Group. Ive had the pleasure of working within this sector for over 10 - - PDF document

Slide 1

Cary Rankin – Managing Director, Bertram Nursery Group.

I’ve had the pleasure of working within this sector for over 10 years and it’s a great sector to work in. Challenging, but then again that’s what makes it interesting and highly rewarding when you get it right. The people working in this sector are passionate, committed and above all focused on improving outcomes for the children they care for. For many the journey into childcare stems from a love and passion for working with children and this ended up with them ultimately running their own business. There are over 15, 500 individual early years providers according to today’s research, with the top 25 chains accounting for just 14% of the total market.

Slide 2

As at 31 March 2017, the proportion

• f childcare

providers judged to be good or

• utstanding was

93% This huge sense of pride and commitment to deliver high quality childcare and education, means outcomes for children are

• improving. Ofsted, the body that inspects and regulates us recorded that as at March 2017, 93% of Childcare providers on

the EY Register were rated good or outstanding. That’s up from 73% in 2012. Ofsted continue to ‘raise the bar’ and produce clear guidance for providers to follow, setting the standards. The Statutory Framework, together with the ‘Common Inspection Framework’, which sets the rules around inspections and evaluations, is regularly reviewed and changed to ensure it is progressive. The desire for ever evolving and improving standards and

• utcomes is welcomed by most, as the sector acknowledges and supports the need to continually improve outcomes for

children. Obtaining that all important ‘Outstanding’ grade from an inspection is an ambition for most, as this grade recognises the quality of their team and provision and strength of leadership and management. However, it is also important to recognise that good quality comes at a cost and the need to continuously invest in teams & facilities is essential to ensure we can provide the very best outcomes for children and families in the communities we serve. The early years of a child’s life lay important foundations that are crucial to their long-term development, and quite simply, you get out what you put in!

Slide 3

• Fixed Funding Rates
• Operational Cost Increases

The word ‘resilient’ continues to be used frequently to describe this sector and as complimentary as this sounds, to many providers this also translates as ‘find a way to make it work’. Operating a business within one of the most heavily regulated sectors, at a time where operational costs are increasing faster than ever, where funding rates remain static and where our government childcare support schemes remain grossly underfunded; this means many smaller independent settings and let’s not forget our childminder workforce are either hanging by the proverbial thread, or simply not surviving. The question for some providers has become one of “can we or do we want to continue operating our childcare provision”? For some this may be more about having the effort and energy than business mathematics. So, in a market where demand for places continues to rise, capacity and ‘affordable’ or ‘accessible’ childcare is or could be an issue; childcare businesses will need to find a way to prevent nursery fees increasing above the reach of its customer.

Slide 4

One of the ways providers ‘balance’ their costs and try to ‘make things work’, is through cross subsidising places. This is where private fee income is increased to bridge the gap created by the low funding rate for funded places. Certainly, in areas of significant deprivation, where access to day care provision may be primarily through funded places, a provider may not have the means to ‘balance’ its costs this way. This ‘cross subsidy’ reliance may continue to be a critical factor in the longer-term sustainability of an independent or small nursery business. So, with this ever-challenging landscape it may now be more about an owner forward planning, scale, versatility, adaptation and perhaps and crudely ‘survival of the fittest’! Whilst a very sensitive topic for many providers, conversely this is perhaps a real stimulus for market activity in general, with nursery owners either ‘testing’ their options or making firm decisions to sell. We know from Christies & Co that they have seen significant and increased UK based transaction activity as well as significant overseas interest, which doesn’t appear to be subsiding. In short, this market consolidation presents real opportunities for sellers and buyers.

Slide 5

Funding Rates

https://www.gov.uk/government/publications/review-of-childcare-costs www.ceeda.co.uk/media/1085/counting-the-cost_ceeda-oct-2014.pdf

“This review gives government a solid evidence base for the purposes of setting a funding rate for the entitlement.”

