Government told to scrap business rates for 'struggling' nurseries

Small childcare providers are struggling to make ends meet, with some considering closing their doors for good, a new report has revealed.

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The Federation of Small Businesses (FSB) is urging the Government to increase the hourly rate paid to local authorities for the 30 hours free entitlement, and introduce a new 100 per cent business rate relief scheme to reflect the increasing cost pressures nurseries are facing.

From 1 April nurseries in Scotland have been exempt from paying business rates.

Mike Cherry, FSB national chairman, said: “The success of the 30 hours free entitlement depends on small childcare providers, which make up the majority of the marketplace, being able to provide an affordable, high-quality offer to parents. But many are struggling financially, hit hard by a heady mix of rising business rates, operating costs and staffing costs, driven inadvertently by different ministerial decisions.

“Being able to deliver a high-quality service to parents is crucial for all the childcare professionals, and a source of great pride. The right policy, funding and support must be available to allow them to thrive and deliver both affordable and high-quality care. Otherwise we risk small firms being forced to close their doors in the face of an unsustainable future.”

Funding shortfall

Research from FSB shows increases in business rates, operating costs and staff wages are weighing heavily on small childcare providers.

The nine small childcare providers interviewed reported a significant shortfall between the amount of local authority funding received for the 30 hours scheme, and the fees the provider recoups from parents, forcing many to supplement by increasing the cost of ‘extras’ like nappies or a cooked lunch, or per session of un-funded hours.

Recent increases to the National Living Wage (NLW) and employer contributions to pensions auto-enrolment is further exacerbating this shortfall, halting investment and leaving many nursery owners reconsidering their future.

The new report, Handle with Care, is urging the Government to review funding rates for the 30 hours scheme to allow providers to deliver the childcare offer in a sustainable way, followed by annual evaluations.

'Government must step up'

Mr Cherry added: “Like all small firms, many childcare providers are still reeling from last April’s business rates revaluation. On top of utilities, rent and staffing costs, these businesses are trying to deal with huge business rate hikes placing significant pressure on their costs.

“The Scottish Government has already recognised this and introduced much needed rates relief for the sector. It is time for the UK Government to step up and alleviate the pressure on England’s nurseries and pre-schools, so they can deliver high-quality childcare.”

Neil Leitch, chief executive of the Pre-school Learning Alliance says the report paints a stark picture of a government policy that has left many small childcare providers “struggling to stay afloat.”

He commented: “Until funding rates match the true cost of providing high quality childcare, the government’s flagship policy has little chance of succeeding. It is vital that ministers now face facts and commit to investing what’s needed to ensure the sustainability of the sector in the long term.”