Nursery fees ‘to rise by £1,000 this year’ as childcare providers struggle with costs – forcing parents to quit work

Published

2 years ago

February 15, 2023

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The soaring cost of childcare in the UK is revealed in new figures today, suggesting nurseries will raise fees by £1,000 this year.

A survey of 1,156 providers by the Early Years Alliance found nine out of 10 expect to increase fees, typically in April, and by an average of 8% – higher than in previous years.

Cost of living – latest: Semi-skimmed milk and children’s jeans – the details behind inflation

UK childcare costs are already among the most expensive in the world, with full-time fees for a child under two at nursery reaching an average £269 a week last year – or just under £14,000 annually.

An 8% rise would take that to more than £15,000.

Three and four-year-olds in England attending a nursery or childminder are eligible for either 15 or 30 free hours a week depending on whether their parents work, so their costs are a lot lower.

There are different schemes in Wales and Scotland.

But the concern is that by this stage many parents – particularly mothers – have felt forced to drop out of work or cut their hours.

Tory MPs have been pressing the chancellor to take measures to make childcare more affordable in the March budget in order to reduce pressure on families, and enable more women to re-enter the workforce.

But an option to extend free hours to all two-year-olds is understood to have been ruled out.

Most nurseries and childminders surveyed – 87% – said the money they get from the government does not cover their costs to provide the “free” hours – leaving them out of pocket.

More than half of providers (51%) said they had operated at a loss last year. A handful said they were looking at fee increases of as much as 25%.

Becky Burdaky, 26, from Wythenshawe, Greater Manchester, told Sky News she had taken the “daunting” decision to leave her job in sales after having her second child, Bobby, last year.

Her daughter Harriet, aged three, goes to pre-school near their home, but the family found the costs they would face for their baby son beyond their reach.

She will stay at home and they will live on the wages of her partner Steve, an electrician.

‘Not asking other people to pay for my kids’

Becky said: “When we looked into the fees it was £70 a day – it would have been all of my wage. With Harriet it was about £54, so that’s a huge difference.

“And if he was home poorly, I wouldn’t get paid but I’d still have to pay his fee. Once we sat down and worked it out I would have been paying to go to work.

“I never envisaged myself being a stay-at-home mum, you know just cooking and cleaning and bringing up children, as I’ve always worked.

“It’s our decision to have children – I’m not asking other people to pay for my children. And I definitely don’t want people’s taxes to go up because of it.

“But I think slightly subsidising the cost of fees so it’s affordable for working parents means we can work and contribute.

“You don’t know what it’s going to be like when you return to work, you’re starting from the bottom.”

The campaign group Pregnant Then Screwed surveyed 27,000 parents last year and found nearly two thirds paid more for childcare than their rent or mortgage.

Although childcare costs have risen significantly in recent years, many providers are struggling to stay in business – with 5,400 closing their doors in the year to August 2022.

Fees for the youngest children, aged under three, are often used to keep the nurseries in business, and the rising cost of living means parents are cutting back.

What support is available?

Tax free childcare [all ages] for every £8 you pay in, the government put in £2
15 free hours for two-year-olds in England who are disabled or on certain benefits
15 free hours for all three and four-year-olds up to 38 weeks a year [10 in Wales]
30 free hours for three and four-year-olds with working parents for 38 weeks a year in England and Scotland [48 weeks in Wales]
Support for those on Universal Credit up to a maximum of £646 per child or £1108 for two

‘I’ve put my savings in to cover wages’

Delia Morris is the owner of Morris Minors pre-school in Croxley Green, Hertfordshire, where children used to start aged two but are now increasingly starting at three.

She is paid £5.41 an hour by the local authority for their free hours, but says providing it costs her around £7.

“Children come in later, when they are funded,” she said.

“That’s had a huge impact. I did raise my fees a very small amount this year but it doesn’t cover it because we only have one or two children doing a couple of sessions a week [that parents pay for].

