Could Social Enterprises fix the Childcare System?

Why the social enterprise model could be the solution to fixing England’s broken childcare system by expanding access to the communities that need it most. 

England is one of the worst countries in Europe for childcare access while Scotland is one of the best – that’s according to a new world-first by Victoria University (VU). This landmark research – International childcare: Mapping the deserts – mapped childcare access for 10 million children across nine countries: England, Scotland, Wales, Northern Ireland, Australia, France, Sweden, Norway, and the Netherlands and is the first global study to track how and why countries are delivering childcare and the impact it has. 

This is further supported by findings from the Early Childhood Education and Care Coalition manifesto where 67% of people agree that investing in high-quality, affordable early education and childcare benefits the entire nation. This not only helps parents to work and stimulate local economies, but most importantly, gives children from disadvantaged communities the same opportunities for a fair start as their more privileged peers. 

Key findings from the Victoria University study 

•  45% of children ( i.e. 1.5 million) cannot access childcare in England
• Compared to other nations, England ranks 8th of the nine nations in the study with Norway, Sweden and Scotland making up the top three for best childcare accessibility 

The study also found that policy impacts accessibility to childcare. So, when Governments in countries such as France approach childcare more like school, the access for small children is very low. But where the policy is universal like Norway, Sweden and Scotland, there is broadly more access for the younger children and the model is more likely to benefit lower socio-economic areas. This is a useful check to the Government’s plan to use schools to support the expansion.  

Childcare Inequality 

The research demonstrates huge disparities in childcare access across England. Childcare accessibility is better in the wealthiest parts of the country, a trend correlating with wealthier areas of towns and cities too. Childcare accessibility in the top 10% of advantaged neighbourhoods in England is 16% greater than in the 10% most deprived areas of England. Providers are incentivised to operate in the wealthiest parts of nations populated by families that can afford to pay higher fees for their children’s care, highlighting a link between childcare accessibility and price.  

Certain areas of London, such as Kensington, Chelsea, Hammersmith, Fulham and Wandsworth, have the best childcare accessibility as they are in the wealthiest parts of  London and therefore command the highest fees. This suggests providers go where they can charge more with the possibility of greater profits.  

What does that mean for the expansion policy? 

Social enterprise nurseries do not extract profits but use a circular business model to cross subsidise places through a fair fees model. This ensures a higher proportion of nurseries operate in poorer neighbourhoods. For example, 75% of LEYF nurseries are situated in areas of deprivation as measured on the IDACI score. This limits the risk of nursery ‘deserts’ in poor neighbourhoods or just having one or two run by a charity or a local authority (LA). 

The benefit is that local authorities are not burdened with the financial strain of funding their nurseries, which often begin to deteriorate when resources become overstretched. Moreover, LAs often lack the business expertise and necessary tools to ensure access, equity, and sustainability to effectively restructure the service. I have encountered this situation repeatedly and have intervened on numerous occasions to save LA nurseries, preserving jobs and places while reinvesting in neglected and poorly maintained buildings. In effect, LAs cannot be all things to everyone, they need to access specialist expertise. 

Social enterprises operate a social pedagogy based on the three P’s: People, Profit and Planet which puts children, families, staff and community at the centre of their decision-making. Fundamentally, they need to be financially viable but given we are not driven to pay shareholders, any additional profit stays within the business for the benefit the children, the staff and the sector.  

The model is structured to offer a portion of subsidised places for children, make targeted investments in improving poor-quality buildings to transform them into outstanding learning environments, provide dedicated funding for staff development, and implement an annual plan to engage with the local community. Any profits are reinvested into the wider sector, supporting research initiatives to enhance quality or offering free resources, like the recent LEYF prison pack, aimed at helping staff working with families affected by incarceration

What should we do? 

One of the reasons we are seeing the huge growth of privately invested chains of nurseries arriving in the UK is because they can extract a profit. They can also grow quickly because they have easy access to capital funds at preferential rates. This means they have the money to find and refurbish buildings to a high standard with limited financial risk because the buildings are situated in high value areas of the country and so provides a useful capital lock. Therefore, they can respond quickly to the needs the market. We also know that MAT academies can step into the space because many also well financed and have no local authority controls, reporting directly to government. 

We need to see equivalent support for groups of social enterprises to operate at speed. We know how to do this, but the cost of capital is higher for us. What we need is a plan based on collaboration and partnership. To this end, I have set up the Early Years Social Enterprise Collective (EYSECollective) with colleagues from some of the largest SE groups in Ireland, Northern Ireland, Wales, Scotland and England. We are currently shaping the Collective ready to invite colleagues operating social enterprise nurseries across all five nations and beyond. 

Our Call to Action 

1. Let’s meet Stephen Morgan MP, our Early Years and Families Minister with the new Business Minister, Jonathan Reynolds to explore how the social enterprise model can be leveraged to address and improve access to childcare and ensure sufficient provision. This can be the basis of a willingness by government to invest and broker a national reform conversation with social enterprises, schools and MATs and consider a national locally mapped plan
   
2. If you operate as a social enterprise already, look out for our invitation to the EYSECollective which will be in November (Social Enterprise month)