Nursery funding

Cost of delivering childcare to increase as inflation soars to 10% during 2022

As prices across the spectrum continue to increase, the Bank of England has raised interest rates in an attempt to reduce the upward trend in the cost of living.

Interest rates have risen from 0.75% to 1%, their highest since 2009, the fourth time since the start of December that the rates have been risen. Inflation, seeing a 30-year high, is also on track to hit 10% or more by the end of 2022, despite the increases in interest rates.

With the delicate position that childcare providers find themselves in, the cost of delivering this care will be out of reach for many providers.

NDNA’s Chief Executive, Purnima Tanuku OBE said: “The increase in interest rates and 9% inflation predicted for the coming months could spell disaster for many nurseries and childcare providers. The most providers can hope for from Government is a 3.8% increase which is nowhere near keeping pace with rising costs.

“Recently released government reports show that last year, half of providers were already only breaking even or making a loss while our research with providers suggests it could be much higher.

“With energy costs rising rapidly and inflation to hit a 10% high by the end of 2022, many more nurseries will either have to increase fees or risk closure.

“The Government is their biggest customer, paying for funded places for eligible two-year-olds, and all three and four-year-olds. Last month, funding rates to local authorities increased by 17p – for those on the lowest rate, this was a 3.8% rise. We know that many providers won’t receive the full increase which is effectively a cut in income when face with wage rises of more than 6%. Bills for food, energy and other essentials have widened this shortfall.

“We really fear for the early years sector given these new financial forecasts. Nurseries are left with two options: to raise fees again to parents at a time when families especially are already struggling with the cost of living; or to shut up shop. As well as looking again at the funding rates we need the Government to take action where it can, reducing business rates and VAT bills for nurseries to ease these immediate cost pressures.

“All children deserve accessible, affordable care and early education. This will not be possible for all children unless the Government pays providers a fair rate that at least covers their ever-rising costs.”

  • England

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