ECE Service Closures and Licence Cancellations last year

ECE Service Closures and Licence Cancellations in 2023

Below is the list of the ECE services that closed in 2023 and had their licence cancelled.

Between 1 Jan 2023 and 31 Dec 2023, 173 licences were cancelled in total. Of these

• 129 were commercially operated or privately owned services
• 44 were public or community-based services

The majority of those that closed were teacher-led ECE services which is what would be expected since teacher-led services outnumber parent-led services in the sector:

• 88 teacher-led centres (this includes 4 free kindergartens and 3 casual centres)
• 74 homebased licences
• 4 Playcentres
• 7 Te Kōhanga Reo

The number of service closures was lower in the second half of the year (27 fewer closed).

Should we be panicking about the number of service closures? No.

It does not represent a crisis because the number includes 52 services under the ownership of just one operator – the Rainbow Corner Group (PORSE and Rainbow Corner centres). Subtract those 52 services from the total of 173 and there is 121 remaining. Did you know that the year before, in 2022, 147 ECE services closed? (read ECE services in 2022 that closed). 121 services last year seem to be a surprisingly small number. Families and many businesses in NZ have been doing it tough because of economic conditions and the number of licences cancelled could have been expected to be really high but the data shows that this was not the case.

Note that businesses open, and businesses shut – that is the nature of business. There are over 4,500 services in NZ. No ECE service should, for example, be forced to remain open should the operator not want to run their business any longer, find that their money would achieve greater returns if invested elsewhere, or remain open when there is lots of spare capacity for children and it’s not viable to have so few children (something that could worsen as the government is removing Network Management to allow services to open anywhere and increase competition).

The reasons for services closing recorded by the Ministry for Education were:

• 41 licences cancelled due to non-compliance or non-compliance with a licence suspension notice.
• 106 licences due to the operator’s voluntary decision to close and cease operating.
• 16 licences cancelled due to a declining roll and not enough children enrolled to justify continuing to operate the service.
• 7 licences cancelled due to financial reasons.
• 3 licences cancelled as merged into other existing licences held by service providers.

Not all closures represent a loss of service. Three licences were cancelled for the purpose of merger – instead of operating multiple licences on the same site a service provider may choose to cancel one licence and increase child numbers on their other licence.

The licence of one centre was cancelled as it was relocating to new premises and is therefore recorded as closed – but in fact it continues to operate under a new licence.

Forty-one licences were cancelled by the Ministry of Education due to non-compliance or non-compliance with a licence suspension notice. The suspension notice could be related to the named service provider no longer being in control of the service due to liquidation or related to serious and unresolved issues of non-compliance with education regulatory standards. See the names of services that had licences downgraded for breaching standards in 2023 and 2022.

ECE operators can run into problems that result in licence cancellation when they take on one or more new services or purchase existing services and expand too rapidly. For example, the owner of Gumdrops purchased two additional centres when they came on the market – unfortunately then finding it hard to meet the costs and forcing all three centres into liquidation. When taking on a new or additional service, operators may under-estimate debt/ financing requirement costs or potentially over-estimate revenue.

We know of service operators that shut one or more services for the reason that the best return on their capital was going to came from selling the property and not from the daily operation of an ECE centre. This will happen more often if property values escalate again.

Retirement and not wanting to run an early childhood service anymore is a reason why some private providers choose to close.

When buildings become dilapidated or no longer able to be used, the costs of refurbishment needed, renovations, or relocation may be unaffordable leading to a decision to close permanently. This tends to be a reason for community-based rather than privately-owned service closures.

Closures of ECE Services – 1 Jan 2023 and 31 Dec 2023