“I’ve had to put my own savings in to cover the wages last summer, and the staff had to drop a session.”

As to what the government should do, she said: “They have to put money in. It’s difficult to say, but I have to be realistic that if I can’t make ends meet I will have to close and that’s it.”

Neil Leitch, chief executive of the Early Years Alliance, said the organisation had closed half of the 132 nurseries it operated in the last four years.

“They are exclusively in areas of deprivation, which seems to fly in the face of any levelling up agenda. These are families and children who would benefit most from support and care,” he said.

According to the OECD, the UK tops the table for the proportion of a mother’s income taken up by childcare costs – based on two children in full-time care.

‘The gender pay gap just explodes’

Christine Farquharson, education economist at the Institute for Fiscal Studies, said childcare costs for two-year-olds have risen twice as fast as inflation in the past decade – with a lasting effect on women’s pay.

“We ended up in a situation where the youngest children have the highest prices they’re ever going to pay, with the least access to government support,” she said.

“And it’s coming at this critical moment where parents are making decisions about whether or not to go back to work after they’ve been on parental leave.

“When mothers – and it is mostly mothers – make that choice to step back from the labour market it’s not just those few years. The gender pay gap just explodes and literally takes decades to come back to anything approaching the situation before they became parents.”

Proposals, championed by Liz Truss, to increase the ratio of children looked after by each adult, have attracted opposition from nurseries and parents.

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But Tory MPs are pressing the government to help parents with the cost of childcare by reducing business rates for nurseries or extending free hours to two-year-olds.

Robin Walker, chair of the education select committee, said some of the existing schemes are not working effectively – such as tax-free childcare – for which uptake is only around 40%.

Universal Credit claimants are also eligible to have up to 85% of their childcare costs funded but are put off by having to make upfront payments.

“There is money there that isn’t being used,” he said. “Upfront payment for Universal Credit and tax-free childcare are putting a lot of parents off using them at all.

“The government is already spending more than any previous government has in this space, but other countries in Europe are spending more particularly in the 0-2 age bracket.

“If we were to make the case for more investment it would unlock those opportunities for people to continue in the workplace and stimulate children in the early years.”

If they win power, Labour have promised an expansion of childcare from the end of maternity leave until the start of primary school.

Shadow education secretary Bridget Philipson told Sky News this would be a “key battleground issue” at the next election.

A Department for Education spokesperson said: “We recognise that families and early years providers across the country are facing financial pressures and we are currently looking into options to improve the cost, flexibility, and availability of childcare.

“We have spent more than £20bn over the past five years to support families with the cost of childcare and the number of places available in England has remained stable since 2015, with thousands of parents benefitting from this.”

Business

Manchester United Foundation to be targeted in Ratcliffe costs purge

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1 hour ago

December 29, 2024

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Manchester United Foundation to be targeted in Ratcliffe costs purge

Manchester United Football Club is to cut the funding it provides to its charitable arm as part of a purge of costs being overseen by Sir Jim Ratcliffe, its newest billionaire shareholder.

Sky News has learnt that the Premier League club plans to inform the Manchester United Foundation that it intends to curb the benefits it provides – which totalled close to £1m last year – from 2025 onwards.

Sources close to the situation said a substantial element of the support given to the Foundation by the club would be axed, although Old Trafford insiders insisted on Sunday that it would still provide “significant” support to the charitable wing.

A decision is said to have been made by the club’s leadership to proceed with the cuts, with the Foundation expected to be informed about the scale of the reductions in the coming weeks.

In 2023, the club paid the MU Foundation nearly £175,000 for charity services, which include managing the distribution of signed merchandise to individuals raising funds for charitable causes.

Manchester United also provided gifts in kind amounting to £665,000 last year, which were understood to include use of the Old Trafford pitch and other facilities, alongside free club merchandise and the use of back-office services such as the club’s IT capabilities.

The MU Foundation works in local communities around Manchester and Salford to engage with underprivileged and marginalised people.

