Call to address long-term impact of reduced demand for nursery places due to extension of furlough

Friday, November 6, 2020

While the extension of the furlough scheme to March throws many providers a life line, concerns increase about the viability of staying afloat in the Spring term and beyond.

Lower demand is decimating nurseries' income.
Lower demand is decimating nurseries' income.

Early years sector organisations are calling for a commitment from the Government to continue to pay for funded childcare places that would normally have been used by families, until the end of the Spring term.

Many early years settings face the prospect of decreased demand over several months due to the latest restrictions and the fact that many parents on the extended furlough scheme will not require childcare.

Furlough – how the extension works
Yesterday (5 November), Chancellor Rishi Sunak announced that workers across the UK will benefit from increased support with a five-month extension of the furlough scheme into Spring 2021.

The Coronavirus Job Retention Scheme (CJRS) will now run until the end of March with employees receiving 80 per cent of their current salary for hours not worked.

Similarly, support for millions more workers through the Self-Employment Income Support Scheme (SEISS) will be increased, with the third grant covering November to January calculated at 80 per cent of average trading profits, up to a maximum of £7,500.

On top of this, the Government has announced:

  • Cash grants of up to £3,000 per month for businesses which are closed worth more than £1 billion every month
  • £1.1 billion is being given to Local Authorities, distributed on the basis of £20 per head, for one-off payments to enable them to support businesses more broadly
  • Plans to extend existing government-backed loan schemes and the Future Fund to the end of January, and an ability to top-up Bounce Back Loans
  • An extension to the mortgage payment holiday for homeowners
  • Up to £500 million of funding for councils to support the local public health response.

There are currently no employer contribution to wages for hours not worked. Employers will only be asked to cover National Insurance and employer pension contributions for hours not worked. For an average claim, this accounts for just 5 per cent of total employment costs or £70 per employee per month.

The CJRS extension will be reviewed in January to examine whether the economic circumstances are improving enough for employers to be asked to increase contributions.

Looking ahead
At the NDNA, chief executive Purnima Tanuku, is calling for greater clarity about the future. She said: ‘Extending the Coronavirus Job Retention Scheme until the end of March is good news for employers because its replacement was due to be a much less generous scheme. 

‘However, the concern for nurseries is how to make sure they have the staff they need to be able to stay open. As we start to look to next year, our members are worrying about what the funding arrangements will be for the spring term and beyond. As the average nursery continues to have fewer children than usual, it’s vital that the government gives certainty that settings won’t lose out on funding because of the pandemic. This clarity is needed now and can’t be left until the last minute.

‘Childcare providers are having to find higher operating costs to keep their nurseries safe, but lower demand has decimated their income. NDNA has been lobbying for transitional funding and a longer term review of rates that reflect actual costs.’

Meanwhile, Neil Leitch, chief executive of the Early Years Alliance believes the move acknowledges the long-term impact of the latest restrictions.

‘As the Chancellor clearly knows based on his actions today, businesses need certainty to plan for the future,’ he said. ‘It's critical, therefore, that that same certainty is given to early years providers who now face the prospect of reduced demand for several months as a result of changing work patterns and a sharp increase in the number of parents on furlough no longer requiring childcare.’

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