EDUCATION unions are warning of the “disastrous impact of finance-driven organisations” on early years settings, as a new study finds that risk-taking private companies are destabilising the sector. 

Today’s report by researchers at University College London accuses profit-hungry companies that run many nurseries across England of failing to create more places for children or investing in staff.

The study, funded by the Nuffield Foundation, charts changes in early years childcare provision over the past two decades.

Many private providers, which are heavily indebted and rely on “risky financial operating models,” are causing the same problems that afflict adult social care, with some care homes having to close at short notice, the report warns.

The researchers, who surveyed about 80 nurseries nationwide, describe the findings as “very concerning,” given that taxpayers contribute an estimated £5.6 billion in support for early years childcare in England.

The study also highlights the “stark contrast” between the running of not-for-profit childcare companies, which submit transparent accounts to the Charity Commission, and the more limited balance sheets that private companies are required to publish, they added.

Lead author Antonia Simon blasted the Tory government’s funding model for allowing companies “heavily reliant on private equity funding, [with] growing debts and low to negative operating reserves,” to buy up nurseries. 

She said: “The complex financial structures of these companies involve foreign investors and shareholders, which are used, alongside public money, to expand their market share.

“While shareholders in the private equity companies and their senior executives may profit from investing in such companies, little of this money is being reinvested back into the sector.”

Branding the findings “simply unjust,” National Education Union joint general secretary Kevin Courtney said: “Early years workers are already scandalously undervalued, with rock-bottom pay and terms and conditions that rarely include contractual sick pay.

“At the same time, directors and shareholders of some of the largest nursery chains are able to take handsome salaries and dividends.

“Childcare and early years provision are a vital foundation to greater equity for children, but privatisation undermines this and risks further erosion of pay, terms, conditions and the professional standing of early years workers.” 

Greater regulation of private interests and a “significant commitment to rebuilding our publicly funded and delivered childcare system” is needed, Mr Courtney insisted.

A Department for Education spokesperson said: “We are increasing the hourly rates childcare providers will receive from next year and investing millions of pounds in early years recovery, not only to address the impact of the pandemic on the youngest children’s skills, but also to build a stronger, more expert workforce.

“The key measure in a healthy and competitive market is supply of places for parents and children, even as providers enter and exit. We have not seen any substantial number of parents unable to secure a childcare place."