'Playground for private equity' fear for childcare

Investment funds more than double their stakes in childcare

- Carmen Aguilar García Michael Goodier Alexandra Topping

England's childcare sector risks becoming a "playground for private equity", experts have said, as exclusive analysis by the Guardian reveals that investment funds have more than doubled their stake in the sector in four years.

The findings come as the Treasury prepares to spend an extra £4bn a year of taxpayers' money funding nursery places. The research has prompted warnings that the increasing involvement of private equity could leave providers more vulnerable to closure and do nothing to address the shortage of places in deprived areas, where parents cannot afford to pay as much.

The Guardian's detailed analysis of Ofsted-registered nurseries reveals that in 2022 at least 1,048 were fully or partially controlled by investment companies, including private equity and venture capital firms - 7.5% of all nursery places, up from 4% in 2018. Investment funds ultimately own nearly 81,500 childcare places in England - almost double the 2018 total.

The rapid growth means thousands of nurseries could be vulnerable to collapse, according to unions and experts, who say that the chaotic near-demise of Thames Water and the high-profile failures of private equity-backed firms in adult social care should act as warnings.

A University College London report last year warned that nurseries were being snapped up by profit-focused companies that were "heavily indebted" with "risky financial operating models [that] could threaten the provision of nursery places". The research found "market dynamics can lead to insufficient coverage in poorer, less profitable areas".

These risks were highlighted in the adult social care sector, with the high-profile collapse of Southern Cross in 2011 and of Four Seasons Health Care, which is now operated by administrators after a previous owner, the private equity firm Terra Firma, racked up huge debts.