The Employers Strike in the Childcare Sector

An employers’ body – the Federation of Early Childcare Providers – has called a three-day ‘strike’ in the childcare sector.  They are closing down creches and early years’ services over their claim that the government is not providing enough money to private sector owners to run the services. 

However, a SIPTU survey of the accounts of select companies providing early years’ services tells a far different story:  profits, dividends and directors’ remuneration all rising, while providers amassed larger amounts of cash thanks largely to public subsidies.  Are there private companies that are struggling?  No doubt.  How many?  We don’t know.  Is it spread across the entire sector?  No.

If there is a crisis in the childcare sector, the main driver is not that private providers aren’t getting enough subsidies; it is that the current ownership structure of the sector (largely privately owned) is incapable of providing affordable childcare, proper wages and services accessible throughout the country, in a fiscally efficient manner.

Giraffe Childcare

Giraffe is the largest childcare chain in Ireland, operating in 23 locations.  It is owned by a UK firm which is controlled by the Ontario Teachers’ Pension fund.   Their financial accounts only go up to 2020 – they are over a year late in filing their 2021 accounts. However, the first year of the covid lockdown proved profitable to the company.

In 2020, profits rose by 61 percent, to nearly €3.5 million. 

The company more than doubled their cash holdings – to over €5 million. 

In 2019, the company paid €6.5 million in dividends to their owners.  Though the amount paid in 2020 was reduced, nearly €1.7 million was paid.  In that year, the company received €6.7 million in public subsidies through the Temporary Wage Subsidy Scheme.  In effect, the subsidy helped pay the dividend.

Given the pattern of other private sector childcare companies (see below), when Giraffe management finally get around to filing their 2021 accounts, we should see another bumper year for the company.

Six Select Companies

Taking six companies, which can be categorised as small to medium companies (Links, Cocoon, Grovelands, Little Rainbows, Safari and Tiger) we can see their financials up to 2021, incorporating two years of covid lockdowns, restrictions and public subsidies.

Between 2019 – the year before Covid – and 2021:

• Combined profits for the six companies increased nearly 7-fold, to €6.9 million (though a large chunk of that was due to one company: Links). 

• Combined cash holdings increased by over 3-fold, to €9.1 million

• Directors’ remuneration (another vehicle to extract value from a company) increased by two-fold, to €2.4 million.

These are serious increases, though we won’t know how these companies fared in 2022 for some time (there is usually a lag of 9 months in filing annual accounts).  It should be noted that four of the six companies (two did not report) received over €8 million in covid and other public subsidies, though not all public subsidies may have been reported.

Not all companies report whether they paid dividends.  Besides Giraffe, only Safari reported their dividend status.  They paid €383,000 in dividends in the years 2020-2021 while at the same time reporting the receipt of €143,000 in covid subsidies. 

A Company on Strike

The employers claim that whatever about larger private companies, small and medium sized companies are suffering (though, as stated, the six companies above can be categorised as medium).  There is no doubt this is true of many providers.  But how many?  How do we know?

Let’s look at one company that is going on ‘strike’:  Oakview.  Two Oakview creches (Tallaght and Cork City) filed financial returns.  Of those two, Tallaght went out on strike, and Cork city may have.

These two creches combined generated nearly €600,000 in profits in 2020 / 2021.  In particular, it paid out over half-a-million Euros in dividends (€569,000).  The dividends are paid to Antartic Cub – a holding company of several companies, including Oakview.  This holding company, owned by the Crean family, generated profits of €1.7 million in the two years 2020 / 2021.

Maybe the parents who are experiencing the loss of this service due to the strike might want to ask who benefitted from those dividends and what impact that has on fees.

What Childcare Companies Are Doing With Their Profits

Childcare companies used their profits and cash holdings for a variety of reasons.  In two instances of the above companies surveyed, it paid for expansion of the company (i.e. public subsidy paid for the expansion).  In one other case, public subsidy was used to pay down significant debt.

