Poorer families are being “locked out” of a big expansion in free nursery hours, experts have warned, as exclusive Guardian analysis reveals that the number of not-for-profit nurseries in England’s most-deprived areas has fallen sharply.
Close to a third of not-for-profit nurseries closed their doors or were taken over by private companies, including private equity firms, in the poorest parts of the country from 2018-2022, according to analysis of official figures.
Experts warn that state-run and not-for-profit nurseries play a vital role in caring for children with special education needs and cater to the UK’s poorest families.
The warnings come before the government’s planned expansion of free childcare schemes starting from April 2024, which experts this week said was undeliverable unless a staffing crisis was reversed.
From April eligible working parents of two-year-olds will get 15 hours a week of taxpayer-funded childcare for 38 weeks of the year and from September 2025, all eligible parents of children under the age of five will be able to get funding for 30 hours a week of childcare for 38 weeks of the year.
Earlier this year experts warned childcare could become a “playground for private equity” with investment funds more than doubling their stake in the sector in four years.
There are warning signs that this will lead to more non-profit nurseries closing their doors, and leave the poorest families – and families of children with special educational needs – living in “childcare deserts”, said Joeli Brearley, founder of the campaign group Pregnant Then Screwed.
“As childcare becomes a new arm of the welfare state, with billions being pumped into it by the taxpayer, it is imperative that every penny addresses the quality and availability of provision, rather than lining the pockets of big business,” she said.
The Guardian analysed more than 18,000 childcare providers and found that the number run by charities, councils, churches and other not-for-profit organisations had fallen sharply in four years.
Close to a third – 29% – of not-for-profit nurseries closed or were privatised in the most deprived parts of England between 2018 and 2022. The number of not-for-profit childcare places reduced by 21% , compared with a 15% drop in the number of under-fives living in those areas.
Across England, nurseries run by not-for-profits have dropped by 23% in four years, while those run by private companies increased by 10%.
“On the whole, disadvantaged children fare better in not-for-profit or state nursery care settings but these centres are dwindling,” said Abby Jitendra, policy adviser at the Joseph Rowntree Foundation. “This is because the government has higher standards for not-for-profits than their counterparts, when the priority should be making sure every child has access to quality care no matter where they live.”
Sir Peter Lampl, founder and chairman of the Sutton Trust, said poorer families were already “locked out” of current help with the costs of childcare. Research from the organisation showed that only 20% of the bottom third of earners were eligible for help for three- to four-year-olds, which requires parents to work for at least 16 hours a week.
He added that nurseries were closing in poorer areas because the hourly rate for “free hours” paid to providers by the government was not enough to cover costs, while there was less scope to make up the shortfall through extra charges to parents.
“Early years provision should be seen as education, not just childcare, and all young children should have access to it,” he said.
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A recent study by University College London found there was a lack of explicit reference to care for vulnerable or disadvantaged children in the private sector, which focuses on profitability and expansion and is dominated by complex financial structures and risky operational models.
Dr Antonia Simon, lead author of the report, said strong safeguards were needed for companies that receive taxpayers’ money, as the Treasury plans to spend an extra £4bn a year to fund nursery places.
“[Can] childcare run by profit-making companies, whose ethos is to deliver profits to shareholders, deliver equal and fair outcomes for all children?” she asked. “We need robust safeguards for childcare companies receiving public money, including meeting the needs of vulnerable children, and locating equally in deprived and non-deprived areas.”
Purnima Tanuku, chief executive of the National Day Nurseries Association, said nurseries in deprived areas were more likely to close “because they have a higher proportion of government-funded children to parent-paid children”.
The government has increased the funding rate but campaigners are saying it is not enough to cover the providers’ costs.
Between 2018 and 2022, the number of childcare providers fell by 10% in the most deprived areas in England, with a 2% reduction in available places in the same period. The least deprived areas saw a 4.3% drop in the number of nurseries but a 5% increase in the number of places.
High quality early education and care plays an essential role in children’s future, especially for those living in deprived areas who are more likely to have special needs as it can “help close the attainment gap which widens during their school years,” said Tanuku.
The Department for Education said the government was “rolling out the single biggest investment in childcare in England’s history.
“To make sure there are enough places across the country, we are already investing hundreds of millions of pounds to increase hourly funding rates, and will shortly be allocating £100m in capital funding for more early years and wrapround places and spaces.”
