We believe that the childcare market will remain attractive to investors. Many are attracted because childcare is viewed as a socially responsible market to be in, but opportunities equally lie in earnings per share being accretive (namely, a nursery is worth more as part of a group) and there is strong support from debt providers. There are also opportunities for growth by outperforming the market by making better commercial decisions and the potential for internationalisation. There is also the opportunity to scale by means of new developments and by ‘organic’ growth and diversification.
“There are, none the less, lessons to be learned from what has happened in the past two decades. Growth is not a given for investors and there is certainly a danger in growing too quickly. Some have failed by not understanding how to operate at scale and also not realising the potential impact of changes in the regulatory environment.”
Arun Kanwar
– Report authorThe 16th edition of the Childcare UK Market Report is vital reading for anyone involved in this highly competitive sector of the UK economy, be they providers, investors or advisors to the sector.
What the report includes
- Market
- Politics and Regulation
- Payors
- Major Providers
- Investors
- Staffing
- Market Potential
- Appendices
- Glossary
- Key Legislation Appendix
- Regulators Appendix
- Trade bodies Appendix
- Commissioning bodies Appendix
- Financial Appendix
Who is the report for
- Independent nursery providers
- Local authority providers
- Policy makers
- Banks
- Private equity investors
- Lawyers
- Management consultants
Table of Contents
TABLE OF CONTENTS
FOREWORD
LIST OF TABLES
LIST OF FIGURES
EXECUTIVE SUMMARY
1. MARKET
1.1 Market definition and size
1.2 Childcare choices
1.3 Sources of income and calculation of ‘Achieved Fees’
1.4 Variations in childcare usage
1.4.1 Demand differences throughout the year (‘seasonalilty’)
1.4.2 Demand differences through the week (‘shouldering’)
1.4.3 Value and volume by region
1.5 Structure of supply
1.6 Historic trends in the market, including recessionary impact
1.7 Growth trends and market drivers
1.8 Demographics shaping the nursery sector
1.8.1 Population forecast
1.8.2 Live births
1.8.3 Birth rates - Total Fertility Rate (TFR)
1.8.4 Influence of interest rates on birth rates
1.8.5 Population of women aged 20 to 39 years old
1.8.6 Further demographics of UK mothers
1.9 Socio-economic factors driving demand
1.9.1 Female workforce participation rate
1.9.2 Socio-economic status of working mothers
1.9.3 The rise of paternal care
1.10 The economy and Brexit
1.10.1 UK economic outlook
1.10.2 Consumer confidence
1.10.3 Business confidence
1.10.4 Employment
1.10.5 Wages and Household Income
1.10.6 Productivity - UK productivity crisis
1.10.7 Public spending
1.10.8 How that economic outlook compares to the rest of the world
1.10.9 The potential economic impact of Brexit
1.11 Nursery affordability - fee vs wage growth
1.11.1 Weekly nursery fees
1.11.2 Wages and Household Income versus fees
1.12 Social acceptance of childcare and wider support for parents
1.12.1 Benefits of nursery provision
1.12.2 Other factors driving nursery usage
1.12.3 Popularity of nurseries and public opinion
1.13 Shifts in informal and formal childcare provision
1.13.1 Trends in usage of different childcare types
1.13.2 Decrease in informal childcare and childminders
1.13.3 Schools based childcare popularity
1.14 Supply trends
1.14.1 Capacity – development, expansion, closures
1.14.2 Occupancy
1.15 Regional and local level market drivers
1.15.1 Regional population distribution and dynamics
1.15.2 Public Investment in the Midlands and North
