Financial sustainability health check of the childcare sector

The Scottish government has published its Financial Sustainable Health Check of the childcare sector

 In April 2021, the Scottish government began work on a Financial Sustainable Health Check to assess the impact of Covid-19 on the business sustainability of childcare providers, and to assess the impact of financial support which has been available.

The report sets out the detailed evidence and analysis that has informed the health check. According to the research:

  • The number of registered private sector childcare services has declined in each year since June 2017, although the rates of decrease were lower in the two most recent years (the years to June 2020 and to June 2021); and
  • Whilst there have been year on year decreases in the number of registered third sector services the highest rate of decline has been reported in the year to June 2021 (with the number of services declining by nearly 6% over this period).

Access to financial support during the pandemic

Since the beginning of the pandemic, childcare services have been able to access a range of financial support. The surveys asked a number of questions to establish the extent to which different types of childcare services had accessed financial support.

The Coronavirus Job Retention Scheme (CJRS) is a UK government scheme which has enabled employers to claim grants to cover the wages of workers furloughed since March 2020. The scheme was initially due to run until 30 May 2020, but has been extended on a number of occasions.

This report highlighted that:

  • The majority of respondents to the survey reported that they had accessed support through the CJRS at some point since March 2020
  • School age childcare only services were the most likely to have accessed the CJRS (95%), whilst services in the third sector were least likely (73%)
  • At the time of the survey some services were still accessing support through the CJRS.

Increase in costs

Respondents to the survey were given the opportunity to set out more details as to what factors had driven any changes in their costs of delivery between March 2020 and at the point of completing the survey. The factors highlighted included:

  • Increased cleaning costs were the most commonly reported factor – this covered both the additional supplies required as well as additional staff time
  • PPE costs, with some respondents mentioning in particular significant increases in the cost of purchasing gloves
  • Meeting the public health guidance for the sector, in particular working with the smaller cohorts (bubbles) which required more staff
  • Costs associated with staff having to self-isolate
  • Increase in insurance premiums.
  • Costs of needing to pay staff the Real Living Wage
  • Costs per hour has declined as less children attending the service
  • Increase in the cost of IT equipment.

Jonathan Broadbery, director of policy and communications at National Day Nurseries Association (NDNA) said:

‘It is important for the Scottish Government to understand what’s happening to early learning and childcare settings across the country. This is a welcome report looking at the concerns of providers and echoes evidence we have given of settings facing higher costs and reduced incomes during the pandemic.

‘While we welcome this report from the Scottish Government, we still have concerns over the sustainable rate in some areas following our own research which showed a number of councils had not increased the rates they were paying to providers. This resulted in a real-terms cut to funding for children’s places. We are pleased that the Scottish Government is planning to strengthen the sustainable rate but this process needs to ensure settings will receive rates that cover their costs and enable them to re-invest in delivering high quality provision for their children.

‘It’s positive that the government has recognised the issue of lost staff from private and voluntary settings and promised actions to improve recruitment and retention in the ELC workforce following campaigning by NDNA Scotland and our members. We have provided lots of evidence about this workforce crisis over the past few years and are pleased that it will now be a priority.’

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