ECE Service Closures and Licence Cancellations this Year

Below are the names and numbers of ECE service closures – services that closed permanently in the first half of 2023.

Between 1 Jan 2023 and 30 Jun 2023, 113 licences were cancelled in total.

There are claims that the number of closures represents a crisis in the ECE sector. But note that as many as 52 of these licences were held by just one operator – the Rainbow Corner Group (PORSE and Rainbow Corner centres), and also note the many varied reasons why licences are cancelled, and this includes why operators may themselves choose to close.

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 then it was relicensed, so in fact it continues to operate.

Many of the ECE service closures were of services that were not up to scratch and had compliance issues. Many of the licences cancelled due to non-compliance with a licence suspension notice because the named service provider was no longer in control of the service due to liquidation, also had prior issues of non-compliance with education regulatory standards. See the names of services that had licences downgraded for breaching standards in 2023 and 2022.

The OECE knows that 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. They under-estimate debt/ financing requirement costs or potentially over-estimate revenue.

We also know operators that close because the best return on the capital that they had to invest came from selling the property and not from operating an ECE centre. This will happen more often if property values escalate again. However, operators may also look to where the price of land is cheaper, where new home buyers are going, and face opportunities to open in new areas of family expansion (colloquially dubbed “nappy valleys”).

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

When equipment, toys, and 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.

The reasons for licence cancellation recorded by the ministry as shown in the Table below were:

• 34 licences cancelled due to non-compliance with a licence suspension notice.
• 51 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 with other licences held by service providers.

The numbers by type of service are:

• 95 Commercial and private service licences
• 18 Public and Community-based service licences
• 53 Teacher-led centres including 2 Free Kindergarten licences
• 56 Homebased licences
• 2 Te Kōhanga Reo licences
• 2 Playcentre licences

ECE Service Closures – 1 Jan 2023 and 30 Jun 2023