Sector challenges include: -

• Funding rates.
• Workforce availability
• Increased operating costs

Funding When you look at most of the issues providers face, it will in most cases come back to funding. Funding rates and funding/grant availability. The DfE set the funding rates and they did so based on a report conducted in November 2015 called ‘Costs of Childcare’. This report, still used today by DfE to justify the funding rates it set, is widely disputed as inaccurate and that its data set was poorly sourced. Research completed by CEEDA, an independent research body concluded the rate per hour was indeed too low. Prior to the launch of the 30hours funded childcare scheme the Government announced a move to a minimum rate of £4.30 per hour for 3&4-year-old funding. Still not enough but a step in the right direction. Despite a 93% pass through requirement, many providers saw much less than the minimum £4.30 per hour, with some receiving as little as £3.85 per hour. Nurseries operating in the South or in areas where costs of operations far exceed the funding rates provided, may be worse off than nurseries in parts of the country where operating costs are lower. Even though some LA’s have set rates above £4.30 it is not enough to cover the current gap. Most providers have also introduced ‘supplementary’ charges to charge parents accessing the 30hrs funded childcare for ‘consumables’ and other related costs associated with providing a place. Effectively ‘topping up’ the funding to partly of fully bridge the gap. So, what are we doing about this? Sector leaders and providers are already working closely together to drive change at central and local government level. Along with many other sector colleagues we regularly attend Westminster to meet, discuss & debate key sector challenges and issues. This presence and willingness to support the sector is promising and the recently appointed Shadow Childcare Minister ‘Tracey Brabin’ has been working closely with the sector to understand the challenges and support change. With the removal of Robert Goodwill, it is perhaps still too early to comment on the current Minister Nadhim Zahawi. There has also been a very valuable consultation completed by PSLA and there continues to be further independent research from CEEDA to evidence the impact of funding shortfalls.

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Career Choice L3 Qualified Pipeline

Workforce

Workforce There is limited emphasis, starting at central government departments, on promoting early career programmes or understanding of the value of a role working in the Early Years sector. There needs to be as much emphasis placed on the role of teachers/practitioners in the early years as there is on teachers for primary and secondary education. Raising the profile and perception of the role to encourage interest at secondary school and college is essential, colleges are struggling to fill courses and sadly too many practitioners fall into the profession rather than choose it from the outset. We want those who are already working in the sector to see further

• pportunities for CPD, to improve retention and enhance careers and wages.

Entry level wages is part of the issue, and whilst the increase to NLW will help address this generally within the sector, the real focus needs to be on attracting people toward a career in childcare and critically males into our workforce. Removing the mandatory English & Maths GCSE requirements for L3 qualifying has helped, although the impact of the poor government decision in 2015/16 means there has been a serious fall in L3 qualified practitioners available. We understand the governments workforce strategy will focus on linking progressive career opportunities for those entering the sector, although we are still pushing to bring back grants to help fund team CPD and employ higher qualified team members who will further enhance outcomes for children. This will also support retention and provide a ‘reason’ for people to stay in the sector by way of career enhancing

• pportunities

The DfE themselves recently acknowledged and presented their view that there was a clear and positive correlation between the quality of settings and a well-qualified workforce.

Slide 7

Operating Costs

Operational costs The reduction and/or removal of business rates for nurseries remains a local government decision rather than central government and given this may well be a primary source of income for local authorities, in a time where they are seeing a reduction in funding from central government, it is unlikely they will give up or reduce business rates for childcare providers. The decision to make nursery providers exempt from business rates in Scotland is well thought through, in preparation for the extended funded hours in 2020. Keeping operational costs low for providers to maintain affordable fees will support thousands of nursery providers to offer these additional hours through funded places. For the NLW – Setting the target of £9 by 2020 is ambitious and if this is to be achieved the costs associated with statutory and non-statutory increases each year will need to be found by every provider affected by the increase. If funding rates do not increase, or other business costs decrease, providers will have no option but to find the additional money through increasing fees and further cross subsidisation. Affordability, quality and ensuring access to nursery provision by all families is key to keeping occupancy at sustainable operational levels. Continuing to fight for fair funding rates and

• ffsetting operational costs continues to be a key focus for the sector.

Slide 8

Balance Adaptation Quality Mix Location Scale Group Synergies

In Summary

In Summary Market is buoyant, and sector continues working hard to ensure it can strike a balance between affordable parent fees, quality, managing operational costs and making a profit. In the absence of increased funding, providers with scale, a strong quality reputation, versatility in facilities and those who plan well and have the capacity to adapt will prosper through these tough times. Characteristics such as location, quality of premises and children's outcomes, reputation, population & deprivation demographics, competition level and private to funded mix remain key indicators of a successful and attractive business today. There is no doubt the benefits of ‘group or supergroup synergies’ may play out more in the months and years ahead.