Operators are adapting to increased competition and low funding levels
London, United Kingdom (PRWEB) May 03, 2013
The Pre-Primary Education industry includes a range of providers, such as local authority nursery schools and classes attached to primary schools, privately funded schools, community organisations and charities, and private for-profit businesses. Nurseries primarily cater to three- and four-year-olds, although operators are increasingly expanding their services to offer childcare for two-year-olds and even younger children. The necessity of nurseries and preschools for working parents generally prevents dramatic fluctuations in revenue. However, over the past five years, sustained recessionary conditions have had a significant impact on the industry. In the five years through 2013-14, industry revenue is estimated to decline at a compound annual rate of 0.5% to £3.3 billion.
According to IBISWorld industry analyst Temitope Onabanjo, “nurseries have found themselves under increasing pressure as demand for nursery places has slowed and government funding for educating under-fives has stagnated”. Rising unemployment has eroded families' ability to pay for pre-primary education. Parents who have lost their jobs or are working fewer hours now have more time to care for their young children. Profit margins are largely slim. A number of nurseries operate on a not-for profit basis. For-profit enterprises have struggled to maintain their margins in the face of declining demand. A number of reviews on the importance of early education are expected to boost demand for the industry and result in an increase of 1.1% during 2013-14.
The industry faces significant challenges over the next five years. Medium-term demographic trends are unfavourable and public finances remain weak. Nurseries are expected to experience increasing competition from child day-care centres, which can offer parents more flexible hours. Onabanjo adds, “the perceived importance of an early education and government plans to relax regulations pertaining to the number of children an establishment can cater to are projected to just about keep revenue afloat”. Furthermore, as unemployment slowly declines, an increase in the number of working parents should boost demand. Revenue is forecast to return to modest growth over the five years through 2018-19.
The Pre-Primary Education industry has a low level of market share concentration, as no single player accounts for more than 3.0% of industry revenue and the largest enterprises control just 4.1% of the market. Nurseries serve the needs of their local area, and it is very rare for any single establishment to take more than 200 children. This is due to the nature of education, and particularly early childhood education, which involves a high level of supervision and care. Consequently, there are limits to the benefits of economies of scale.
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IBISWorld industry Report Key Topics
Pre-primary education is offered to children aged three or four in the year before they start primary school. Nursery education, as it is commonly known, is provided by each of the constituent governments of the United Kingdom and systems vary between England, Scotland, Wales and Northern Ireland. The industry includes organised instruction delivered through nursery schools and nursery classes. Programmes offered by child day-care centres are excluded.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalisation & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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