Its projects include Street Reds, which is targeted at 8- to 18-year-olds, and Primary Reds, which works in school classrooms with 5- to 11-year-olds.

It also organises hospital visits to support children with life-threatening illnesses.

The disclosure about the latest target of cost-cutting by Sir Jim’s Ineos Sports group, which now owns close to a 29% stake of Manchester United, comes just a day after The Sun revealed that an association set up to facilitate relations between former players, would see its club funding axed.

A similar move has been made in relation to funding for the club’s disabled fans’ group, while hundreds of full-time staff have been made redundant in recent months and costs have been slashed across most areas of its operations.

People close to the club anticipate further cost-cutting measures being introduced as soon as next month.

One club source said it remained “proud of the work carried out by the Manchester United Foundation to increase opportunities for vulnerable young people across Greater Manchester”.

“All areas of club expenditure are being reviewed due to ongoing losses.

“However, significant support for the Foundation will continue.”

Sir Jim has injected $300m of his multibillion pound fortune into Manchester United, although it will need to raise substantially more than that to fund redevelopments to Old Trafford or a new stadium.

Last year, the club, which is listed on the New York Stock Exchange, lost more than £110m, with sizeable interest payments totalling tens of millions of pounds annually required to service its debt burden.

The men’s first team has seen an alarming run of results under Ruben Amorim, who was appointed to succeed Erik Ten Hag in the autumn.

United have lost three of their last four matches – the exception being a derby win away at Manchester City – and lie 14th in the Premier League table.

Mr Amorim has acknowledged that he could face the same fate as Mr Ten Hag unless results improve.

Dan Ashworth, who was brought in from Newcastle United FC as sporting director in the summer, left after just five months.

Responding to news of the plans, a spokesman for the Manchester United Supporters Trust (MUST) said: “The prospect of cuts to the charitable Foundation are another depressing example of the wrong priorities at United, cutting back on support to the community it purports to serve.

“Financial sustainability is important but instead of further investment to show ambition and go for growth, the Club is counter-productively trying to cut its way out of its problems.

“It’s hard not to conclude that the negative atmosphere they’re breeding is feeding its way through to the equally depressing performances on the field.”

Manchester United declined to comment formally on the proposed cuts to the funding of its charitable arm.

Business

Starmer throws down gauntlet to watchdogs with growth edict

Published

1 day ago

December 28, 2024

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Starmer throws down gauntlet to watchdogs with growth edict

Sir Keir Starmer has ordered Britain’s key watchdogs to remove barriers to growth in a bid to kickstart Britain’s sluggish economy.

Sky News has learnt that the prime minister wrote to more than ten regulators – including Ofgem, Ofwat, the Financial Conduct Authority and the Competition and Markets Authority – on Christmas Eve to demand they submit a range of pro-growth initiatives to Downing Street by the middle of January.

One recipient of the letter, which was also signed by Rachel Reeves, the chancellor, and Jonathan Reynolds, the business secretary, said it was unambiguous in its direction to regulators to prioritise growth and investment.

Ofcom, the Environment Agency and healthcare regulators are also all understood to have been sent it.

It comes after a torrid first few months in office for the PM, who has been forced onto the back foot by a series of damaging sleaze rows and turbulent policymaking.

October’s budget, which involved pledges to raise taxes by tens of billions of pounds, triggered a bruising backlash from the private sector, with bosses in a string of sectors warning that it will fuel inflation and cause job losses and business closures.

One regulatory source said this weekend that the letter to watchdogs and a wider drive for regulatory reform emanating from Downing Street were the brainchild of Varun Chandra, the PM’s special adviser on business and investment.

Sir Keir’s letter is understood to have referred to a need for every government department and regulator to support growth, and called on each recipient to submit five ideas for delivering that mandate by 16 January.

The letter also urged regulators to identify how the government could remove barriers to economic growth and where regulatory objectives were either conflicting or confused.

