Nursery Management: 30 Hours: Business Support - Stretch marks
Monday, March 20, 2017
What next for those who won capital funding to extend their settings before September? – and for the many who did not get a grant, what other options are there? asks Karen Faux
At Sunflowers Day Nursery in Pateley Bridge, North Yorkshire, children are thrilled by the sight of cement mixers, diggers and lorries arriving daily on site. But while expansion plans for the 30 hours per week of funded childcare are going full steam ahead, for manager Heather Clark-Kelly, the journey so far has been stressful.
Sunflowers’ new extension has been made possible with the help of £63,000 in grant funding from the Department for Education, and it will create an additional 28 places for the ‘Outstanding’ nursery. After submitting its bid to a tight schedule in August 2016, Ms Clark-Kelly heard in December that her setting was the only one in North Yorkshire to be successful.
She says, ‘We then didn’t hear anything more from the DfE, but in order to meet its deadline we needed to start work in January to be ready for the September roll-out. At the beginning of the year we still hadn’t seen a copy of the terms and conditions of the grant and had not received the money.’
The setting made the bold decision to press ahead with the work, paying out £20,000 of its own money before it received any cash from North Yorkshire County Council, which happened in February. Ms Clark-Kelly says, ‘We’ve now had sight of the terms and conditions and understand we must offer the 30 hours for as long as it is offered by the Government. If we stop, we have to pay back the grant.’
WHAT’S AVAILABLE
As anticipated, the Government’s £50m early years capital fund, launched last June, was massively over-subscribed. Nearly 200 applicants secured finance, creating an estimated 9,000 additional childcare places – short of the Government’s expectation of 10-15,000 and just 2 per cent of the 390,000 total places the Government now expects to be needed for the 30 hours. According to a report by the Family and Childcare Trust last February, 59 local authorities say they do not have enough places to deliver the 30 hours.
While last year’s announcement of a £5.2m Early Years VCS Grant for voluntary and social enterprise groups was welcome, it is not solely dedicated to creating additional 30-hour places. At the time of going to press, the list of successful applications had not been published, but most of the funding is expected to be spoken for by leading sector charities.
That leaves the Early Years Investment Fund – or ‘Early Years Bank’ – that was set up by the Government to provide loans to individual PVI providers. According to the Foundation Years website, the fund ‘will facilitate provider access to loan finance for those that would not be able to access traditional commercial finance’. It is a pot of £30m, a third of which comes from the DfE, with the rest expected to come from commercial and social investors, plus a £2m support grant facility funded by the DfE. The fund’s external investors will be sought by an early years investment manager, who is to be appointed this month.
This pot can also accept capital bids for new builds or extensions and refurbishments. It will also be open to cover working capital (including operating costs) and maintenance and infrastructure improvement projects.
The money will come in the form of loans, and a DfE contract notice about the fund says, ‘All providers that apply and are accepted for a loan finance package are also eligible for a grant as long as they can demonstrate a clear need’, and that ‘the balance between loan and grant should ensure provider capability to seek further investment in the future’.
Despite repeated requests for more information, the Government has not been able to clarify further.
The notice adds that the funding will be most likely to focus on providers ‘who are able to demonstrate social impact’. Disadvantaged children, the funded two-year-old places and SEND provision are expected to be prioritised. Loans are expected to be awarded from early 2018 and support grants from late 2017, with the aim of creating an additional 5,000 30-hour places.
Yet borrowing money has not, historically, been something the early years sector has been very keen to do. According to James Hempsall, director of Childcare Works, the national support programme working with local authorities to assist businesses to deliver 30 hours, the sector still has some way to go before it embraces the practice. He says, ‘Settings can often find it tricky to think beyond their annual business plan, and a three-year plan can be a big challenge. A combination of loan and grant can be one of the best options to finance capacity.’
The support programme will be delivered through a consortium led by management consultancy Mott MacDonald, with Hempsall’s as the early years training provider, and charity Action for Children. Last year they began offering free Learn Explore Debate workshops to providers, local authority officials and other early years professionals. They have also run events targeted at childminders. These introduced the steps providers need to address, including using market research to create a business plan.
GET ADVICE
Mr Hempsall says one recurrent way providers demonstrate poor business skills is to fail to seek out specialist business support. He says generic business advice is inefficient because settings operate very specific models. He says settings should work with each other to share best practice, but admits some providers will need time to develop the skill of networking.
The high-profile nature of 30 hours, along with Childcare Works’ networking drive, is undoubtedly helping providers to work more closely with local businesses and the community at large, which in turn can help to leverage funding opportunities. As the National Day Nurseries Association points out, funding can come from a range of less obvious sources, such as local charitable trusts, regeneration projects and corporate companies such as the big supermarkets.
But it’s fair to say that all those providers who have decided to invest for the 30 hours are making a leap of faith as it is still by no means sure that the initiative will succeed – or indeed be supported – in the longer term.
Ms Clark-Kelly believes that providers should think carefully about bidding for capital if further opportunities arise. ‘Make sure you have a sustainable model for the future and do your research – otherwise your shiny new extension could be a big weight around your neck for years to come,’ she says.
CASE STUDY: HUMPTY DUMPTY DAY NURSERIES
Philip Siddell, owner of family business Humpty Dumpty Day Nurseries, which operates two settings in Staffordshire, says, ‘We went all out to achieve the funding’ – and at the time of going to press, he was still waiting to receive the cash. The total cost of the company’s new-build pre-school on its Lichfield Nursery site is £306,577, and Mr Siddell has secured 40 per cent of this – £122,631 – in funding.
His application to Staffordshire County Council took ‘two solid weeks of work’. His success ultimately came down to a 90 per cent score in meeting its criteria of localised sufficiency, project outcomes for children and value for money, which he achieved with the help of information from the council.
The funding has paid for a high-quality new build, boosting the total number of places across his two sites to 81. Key to his application was a commitment to ring-fence 20 places for children on the subsidised rate of £4 an hour. However, committing this lower rate to the financial mix, when banks are looking for an assurance that providers can service their loans, can be tricky.
But he says, ‘Scaling up our operation by around 38 per cent gave us a strong case for attracting bank funding for the project – even at expected funding levels.’
CAPITAL FUNDING: THE RECIPIENTS
Around three quarters of the £50m capital pot has been awarded to PVI sector providers, with the rest to schools. The biggest chunk of expenditure, at just below 38 per cent, is on new builds, followed by extensions – more than a quarter of all projects. The rest are mainly refurbishments and conversions.
In terms of region, the South West and London have received the biggest slices of funding at around 17 per cent each, while the rest of the pot has been shared fairly equally between the remaining regions. Designated Opportunity Areas – now identified by the Government as recipients of additional funding for the 30-hours – are represented by Oldham, North Somerset, Blackpool and Stoke, with fewer than 20 projects between them.
The Government says the pot has gone to a ‘range of projects from a variety of providers, which represent the diversity of the market and the Government’s clear commitment to delivering 30 hours’ free childcare’, adding the investment comes alongside an uplift in the national average revenue funding rate for three- and four-year-olds to £4.94 per hour.
FURTHER INFORMATION
NDNA’s fact sheet Expanding Your Nursery Business is free to non-members until 3 April, www.ndna.org.uk/expandingyournurserybusiness
DfE Contract Notice for Early Years Investment Fund Manager, www.government-online.net/dfe-contract-notice-for-early-years-investment-fund-manager
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