on public spending. Specific to the nursery sector, these factors include static corporate funding of nursery care in 2010, cuts to childcare tax credits and to relief on corporate childcare vouchers in 2011, and increasing use of informal childcare by parents.
‘At the same time the Coalition has committed to many of Labour‘s spending pledges for early years, most notably the extension of subsidised places for two, three and four-year-olds. In addition, most nursery providers appear generally optimistic about future business conditions, and strong performers, which have been able to attract investment, are in a good position to expand and develop while business values remain below trend.’
Sector reaction
Purnima Tanuku, chief executive of the NDNA said, ‘NDNA is pleased to see that the majority of nurseries have a positive outlook about what the future holds for the sector in terms of sustainability. It is also positive news that, although there has been no improvement over the last year, vacancy rates have fallen since the peak of the recession in 2009 and stabilised over the past two years.
'However, it is still a concern that 31% of nurseries believe that business conditions will get worse over the next year. We must ensure that nurseries are supported through further economic risks such as restraints on public spending and this reflects the feedback some of our member nurseries share with us. Uncertainty remains given the economic climate and unemployment rates. However, the growth in the birth rate means demand for early years services must be met long term.
‘Nurseries provide a valuable service for children and families and NDNA is happy that Government has recognised this and is proposing a ‘covenant’ for how it wishes to work with the sector. As well as rolling out two year olds’ free places and reforms to schools funding, which includes the three and four-year-old free nursery education funding, it will be vital that the sector can engage in a way that is sustainable and supports quality provision.’
Courteney Donaldson, director of Christie & Co and head of childcare, said, ‘We are seeing a mixted picture with nurseries. The survival of settings seems to depend on the nursery itself and where it is in the country.
‘In the past few years, January has been a bumper month for enquiries from parents about places, however many nurseries reported that this January the number of enquiries were a lot lower, but increased in February, March and April, coinciding with the new tax year. A couple of nurseries have also told us that they have dropped their minimum requirements for the number of hours, to be as flexible as possible, in the hope that parents will eventually increase the number of hours their child attends.
She added, ‘It’s very difficult to know what will happen. These are still uncertain times, but the outlook is more positive than negative. The nursery sector is far more robust than other industries, and parents will always need childcare.
‘Any nurseries that have concerns over occupancy rates should speak to a bank sooner rather than later.'