Mr Chandra is said by government insiders to have ruffled feathers in Whitehall since his appointment shortly after Labour’s massive general election victory in July.

A former managing partner at Hakluyt, the strategic advisory firm, Mr Chandra has been “relentlessly” emphasising the urgency of transforming business sentiment to drive growth, according to one Whitehall source.

The insider added that the letter to watchdogs was expected to be the first step in a broader programme of supply-side reforms to be overseen by Downing Street during the coming months.

Most of Britain’s economic regulators already have a Growth Duty enshrined in their statute, having come into effect in March 2017 under the Deregulation Act of two years earlier.

The push for watchdogs to have greater regard for economic competitiveness has already triggered a series of flashpoints, most notably in the financial services industry, where ministers have clashed with FCA officials over a number of policy areas.

Sir Keir has already signalled his aim of removing red tape, telling the government’s flagship International Investment Summit in the autumn: “The key test for me on regulation is of course growth.

“We’ve got to look at regulation across the piece, and where it is needlessly holding back the investment we need to take our country forward.

“Where it is stopping us building the homes, the data centres, the warehouses, grid connectors, roads, trainlines, then mark my words – we will get rid of it.”

On Saturday, a government spokesman declined to comment on the contents of the letter to regulators but said: “Our Plan for Change will drive economic growth right across the country, putting more money in people’s pockets.

“Regulating for growth instead of just risk is essential to that mission, ensuring that regulation does not unnecessarily hold back investment and good jobs in the UK.”

Business

Searchlight shines on £140m funding package for insurer Wefox

Published

2 days ago

December 27, 2024

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Searchlight shines on £140m funding package for insurer Wefox

Searchlight Capital Partners, the private equity firm which has backed companies including Secret Escapes, is to lead a new funding package for Wefox, the European insurance company, that could be worth up to €170m (£141m).

Sky News has learnt that Searchlight has effectively proposed stepping in to refinance Wefox’s existing bank debt as the group seeks to avoid a fire-sale of its most prized assets.

Banking sources said a deal was close to being struck with Searchlight, which would be accompanied by an equity raise of between €80m (£66.5m) and €100m (£83.1m).

Last month, Sky News revealed that existing shareholders in Wefox, which operates across a swathe of European markets, were preparing to back a fresh cash call.

This group is understood to be led by Chrysalis, the London-listed investor in companies such as Klarna and Starling Bank, and Target Global.

One banker said that if completed, the wider refinancing deal involving Searchlight could be announced as soon as next month.

The share sale has been designed to allow Wefox to avert a sale of TAF, one of its prized subsidiaries.

It said earlier this month that it had reached an agreement to sell its insurance carrier arm to a group of Swiss companies led by BERAG, an independent provider of pension services.

Wefox is also backed by prominent investors including the Abu Dhabi state fund Mubadala.

The company has twice this year warned that it faced running out of money within months.

It has been ravaged by losses in a number of its key markets including Italy, although its operations in the Netherlands remain profitable.

The company was valued at $4.5bn (£3.6bn) in a funding round less than two years ago and counts Barclays and JP Morgan among its lenders.

It is now valued at far less than the $1bn (£796m) needed to preserve its status as a tech unicorn.

Earlier this year, the company bought itself time by raising roughly €20m (£16.6m) from existing investors, while it has also sold Assona, a subsidiary which offers insurance cover for electric bikes.

Founded in 2015, Wefox sells insurance products through in-house and external insurance brokers, and has frequently boasted of its ambition of revolutionising the insurance industry through the use of technology.

It has more than 2 million customers across its business.

In July 2022, Wefox raised a $400m (£318m) Series D funding round valuing it at $4.5bn (£3.6bn), making it one of the largest fintechs in Europe.

That followed a $650m round in May 2021 valuing it at $3bn, reflecting the frothy appetite of investors to back scale-ups regarded as having the potential to become global competitors of genuine scale.

Neither Wefox nor Searchlight could be reached for comment.