Nurseries face closure as owners slash wages in desperate attempt to stay afloat

Nurseries fear increases in national insurance and wages will force them to close with owners slashing their own salaries to stay afloat.

It comes as a new survey found parents’ nursery fees could spike by an average of 10 per cent as a result of employers’ national insurance contributions (NIC) increasing from April.

The National Day Nurseries Association (NDNA) says one in seven nurseries and the Government’s flagship childcare expansion are at risk.

They urged the Chancellor to reimburse nursery NIC increases on publicly-funded places and exempt them from business rates.

More than half of 700 nursery businesses in England surveyed blamed NIC increases for an average 15 per cent increase in staffing costs, a figure the Department for Education disputes.

Owners are now urging the Government to increase funding as they face going out of business over what some branded a stealth tax.

Michelle Levene, who owns Jolly Tots childminders in Borehamwood, Hertfordshire, faces having to cut her own salary to cover extra costs.

“We can’t put our fees up at all. Any kind of impact, whether it’s national insurance or minimum wage that is going up will impact our profits,” she said.

“Hiking up our national insurer and our minimum wage as well. I think I’m going to be about £1,500 a month worse off, and that will be coming out of my personal salary.

“It’s a massive worry. We really don’t know we’re going to survive this. It’s just not sustainable. We’re going to see loads of people going out of business again.”

While the funding rates that the Government pays providers for childcare places will increase, they will not account for NIC changes, the NDNA said.

Funding rates are due to rise by an average 4 per cent, but two-fifths of nursery businesses surveyed by the NDNA didn’t know their new rates, with 96 per cent saying they’ll have to increase fees.

As well as NIC, the National Living Wage and Minimum Wage will also increase from April.

Laura Weston, chair of Hartwell Nursery and Preschool, in Hartwell, Northamptonshire which employs seven staff looking after up to 20 children attending, fears they could shut by summer.

“The funding that we receive just doesn’t cover the costs of running a preschool to Ofsted standards. Our next step will be closing,” she told The i Paper.

“We had a council inspection last year, and they made us aware that as much as we can add a consumable charge [for items like nappies] to our parents, for parents whose children are funded we can’t enforce that charge.

“So we have no way of getting more money out of the parents that send their children to us.

“We can’t drop staffing, because we then wouldn’t have enough staff per child for the ratios. So unless we can magic fundraising from somewhere, it will be closure.”

Rachel Wilkinson, the managing director of Green Gables Montessori Nursery in Harrogate, North Yorkshire, said the Government should allow nurseries to reclaim 20 per cent VAT on investments, and increase funding for children to ease the burden.

While not at risk of closure, the nursery, which looks after 72 children and has 28 staff, needs to raise fees by 12-15 per cent from April to meet the added NIC cost.

“That’s a big jump for the parents, so that then impacts on our families,
and potentially, we have people turning around going, ‘Well, I’m sorry that can’t bring my child there anymore’,” Ms Wilkinson said.

“It’s another stealth tax for nurseries. We’ve been squeezed so much over the years there’s nothing left to squeeze. We’re already wrung dry.

“We’re being asked to teach the children all the time, but we’re being paid for babysitting.

“I’d like some respect from the Government for what we actually do – for bringing up the next generation and preparing them for school.”

‘NIC hike is unfair on parents’

Ceri Powe, 33, from Swansea, has been told the fees at his three-year-old son’s nursery are increasing by £3 a day to cover the NIC rise.

He and his wife had already dropped the number of days their child, Arlo, attends nursery from four to three due to the cost of fees, with the family facing bills of £900 a month.

They now receive 30 hours free weekly childcare, but Mr Powe, who works in a contact centre, believes it’s “unfair” parents are paying more to cover employers’ national insurance charges.

“The national insurance increase is going to mean other businesses are going to push on other costs elsewhere,” he said.

“Compared to other parents’ situations who are paying their full bill and their prices are going up I’ve probably got it a bit better than them.

“But at the same time, when you get an incentive that brings the childcare bill down, and then you balance your household budget around that, for it to go up it is still a shock.”

Rob Fox, who runs Happy Bunnies Nursery in Shepreth, Cambridgeshire, said the sector faces a “funding crisis”.

“If a parent comes to me and says, I want four days a week of childcare, and a parent comes to me with their 15 hours and says, I just want two days a week of childcare, I’m having to become more selective in who I choose,” he said.

“I just feel like the Government has no respect for us as providers. We need to start seeing a bit more action from them.”

Neil Leitch, CEO of the Early Years Alliance, said without urgent Government action April’s NIC changes will be “catastrophic” for providers and families.

“The only way settings will be able to shoulder the cost is if it either exempts the early years from the changes or commits to fully funding the changes,” he said.

Lydia Hodges, head of Coram Family and Childcare, said disadvantaged children with Special Educational Needs and Disabilities and families on low incomes were first to be “squeezed out” by rising costs.

The Department for Education spokesperson said: “Giving every child the best start in life is central to our mission to break the unfair link between background and success, and our Plan for Change commits to getting thousands more children school-ready by age five.

“That’s why despite having to take tough decisions to fix the foundations of the economy, we are raising early years funding by over £2bn next year, including a targeted £75m grant to support the increase to 30 government funded hours from September.

“We will continue to work closely with the sector to make sure the funded childcare hours remain fair and accessible to all parents.”