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High-quality early education and childcare can have a positive impact on children鈥檚 wellbeing and听life chances. The ability to combine work and care can benefit the whole family. But, for many parents,听childcare costs听are a significant drain on household income, and听COVID-19听made childcare problems for families worse.

Between April 1 2020 and July 31 2021,听5% of all registered providers听in England closed permanently.

In this difficult atmosphere, many day nurseries changed hands. The COVID-19 crisis encouraged rather than deterred the buying and selling of nurseries. According to property specialist听Christie & Co,听transactions increased听by 21% between 2020 and 2021.听Our research听shows that, in many cases, nurseries have been bought up by large private for-profit groups.

Our research has investigated the consequences of these private for-profit groups moving into the childcare sector. They include increased financial risk for day nursery groups, threatening childcare availability for parents and children.

This pattern of large private-for-profit groups acquiring nurseries is relatively new. However, in the听care home market听it is a听well-established trend听known as 鈥渇inancialisation鈥�.

The precarity of the care home market has been demonstrated in recent years by the听collapse of several chains, such as Four Seasons and Southern Cross. These groups were unable to repay the debts they owed to the private equity companies whose investments had enabled them to expand their business.

Together with colleagues, we听conducted research听funded by the听Nuffield Foundation听on the growing volatility of the English private childcare market over the past two decades. We found that the market reach of for-profit group-based provision in England is considerable. In 2021听70% of all group-based day nursery places听were in the for-profit sector.

Using听forensic accounting methods, we found evidence that smaller nursery chains and single nurseries are increasingly being bought up by large companies seeking to make profits with the help of private equity funding.

This enables such companies to continually expand their provision, while seriously in debt to their investors and needing to pay their shareholders dividends. As a result they have low to no financial reserves, placing them听at risk of collapse.

Shortly after we completed the analysis of the accounts of one of our report鈥檚 five medium to large for-profit case study companies, it was听bought out听by a Dutch childcare chain. We found that complex financial structures involving foreign investors and shareholders, alongside public funding, enable these companies to increase their share of the childcare market.

The borrowing of money to enable for-profit childcare companies to buy additional nurseries has so far not led to a substantial increase in childcare places, as our analysis of听Ofsted data听showed.

We found that private for-profit companies in England were charging high fees relative to other Organisation for Economic Co-operation and Development (OECD) member states.

While for-profit childcare companies market themselves as providing quality care and child-centred practice, the research uncovered a lack of explicit reference to care for vulnerable or disadvantaged children.

For-profit is only one way that childcare provision is delivered in England. Alternative not-for-profit models include charitable and social enterprises.

Our team also carried out听financial analysis听on a sample of six not-for-profit childcare groups. The latter, where registered as charities, must submit highly transparent accounts to the Charity Commission. They also need to have operating reserves, are limited as to the amount of debt they can carry and must reinvest any surplus into the childcare business. Other not-for-profit organisations have shared ownership structures which safeguard a sale of a company until all trustees agree to it.

The governance of social enterprises, cooperatives and employee 鈥� rather than investor-owned organisations 鈥� makes them accountable to trustees, staff, and parents, who may also be members of trustee boards. Their operations must make clear how they pursue their social aims.

These features put them at much lower risk of financial collapse than for-profit companies.

The scale of听public funding听invested in the sector in England, through funded early education hours and parental childcare subsidies amounted to some 拢5.6 billion in 2019. This money is meant to support a childcare system that is of high quality and equally accessible and affordable for all families with young children.

Instead, we have听a dysfunctional market听characterised by deep structural problems.

These include the increasingly dominant role of highly indebted childcare companies, putting the system鈥檚听sustainability at risk听and placing childcare out of reach of听low-income families.

This article first appeared in on 16^th February 2022.

Links

• Original article in
• IOE 鈥� Social Research Institute
• IOE, UCL鈥檚 Faculty of Education & Society

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