Finance

The Guardian view on nurseries: build playgrounds for toddlers, not investors | Editorial


Opaque ownership structures and bumper profits point to an early years sector gone wrong

Childcare and nursery education in England is in the process of being transformed. Following ministers’ decision to make it a priority as a way to tackle labour shortages, public funding is set to double by 2027-28. In a few years 80% of all early years places will be government-funded, compared with 50% today. At the same time, pressure on providers caused by long-term underfunding and rising costs has led to a situation in which private equity and investment company-backed nurseries are expanding at the expense of everyone else.

New research showing that more than £1 in every £5 spent at such nurseries ends up as profit is one thing that is wrong with this situation. Another is their level of debt, which is typically far higher than average (between 2018 and 2022, investment firm backed nurseries had debts on average three times their income – more than twice the ratio of other private nurseries). A third is weak regulation, in some cases making accounts hard to scrutinise. These factors combine to increase the risk of a business failure, with the potential to severely disrupt the lives of young children (for comparison, imagine the impact of a reception class closing down).

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