Experts have raised concerns that England’s childcare sector could become a “playground for private equity,” as new analysis from The Guardian reveals that investment funds have more than doubled their stake in the sector over the past four years. The research comes as the UK Treasury plans to spend an additional £4 billion per year of taxpayers’ money on nursery places. However, critics argue that the increasing involvement of private equity in the sector may leave providers more vulnerable to closure and fail to address the shortage of affordable childcare in deprived areas.
The Guardian’s analysis shows that at least 1,048 Ofsted-registered nurseries in England, accounting for 7.5% of all nursery places, are either fully or partially controlled by investment companies such as private equity and venture capital firms. This represents a significant increase from the 4% recorded in 2018. Investment funds now own nearly 81,500 childcare places in England, nearly double the total in 2018.
Unions and experts warn that this rapid growth puts thousands of nurseries at risk of collapse. They point to the failures of private equity-backed firms in the adult social care sector and the near-demise of Thames Water as examples of the potential risks. A UCL report from last year highlighted the dangers of profit-focused companies acquiring nurseries, as their “risky financial operating models” and focus on profitability can lead to insufficient coverage in poorer areas.
Mike Short, head of education at Unison, highlighted the reliance of many parents on privately owned nurseries and the need for these businesses to generate profits. However, he voiced concerns about the ruthless pursuit of profit from private equity firms. Short also noted the complex structure of equity-funded nurseries, making it difficult to track where the cash is going.
The Trades Union Congress (TUC) called for sustainable and long-term investment in the early years sector, rather than quick-profit-driven approaches. Joeli Brearley, CEO of campaign group Pregnant Then Screwed, urged government intervention to protect against profiteering and argued that private equity should have no role in the education and care of children.
Dr. Antonia Simon from UCL warned that nurseries heavily reliant on private equity funding are more likely to be at risk of collapse due to high debt and low cash reserves. She urged the government to implement urgent reforms to increase transparency and accountability in the early years sector.
In the last decade, private equity and venture capital firms have made over 500 investments in the UK early years and childcare sector, including acquisitions, mergers, and buyouts. The British Private Equity and Venture Capital Association defended private equity’s role and emphasized the long-term commitment of investors, which they argued is essential for responsible growth.
The article also highlights specific examples of investment in nursery chains, such as Fremman Capital’s acquisition of Kids Planet and Waterland’s acquisition of the Partou group. The spokesperson for Partou emphasized that private equity funds focus on quality improvement and professionalization of the sector, and that concerns about prioritizing financial returns over public interest are unfounded.
Several experts and policymakers called for stronger regulation and financial sustainability requirements for childcare providers. Bridget Phillipson, shadow education secretary, suggested that a Labour government would introduce stricter regulations on the ownership of childcare settings. The Department for Education stated that it will closely monitor childcare sufficiency as it invests significantly in the sector.
Overall, the analysis reveals the growing influence of private equity in England’s childcare sector and the potential risks associated with this trend. Critics argue that the pursuit of profit may undermine the quality and affordability of childcare, particularly in deprived areas. Calls for stronger regulation and long-term, sustainable investment aim to address these concerns and ensure the well-being of children and families.
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