Somewhat exotically, one company, among other things, diverted resources to invest in luxury property.  From Links childcare 2021 accounts:

“The company advanced an initial loan of €1,500,000 to connected undertaking P. Kelly Villas Limited in a previous financial year and has advanced further loan funding in the current financial year. The loan balance receivable by the company at the financial year end amounts to €3,064,667 (31 October 2020 - €1,500,000) . . . P. Kelly Villas Limited is a company which is registered in Republic of Ireland and is a connected party by virtue of common shareholders and directors.”

Kelly Villas specialises in luxury property rentals in places such as Florida, Lanzarote, Marbella, etc.

No Basis for Claims

The Federation claims that the situation is so dire that creches are increasingly closing down.  However, this is not the case.  The Department has produced data which tracks the number of closures in the period of January to August:

• In 2019: there were 77 net closures (closures minus new start-ups)
• In 2020: there were 77 net closures
• In 2021: there were 62 net closures
• In 2022: there were 80 net closures
• In 2023: there were 38 net closures

If anything the number of closures is falling. This doesn’t look like a sector in crisis.  And the reasons for closures don’t substantiate the employers’ claim.  For instance, when asked the reason for closures in 2022 less than a quarter stated it was due to ‘financial viability’.  

And if so many childcare providers are in financial straits, on the verge of closure, why are so few seeking the resources they would be entitled to?  The Department has stated:

‘. . . only a handful of providers [are seeking] to avail of particular supports available to those in financial difficulty.’

If companies are in financial difficulties – and no doubt there are – there is a fund to assist them.  But few are availing of it.  Maybe because relatively few need such assistance.

The Real Issues

The real issues in the childcare sector are, first, the lack of financial transparency.  Most private childcare companies hide behind reporting exemptions to withhold financial information from the public (all quite legal).  While the employers’ group claim hardship, they never produce data to substantiate this claim.  If they want to be taken seriously they should urge their members to publish their full financial accounts – and publish it on time.

The second related-issue is accountability.  Many of the private employers complain about the ‘bureaucracy’ and ‘red-tape’ involved in accessing funds.  However, what they call red-tape could be the Department of Children attempting to ensure value-for-money from public subsidies. 

Most of all, this begs serious questions about the ownership structure of the early years sector.  Nearly two-thirds of early year services are owned privately (the remainder are community places).  An additional €400 million has gone into the sector and, yet thousands of workers are on low wages and are not being adequately compensated for professionalisation of the workforce.  Staff turnover is still at crisis levels.  Most services are at capacity.  Access to services is becoming more difficult.  Fees are far too high. 

Maybe we are seeing the contradictions of a public service being provided by for-profit interest groups coming to the fore. 

Maybe we are seeing prosperous, profitable companies exploiting the difficulties that some providers are experiencing; exploiting so that they can get more public subsidies and add to their profit line.

Maybe we are seeing the logic of state-provided childcare services emerging in the debate where decent wages would be paid, fees would be reduced to affordable levels and investment would go into the service rather than dividends.

The employers’ ‘strike’ could create a turning point in the debate over childcare and early education.  But not a turn they anticipated:  rather than increase support for more public subsidies to the private sector, the ‘strike’ could provoke an increase in support for a publicly-provided childcare service.

[Note:  all financial accounts are available from the Companies Registration Office but they are behind a paywall]

Comments

[Dermot]

Great article!

[Meera]

Thanks for highlighting the complexity in the provision of Early Childhood Services.

[Jan Pettersen]

Although you should commended for a well written and well researched article, it is basically an argument against neo-liberalism in a caring profession. There's a lot to be said about this issue, but by taking aim at private operators in the current climate you are missing the target entirely. In fact, they are doing nothing wrong. Instead, you could turn your arguments at successive governments for neglecting the sector. I could list the numerous issues that needs to be addressed, but we all know what they are. Even though the minister is claiming to 'be working on solutions' and making half promises about increases in coming budget, the investment level is coming from such a low base, that we will still be the 'back of the class' compared with other jurisdictions in Europe whatever they put in at the next budget. Ideally, the sector needs a complete overhaul, which btw has been argued for the past 30 years. None of this is the fault of Giraffe, or indeed any of the other private providers.