Nursery chains have been subjected to turbulent trading conditions over the past ten years, and not all have stayed afloat as they struggled with a flood of Government initiatives and a surge of city investors.
When New Labour put childcare on its agenda, few in the sector forecast the scale of the challenges on the horizon. Nevertheless, leading figures in the nursery chain business say that raising the profile of early years has been beneficial, even if some of the policies have had major drawbacks.
'Broadly speaking, the Labour Government has done some great things,' says John Woodward, managing director of Busy Bees. 'They put childcare at the top of the agenda. When we started 25 years ago, the only help we got was £25 towards insulating the loft. Think how much help there is now: the tax credit, vouchers, nursery education grant.
'Although there are some big flaws, the Government has poured a huge amount into support for working parents, which has to be good. But there are some issues I don't understand. Why is the tax credit paid to the parent when it should go direct to the carer?'
'Things have changed enormously,' says Tom Shea, formerly chief executive of Jigsaw and who recently set up the Child First chain. 'Childcare certainly has a much higher profile, but I'm not sure people fully understand it. It is still seen as a Cinderella service. After 40 years in childcare (I was 17 years old when I became a nursery nurse), the major change has been that so much corporate and government money has been thrown at it, but I'm not sure it's in the right places.
'There is more funding to support childcare, but there are too many funding streams, too many local authorities involved, too many rules and regulations, too much red tape.'
Quality control
But has the quality of childcare improved? For Susan Hay, former chairman of Bright Horizons Family Solutions (Europe), the biggest change has been the standardisation of the sector resulting from the Government's initiatives.
'This standardisation has done a huge amount for parents, in terms of what they can rightfully expect and what their children should be entitled to - whatever settings they are in. But the result is that it is more difficult for one setting to stand head and shoulders above another than it was. I think that changes the aspirations you might have for your business.
'If you think of quality of care as a set of asymmetric bars, the bottom bar has been moved up - there is no question of that. My concern is that because of the standardisation, it is quite difficult for the top bar to be raised.'
'I suspect there is now more awareness regarding quality,' says Mr Shea, 'but we still have low-paid staff. No matter how much training you provide, unless you pay, you won't keep high-quality staff.'
Mr Woodward argues that one of the major problems arising from the Government's enthusiasm for the early years sector was the huge expansion fuelled by the Neighbourhood Nurseries Initiative (NNI). 'The race to create nursery places, through Margaret Hodge's NNI, was flawed. The problem was they didn't focus on sustainability. There was this race for places, irrespective of whether they were occupied.
'For the larger operators, it was a real problem. We were competing against people who did not have to cover their costs. It was not a level playing field, but has become more so now. I think that over the next five years there will be an evening out of provision, because unsustainable places will shut.'
Mr Shea agrees. 'The NNI was, in principle, a great scheme, but it was badly implemented. I don't want to be critical of local government, but trying to get a national strategy implemented through local decision-making without clear guidance is desperate. As the plan filters down, it gets slightly warped.
'Sustainability is now the buzz word. Some people took money under the NNI, because they thought the Government would step in if projects proved to be unsustainable. They learned the hard way that the Government does not always step in.'
The sector has become much more competitive, says Mrs Hay. 'Financially, the sector has been squeezed terribly on parallel tracks, with longer maternity leave and schools admitting children at a lower age. The market has been squeezed and micro management is harder.
'The sector has been recognised by serious investors and some serious money is now being invested in the sector, which has changed things. It has made nurseries more business-like.'
Investors looking for 'easy pickings' learned a tough lesson, according to Mr Woodward. 'They quickly realised it was not that simple. Ten years on, there is more understanding about what childcare is about. It can be a reasonable investment, but it is hard work. You're not going to make the huge profits that people toted around.'
Looking forward
What will happen in the next ten years? 'The saddest thing is already happening but it will get worse,' says Mr Shea. 'People who are in the sector because they're committed to the children are increasingly being squeezed out. These are small providers who set up in their local community, run it efficiently and made a living out of it.'
Mrs Hay predicts, 'The challenge for chains will be to find how they can engage with the state sector in public-private partnerships and provide the nursery facilities, the early years offer, for schools.'
Mr Woodward adds, 'I think there will be consolidation among larger groups. There aren't many long-standing, established, experienced management teams. We continue to be successful, make a profit, provide quality care and help, and support staff.
'I hope the Government continues to keep childcare at the top of the agenda. But it has to encourage the state sector more and get over its reluctance to deal with the private sector.'
WHERE ARE THEY NOW?
What has happened to the original top ten nursery chains (figures from Nursery Chains, November 1998 - and September 2008 in brackets, where relevant):
1. Kinderquest
Managed: 36 workplace nurseries, 11 holiday play schemes
Places: 1,956
Employees: 400
Started in 1988 and focused on workplace nurseries, particularly managing provisions for Government departments. Was bought by Bright Horizons.
2. KidsUnlimited
Owned/managed: 30 nurseries and play schemes (51)
Places: 1,774 places (4,758)
Employees: 500 (1,600)
It secured venture capital funding in 2001, enabling it to double over the following five years. It is seek to expand further after new senior management team took a controlling stake this spring and secured further financial backing.
3. Asquith
Owned/managed: 21 pre-schools, 7 independent prep schools and the Montessori Centre International (112)
Places: 1,442 places (6,665)
Employees: 800 (2,400)
For years the largest UK chain, Asquith was sold to private equity firms for £92m last summer.
4. Jigsaw Group
Owned: 14 nurseries
Places: 1,178
Employees: 420
Underwent a management buyout in March 1988. It was sold to Nord Anglia in May 2004.
5. Nord Anglia
Owned: 8 Princess Christian Nurseries, 19 nurseries attached to its schools; 6 abroad
Places: 1,013 places; 1,243 including those abroad
Employees: 260 full time/80 part-time
Bought Leapfrog, Jigsaw and Petits Enfants, but had difficulty merging them smoothly. Staff morale was hit when one setting featured in the BBC Nurseries Undercover programme. It sold its nursery division to Busy Bees in August 2007.
6. Busy Bees
Managed: 12 nurseries, 3 workplaces nurseries, 5 creches, 4 play centres, 3 after-school and holiday clubs (127)
Places: 889 places (11,598)
Employees: 350 (4,630)
Busy Bee has kept the same management as it has grown to become the UK's largest private nursery group. It was bought by Australia-based ABC - the largest publicly listed childcare operator in the world - in December 2006. ABC is now looking to sell the chain.
7. Just Learning
Owned: 11 nurseries (66)
Places: 840 places (6,117)
Employees: 200 (1,767)
Alchemy bought an 85 per cent stake in the chain in December 2001, with plans to double the number of settings over the next five years, which it exceeded.
8. Child Base
Operated: 15 nurseries (35)
Places: 816 places (2,860)
Employees: 298 (956)
One of the few leading chains to have avoided being taken over. Still has the same management and remains privately owned.
9. Copperbeech Day Nurseries
Owned: 13 nurseries
Places: 716
Employees: 340
The St Albans-based chain sold nine of its nurseries to Busy Bees in November 2000.
10. Careshare
Owned 9 nurseries and 2 after-school clubs
Places: 624
Employees: 175
Established in 1990, Careshare was sold to Just Learning in 2003 for £17.5m.
