Seven out of ten nurseries in Scotland say they are under funded

The vast majority of private and voluntary nurseries in Scotland say that the local authority funding rate doesn’t cover their costs for delivering early learning and childcare (ELC) places, according National Day Nurseries Association (NDNA) Scotland.

NDNA’s nursery sustainability survey released today found that funding for three and four-year-olds did not cover the costs for 70% of nurseries with the average shortfall around £1.25 per hour, which equates to an annual loss per child of £1,425.00. For eligible two-year-old places, 74% of nurseries are making a loss, with the average shortfall of £1.62 per hour or £1,846.80 across the year.

ELC providers also revealed that while the average wage bill was increasing by 11.7% fee increases to parent were being kept to an average of 9% at a time when Scottish Government funded hours make up around 43% of the childcare delivered by providers.

As a result, seven in ten nurseries (70%) expect to make a loss or just break even, making it more difficult for them to invest in their setting premises, learning resources and staff development.

Purnima Tanuku OBE, Chief Executive of National Day Nurseries Association (NDNA) Scotland, said: “These results are very concerning for both providers and parents in Scotland. Everyone wants to see children accessing high quality places that help to give them the best start in life, but this must be done in a sustainable way

“The private and voluntary sector make up a significant proportion of the early learning and childcare sector, offering flexible childcare that working families need. However, if funding does not keep pace with rising costs and staffing bills we will sadly see more settings close, leading to less parental choice.

“The Scottish Government’s commitment to support better pay in our sector is really welcome but we have to see the resources put in to make this a reality. We need councils to pay a truly sustainable rate to their partner providers to help ensure we are recruiting and retaining the best staff into this amazing sector.

“Providers know that childcare costs can be difficult for families, which is why we’re seeing them keep fee increases below the level of their rising costs but this cannot be maintained if your biggest customer is not always paying a sustainable rate.”

In addition, the survey discovered that 80% of respondents care for children with additional support needs (ASN) but only 20% of these receive a financial support from their local authority to meet the needs of individual children.

Purnima added: “Children with additional support needs can really benefit if we get the system right at the earliest point. However, if they need additional support this must be properly resourced, otherwise it is the provider or parents who are financially punished and the child may miss out.

When the Scottish Government is making plans for the future expansion of two-year-old places Ministers must to take these results into account. They have to ensure so-called sustainable rates are actually supporting providers’ sustainability so they can deliver the high-quality, affordable and accessible childcare that benefits children, families and the economy.”

Full results from NDNA’s State of the Sector Survey Scotland 2024:

  • 11.7% – average staffing bill increase from April 2024
  • 9% – average fee increase to parents from April 2024
  • Business performance: 24% expect to make a loss this year; 46% expect to break even
  • 70% of respondents say their rate for three and four-year-olds (1140 hours) does not cover their costs
  • The estimated average shortfall is £1.25 per child per hour – this is £1,425.00 for 1140 hours across the year
  • 76% of nurseries who responded are eligible to deliver funded two-year-old places on behalf of their local authorities – of these, 74% say the funding does not cover their costs
  • The estimated average shortfall is £1.62 per child per hour – this is £1,846.80 for 1140 hours across the year
  • 80% of nurseries care for children with Additional Support Needs – of these, 80% say they receive no financial support from their local authority
  • The ratio of parent-paid children to Government-funded children is 57% parent paid; 43% funded
  • The survey ran throughout January 2024; responses covered 97 PVI settings across Scotland
  • Scotland

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