1.15.3 Regional/country level fees
1.15.4 UK regional nursery affordability
1.15.5 Regional analysis of demand vs supply and affluence levels
1.15.6 Discussion about key local drivers: demand, supply, sales capability, competitive position
2. POLITICS AND REGULATION
2.1 Political System Overview
2.2 National Politics
2.2.1 National Political Overview
2.2.2 National Political Outlook
2.3 Local Political Overview
2.4 Introduction to the funding shortfall
2.5 Regulation Overview
2.6 Ofsted
2.6.1 Strategy 2017-22
2.6.2 Early Years Foundation Stage (EYFS)
2.6.3 Staff regulations
2.6.4 Education Inspection Framework (EIF) changes 2019
2.6.5 Inspections
2.7 Funding
3. PAYORS
3.1 Overview of Nursery Income
3.2 Direct public funding
3.2.1 30 hours in England
3.2.2 Additional funding from Dedicated Schools Grant
3.3 Indirect Public Funding
3.3.1 Eligibility for government offers
3.3.2 Tax free childcare
3.3.3 Universal Credit
3.3.4 Government Childcare Vouchers scheme
3.3.5 Child Tax Credit (CTC)
3.3.6 Working Tax Credit (WTC)
3.4 Miscellaneous funding
3.5 Overall sufficiency of funding
4. STAFFING
4.1 The early years workforce
4.1.1 Workforce size and profile
4.1.2 Staffing requirements
4.2 Staffing costs and sector pay
4.2.1 Staffing costs
4.2.2 Sector pay
4.2.3 National Living Wage (NLW)
4.3 Staffing crisis: Overview
4.4 Staffing crisis: Drivers
4.4.1 Demand Factor: Booked places
4.4.2 Demand Factor: Impact of 30 hours
4.4.3 Demand Factor: Staff-to-child ratios
4.4.4 Supply Factor: National Living Wage (NLW)
4.4.5 Supply Factor: Population dynamics
4.4.6 Supply Factor: Unemployment
4.4.7 Supply Factor: Qualification requirements and uptake
4.4.8 Supply Factor: Brexit and foreign workers
4.4.9 Local factors
4.5 Staffing crisis: Mitigation strategies
5. MAJOR PROVIDERS
5.1 Current level of market fragmentation and major players
5.2 Thesis for consolidation
5.3 Market consolidation over time
5.4 Market trends
5.4.1 Past trends – up to the recession in 2008
5.4.2 Past trends – 2008-2010
5.4.3 Past trends – 2010-2014
5.4.4 Current and future trends
5.5 Selected major providers profiles
5.5.1 Just Childcare
5.5.2 Kids Planet
5.5.3 ICP
5.5.4 Busy Bees Group
5.5.5 Bright Horizons Family Solutions
5.5.6 Early Years Alliance
6. INVESTORS
6.1 Investment thesis
6.2 Investments in the nursery sector
6.2.1 Major transactions
6.2.2 Private Equity interest
6.2.3 Closures
6.3 Valuation methods and discrepancies
6.3.1 Generic factors affecting multiples
6.3.2 Buyer specific circumstances
6.3.3 Appetite and valuation of freeholds vs leaseholds
6.3.4 What EBITDA to value on?
6.3.5 Trends in multiples and impact of recent transactions
6.4 Investing in nursery property
6.5 Other paths to growth
6.5.1 New developments
6.5.2 Listing
7. MARKET POTENTIAL
7.1 Internationalisation
7.1.1 Internationalisation thesis
7.1.2 Global market comparison
7.2 Franchising
7.2.1 Benefits of a franchise structure
7.2.2 Economic arrangements
7.2.3 Active franchisors
7.2.4 Quality of franchise services
7.3 Branding
7.4 Quality
7.4.1 Philosophies
7.4.2 Training
7.4.3 Outdoor environment
7.5 Additional and specialised services
7.5.1 Sports, arts and activities
7.5.2 Catering
7.5.3 Technology
7.5.4 Additional care
7.5.5 Parent services and household products
7.5.6 Family Health Services
7.5.7 Special educational needs and disabilities (SEND)
APPENDICES
APPENDIX 1. GLOSSARY
APPENDIX 2. KEY LEGISLATION
APPENDIX 3. NATIONAL STANDARDS OF CHILDCARE
APPENDIX 4. REGULATION IN DEVOLVED STATES WITHIN THE UK
APPENDIX 5. REGULATORS
APPENDIX 6. TRADE BODIES AND ASSOCIATIONS
APPENDIX 7. FINANCIAL APPENDIX
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