Growing children's nursery market attracting foreign investors

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The value and size of the UK childcare market has continued to grow, fuelled by the expansion of two ‘super groups’ and increased interest from overseas investors and providers, finds a new report.


French groups Les Petits Chaperons Rouges acquired Kidd Caru last September

According to LaingBuisson’s annual market report, published today, in 2015/16, the value of day nurseries in the UK was £5.3bn, up from £4.9bn for 2013/14 in the 2014 report.

In real terms due to rising fees and stable volumes, the market size is now almost 50 per cent larger than it was ten years ago in 2006.

The report by the healthcare research and intelligence specialist says it does not expect the 30 hours to have much of an impact as the sector is ‘resilient’ and will be able to adapt and find solutions to make it work. However, it says that if single operators don’t adopt ‘commercial solutions’ they could be at risk.

Market structure

The report says that overall the market is still ‘fragmented’ with two ‘super groups’ (Busy Bees and Bright Horizons) that have broken away from the rest of the market, a trend that is expected to continue for another two years, and increased interest from overseas – a number of investors and providers from North America, Asia and Europe have entered the market. It gives the example of Les Petits Chaperons Rouges, the second largest nursery group in France, which last year bought Magic Nurseries and The Childcare Corporation (Kiddi Caru nurseries), making it the seventh largest operator in the UK.

Likewise, the report also suggests that UK nursery groups are becoming increasingly interested in North American expansion and says it will be interesting to see who buys Learning Care Corporation, the third largest childcare provider in the US, which is expected to go up for sale, and begin the expected wave of consolidation in the country, which is even more fragmented than the UK.

Both Busy Bees and Bright Horizons already operate nurseries in North America.

The report’s author, Dominic Barrett-Evans, said, ‘All of the indicators point to formal daycare services for children under the age of five being attractive for investors taking a long-term approach and a willingness to evaluate each acquisition on its own merits. With many more mothers of young children working and parents recognising the value of good early years education and care, childcare has now become a vital part of everyday life. This will only continue to grow, and the quality of managers and staff are being recognised now more than ever before. We expect continued steady growth, with increased demand for more specialised childcare services.

‘The childcare sector has shown its resilience in the face of economic downturns and Government policy changes over the years. However, the sector has always come back stronger and a very real opportunity exists if the Government settles on the correct childcare strategy soon. It is too early to judge the impact of the 30 hours policy, but it is likely that operators will be able to adapt and find solutions to make it work. Getting the funding right is also fundamental to making sure well-trained and good-quality staff continue to be attracted to the sector.’

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