As we reach the end of 2023, it’s worth reflecting on the year that has gone.
In the 15 years that I have been in the nursery market, this year has certainly been one of the most challenging I’ve seen for UK nursery operators, with a double-whammy of occupancy problems – due to a combination of staffing constraints and some muted parental demand in the wake of price increases, changing working habits and economic uncertainty – and cost pressures from inflation and agency usage.
That said, the March Budget announcement to extend 30 hours to under-threes holds promise if supported properly, although the outcome of the recent staffing consultation will likely only loosen the recruitment and retention challenges by a little (and the level 3 apprenticeship hasn’t dropped the maths requirement yet).
While it was disappointing that the King’s Speech hardly mentioned education, at the time of writing this article we are waiting for the Autumn Statement to find out whether there will be any help for early years providers with VAT and business rates.
From an M&A perspective, after quite a strong start to the year, deal activity slowed down, driven by the challenges cited above – a lot of time has been spent on stabilising the existing estate – and the continuing high cost of debt.
It is important to note that deals are still happening, evidenced in particular by the recent platform investment into Storal alongside continuing bolt-ons by the likes of Old Station Nursery, Grandir, Kids Planet, Busy Bees, Kindred and Bright Stars.
We believe that we are now through the worst of the challenges. There is evidence that staffing issues are easing, enquiries are improving, debt is stabilising, and the first tranche of the additional funding begins in April 2024. That is resulting in a renewed flow of appetite to invest in the sector.
