Welsh Childcare Sector Faces Financial Uncertainty Amid Rising Costs

A leader in the nursery sector has stated that “vital early years education” in Wales faces jeopardy unless substantial financial assistance is provided. Childcare service operators have collectively informed the Welsh government that the current support mechanisms are insufficient to meet their operational expenses. Ellis Jenkins, who manages a nursery in Newport, reported that expenses have increased by 40% in recent years, leading his establishment to confront an annual deficit exceeding £30,000. In response, the Welsh government announced its decision to make business rate relief for the sector a permanent measure and committed to reviewing the childcare offer extended to nursery providers on an annual basis, rather than every three years. Childcare providers situated in Newport, Torfaen, Blaenau Gwent, and Caerphilly have formally communicated their concerns to the Welsh government in writing. A survey conducted by the National Day Nurseries Association earlier this year revealed that 91% of nurseries across Wales anticipated either incurring a loss or merely breaking even this year. This report was released prior to Chancellor Rachel Reeves’ Budget, which subsequently raised staffing expenses for businesses. While acknowledging permanent business rate relief as a constructive measure, childcare providers contend that it fails to address the broader impact of the cost of living crisis and rising wage bills on the sector. Lisa Owen, director of Chuckles nursery located in Bettws, Newport, stated that the financial deficit was amounting to £1,500 per week for her operation. She remarked, “We haven’t paid business rates since 2018 so I don’t see, when the climate has changed as much as it has, why that’s a help to us right now.” Owen further explained, “We can’t cut corners… electricity, water rates, everything is going up, so we’re up against it the whole time. Sixty per cent of my turnover goes on staff wages, they’ve gone up so we’re under a lot of financial pressure and we have to ensure that we are trading within our costs. Part of our regulations say that we have to be sustainable for the security of the children because we can’t just shut tomorrow.” Mr. Jenkins, managing director of Sunnybank nursery, elaborated, “Costs have increased 40% over the last three or four years and that’s inflationary costs as well as national living wage increases.” He added, “At the moment we’re seeing a shortfall of over £30,000 a year. We’re heavily reliant on staff. Recruiting and retaining is difficult and that extra money wouldn’t just go toward supporting us financially but would enable us to re-invest in our teams, make the sector more attractive to work in and retain people.” These businesses are advocating for the Welsh government to raise the childcare offer funding rate to £8.80 per hour, citing the need to account for inflation and increasing wages, and asserted that such an investment would yield benefits for the entire economy. Mr. Jenkins stated, “We provide vital early years education here which prepare children for when they go to school.” He further emphasized, “The economic benefit of investing in early years childcare is profound: We allow parents to go back to work, we provide a safe space for the children when they are in work and so the benefits aren’t just about the children, it’s about the Welsh economy. It’s about being a focal point within communities.” The Welsh government responded by saying: “We recognise the financial pressures facing childcare providers in Wales and have taken action to support them. We have made small business rates relief permanent for registered childcare premises in Wales and have moved to reviewing the hourly rate paid to childcare providers, as part of the childcare offer, annually instead of every three years. We are also investing more than £100m a year into the sector to sustain and grow high quality childcare. We want Wales to be an environment where childcare providers can thrive and are having ongoing discussions with childcare sector partners [Cwlwm – a consortium of five childcare organisations] about how additional support could be provided.”