LEYF warns 30 hours and apprentice levy to hit growth

One of the UK’s largest nursery groups has received £1.5m worth of investment funding to expand its business, but growth could be stalled by Government policies to increase the free entitlement to 30 hours a week and the introduction of an apprenticeship levy, the organisation’s chief executive has warned.

London Early Years Foundation (LEYF), a charitable social enterprise that provides childcare to 3,500 children in 36 community nurseries across nine London boroughs, announced last week that it had received a second stage of acquisition financing worth £1.5m from leading social impact investors Big Issue Invest and Bridges Ventures Social Entrepreneurs Fund. The latest instalment forms part of a £2.75m financing package from the two investors.

Last year, LEYF raised an initial £1.25m with the support of Clearly So, an investment firm that works with charities and funds delivering social and environmental impacts. This was supported with a capacity building grant through the Investment and Contract Readiness Fund, managed by the Social Investment Business Group and funded by the Cabinet Office.

Speaking about the investment, June O’Sullivan, the company’s chief executive, said this second social investment deal will help the organisation to ‘work towards its aim to double in size to reach 5,000 children, create more sustainable apprenticeships and more employment opportunities in areas where there is poverty and unemployment’.

However, she warned, ‘LEYF’s intentions to grow are going to be limited by the 30-hour free entitlement because we don’t know how much funding we’re going to get at the moment.

‘We can’t sustain 30 hours on less than fair funding, and that will ultimately scupper some of our growth and slow down our plans for acquisition because we can’t take the risk in an uncertain market.’

The Government’s requirement from September 2014 for childcare apprentices training as Early Years Educators to achieve a minimum grade C in English and maths on exit continues to be a policy that is causing ‘great concern’ and threatens to ‘scupper expansion’ and, with it, LEYF’s effort to provide a ‘high quality service to disadvantaged children’, Ms O’Sullivan said.

She added, ‘We can’t grow unless we can get really good staff, which is hard. Add the apprentice levy [0.5 per cent of payroll costs for companies with payrolls over £3m from April 2017] into the mix and this will have a knock-on effect on recruitment. I have 60 apprentices and I’m proud of every one of them. Seventy per cent of our staff are internally promoted and 100 per cent of our apprentices received their Level 3 award last year. I’m worried that if the Government insists on this levy, we won’t be able to afford to attract the staff we want.’

LEYF is taking part in the trial starting in September 2016 to double the hours of funded childcare for working parents from 15 to 30 hours.

SOCIAL ENTERPRISES BID FOR NEW FUND

Meanwhile, the Department for Education has received more than 200 expressions of interest from early years settings and social enterprises wishing to receive business and financial support to help them attract corporate investors. The £500,000 Childcare Investment Readiness Fund, launched by childcare minister Sam Gyimah in February, is modelled on the Investment and Contract Readiness Fund run by the Cabinet Office, which has helped around 50 charities and social enterprises win deals worth several million pounds, including LEYF. It will provide grants of up to £50,000 to 15 social enterprise childcare providers that show the most future investment potential. Applications for grants from the fund are being managed by Social Investment Business and successful bidders will be announced ‘in due course’, the DfE told Nursery World.