Northern nurseries see insolvency risk surge

Nearly a third of nurseries in the North West face an above average risk of failure for the next 12 months, new figures predict.

Some 32% of nurseries were deemed to be at above average risk of entering insolvency, according to restructuring and insolvency trade body R3.

Equating to more than 150 businesses, there are also concerns that requirements to offer free childcare to three and four year olds – introduced in September – will also have a negative impact.

Nursery operators have said the finance available from the Government to fund 30 weekly hours of free care during term time is not enough to cover the costs involved.

According to a survey of around 1,400 childcare locations by the Pre-School Learning Alliance, 38% voiced concerns saying that their situation would not be sustainable in a year.

R3’s North West chair Paul Barber described nursery operators in the region as being “under pressure from rising costs and inflation”, before adding that rising business rates have also impacted on several businesses.

The potential costs of offering free care could also have an impact and he warned nursery operators to keep a watchful eye on their finances in the months ahead.

Early trends in the insolvency risk figures may act as a warning of any potential impacts associated with the new scheme.

While the majority of nurseries are choosing not to opt out of the scheme as they fear losing pupils, a portion have taken new approaches in a bid to keep costs down.

Limiting the times when an individual could use their allowance and charging for additions such as food are a couple of the ways that this is being achieved.

Nurseries have a key role to play in supporting working parents, especially when national employment levels are currently so high.

Alongside watching their finances and addressing obvious shortfalls, nursery operators may also want to consider contingency planning so that they have a range of options available if they end up in difficulty.


By Phil Smith


If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1144.

View all Business Insights