Demand for children’s nursery services in the UK picked up well in 2013/14, as an improved economy and an expansion of government subsidised places saw many more children attend nurseries during the year.
That’s according to the latest data from healthcare market intelligence provider LaingBuisson.
Findings published in Children’s Nurseries UK Market Report (13th edition) shows that the children’s nurseries market in the UK was worth GBP4.9bn in 2013/14, increasing by four per cent in real terms from 2012/13. This boost is attributed to a good rise in total children attending nurseries (up 6.5 per cent), though held back by a shorter average attendance of children than in the previous period. There was no real growth contribution from prices, however, as nursery fees increased by just below three per cent on average in 2013/14, close to economy inflation (RPI) over the period.
Stronger economic growth, supporting a continued rise in maternal employment, and a cyclical high for the early years population, helped lift penetration by children’s nurseries to an estimated 15.7 per cent of all under fives at mid-2014 (June/July). This is the highest rate since pre-recession at the start of 2008 when it was 16 per cent. The report highlights that stronger demand from the under threes, which saw penetration move up from 11.8 per cent to 13.2 per cent between mid-2013 and mid-2014, was driven by the government’s wider funding of places for two year olds, as children’s nurseries have accommodated more than half (over 55 per cent) of the total places now available.
Higher demand for nursery services was largely absorbed by existing capacity, highlighted by a rise in average occupancy of nurseries by at least two percentage points over the year. However, the total UK nursery stock (number of nurseries) also increased, the first of significance since the mid-2000s, as a large number of small to medium-sized nursery businesses have expanded their capacity locally or regionally. Some 425 nursery groups (those with three or more nurseries) operating in the UK accounted for 24.6 per cent of capacity at mid-2014, increasing from 22.7 per cent a year earlier, confirming that further corporatisation within the children’s nursery market is driving capacity growth.
Looking ahead, LaingBuisson highlights favourable demand dynamics to support the nursery sector, including solid economic growth, high employment, and expected increased funding from the government as more places for two year olds are rolled out, and wider relief to the working population is projected through new tax credits in the medium to long term. At the same time, LaingBuisson recognises risks to growth, including a decrease in the under 5s population probably sooner than expected following a recent sharp drop in the UK birth rate, potential over-crowding of capacity in some regions, staffing and skills shortages as capacity expands, and increased dependency by nurseries on government subsidies for two, three and four year olds. Unit (per capita) subsidies for places have historically fallen in real terms (after taking account of inflation). As shown by recent events, Ofsted, the sector’s regulator, also has the power to influence demand through its inspection strategy.
Author of the report, economist Philip Blackburn, says: “Growth within the children’s nursery sector appears to building a head of steam in line with economic wellbeing, and supported by optimistic expectations of future prosperity from many nursery businesses and investors. Overall, positive demand drivers going forward support market expansion at a reasonable rate, supported by favourable economic and investment conditions, also by progressive government funding policy approaching a general election, but dependent on the availability of additional nursery staff. However, longer term demand drivers for nurseries are less certain, and as a mature market, demand and supply is vulnerable to cyclical shifts. It is also a sector where regular and ongoing political and regulatory changes may have a significant impact on prosperity at any time.”
