The report, Children's Nurseries - UK Market Sector Report 2002, published last week, warns that the sector is still in its 'honeymoon phase' with investors, just as the care home sector was in the late 1980s. However, with care homes, there was a 'fundamental mismatch between reality and expectations' and it turned out that groups could only grow by going back to their investors for further injections of capital.
The report has found 'some remarkable parallels' to the care homes sector, even to the extent that several individual entrepreneurs have been active in both. Like the nursery sector now, some care homes groups claimed that economies of scale gave them an edge over independent operators. But this did not turn out to be the case, especially as any economies could easily be outweighed by burgeoning head office and management costs.
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