In April 2023, the previous Government announced that it would expand the existing scheme of 15 free childcare hours for three- and four-year olds to include two-year olds from April 2024. The new Government has upheld this policy and, for the autumn term, over 107,000 parents and guardians had applied for codes to access these funded hours, with 87% of these having been validated, according to the Department for Education, a significant fall against the summer term’s 235,000 validated codes. With the new academic year in September 2024, the policy was extended to include children aged from nine months, with nearly 230,000 codes validated for the current term. From September 2025, the entitlement for all the children covered will increase to 30 hours a week.
As children from nine months of age became entitled to 15 hours of free childcare in September, we take a look to see if there’s been any impact so far on the day nursery sector.
The gap between funding and delivery
With most parents and guardians understandably looking to access the funding, demand for places in nurseries which will accept children on the scheme has increased. As a consequence, the Government has expanded funding to operators by 4.6%, however, while welcoming any extra support, this still leaves a crevasse between what nursery operators receive and the cost of delivering good quality childcare. Like other industries, day nurseries have recently had to factor in wage, energy and business rate increases, which have mirrored the wider inflationary environment and have proportionally been much larger than the funding boost, with further rises on the horizon from recent National Insurance and minimum wage changes. Consequently, we are aware that fees for non-funded hours at many nurseries have grown, as operators look to use that income to subsidise Government-funded places.
Geographical differences?
While demand has increased, average access to childcare has decreased in England since March 2020, with an unequal impact across the country. Affluent areas, which tend to have the highest number of nursery spaces and/or operators, are likely to be more able to pass additional costs on to parents/guardians to help subsidise funded-places given higher than average household budgets, albeit these areas can present staffing challenges for operators. Less affluent areas, meanwhile, have fewer spaces and are less likely to be able to increase other charges before the provision becomes unaffordable to customers. Data from Ofsted and the Office for National Statistics backs this up: St Albans and Cambridge, for example, have the highest levels of access to early years education places, while Walsall and Torbay have the lowest, and are classed as ‘childcare deserts’. This data also shows a disproportionate number of ‘deserts’ in rural areas, with the North East and South West the regions with the greatest average decline in accessibility, with the hourly funding rate for both significantly below the national average for all three age groups. London is the only region which has experienced an increase in childcare accessibility, aligning with the higher hourly rates of funding available to providers.
Geographic concerns are not the only measures set to affect the operation of day nursery sites: the new Government’s intention to retain previous changes to the Planning Use Classes Order will continue to release a greater breadth of expansion opportunities that could be acquired for operating children’s day nurseries generally without requiring planning permission (Class E buildings). Together, these changes are likely to see a gradual reshaping of the sector over the coming years which will determine both the operation of existing nursery settings, and how and where others emerge.
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