Significant increase in the number of insolvencies in the nursery sector

The number of nurseries that have been placed into insolvency is up 80 per cent from last year.

It has been reported that 29 nurseries across England and Wales entered into some form of insolvency during the year ending 31st March 2016 compared to 16 for the same period last year.

It is thought that the introduction of the national living wage has put additional pressure on nurseries which has reduced margins and caused cash flow problems for many. In addition, increases in rent, rates and high costs in complying with local government administration have also caused issues for many.

In the 29 reported insolvencies, the national living wage, high staff-to-child ratios and government administration costs were reported as factors for the closures.

nursery sector insolvencies

According to data from the Department for Education, the average hourly cost for nurseries caring for a two year old child is £5.87 compared to £4.25 for three-and four-year-olds. The cost of care is higher the younger a child is, as more staff are required to supervise them. In England, there is an average staff-child ratio of 1:3 for two year olds and 1:6 for three and four year olds.

The increase in the number of nurseries closing is clearly a concern for parents. In order to stay in business, it is likely that many nurseries will have to raise their fees.  The closure of nurseries will also mean that some parents may be  forced to take unpaid leave from their jobs as they struggle to find alternative care at short notice.

I have seen a few local nurseries close over the years, one of which was forced to close as a result of a very low birth rate in one particular year and a rise in unemployment which meant that parents could not afford to place their children into nursery.
Clearly the government must invest in our nurseries in order to build a quality, affordable and sustainability sector.

If the issues facing nurseries are not addressed in the near future then it is likely that many more will close and end up in some form of insolvency in the coming years.