Chaos in childcare may hit employers next year

Deputy Prime Minister Julia Gillard is hell bent on congratulating the receiver of collapsed ABC Learning Centres for providing certainty for parents and employees less than a month after ABC Learning went into receivership. But it’s hard to see why.

Deputy Prime Minister Julia Gillard is hell bent on congratulating the receiver of collapsed ABC Learning Centres for providing certainty for parents and employees less than a month after ABC Learning went into receivership. But it’s hard to see why.

The receiver McGrathNichol has declared that close to 40% of ABC centres – that is over 386 centres that care for 30,000 children – are under threat due to doubtful profitability.

While the receivers say they need more time to examine the future of the “unprofitable centres,” their future is grim. Bank sources told SmartCompany today that it is highly unlikely anyone will buy them, and parents at these centres should get ready for the announcement next week that most of them will close.

Receivers are holding discussions with the Government about alternative arrangements for the unviable centres, but it is hard to imagine the Government providing yet more support to the beleaguered company.

That throws the lives of parents with those 30,000 children into chaos, and will undoubtedly affect their workplaces and employers in the new year just as the downturn really starts to bite.

It is also doubtful these parents can get their children into other centres in their area. Even though the centres were unprofitable, many of them were full and had long waiting lists of parents trying to secure their children a spot.

Parents should also prepare for a rise in childcare fees. While the receiver says there are no plans to increase childcare fees next year, it is hard to see how they can avoid it if they want the centres to remain profitable.

Many costs at centres are locked in. If the centres are fully occupied, staff’s wages are set by awards, rent by the landlords, and the Government sets the staffing ratios – it can be hard to cut costs or raise more revenue if the need arises.

There is good news however; the remaining 656 centres have been deemed viable and will operate under a sustainable business model next year, the receiver says.

Also expect to see local operators who sold their centres to ABC Learning grasp opportunities in both hands and repurchase centres back at a much lower prices.

For a full wrap up of ABC Learning’s travails, go to SmartCompany’s special ABC Learning page.

Related stories:

• Five lessons from the spectacular fall of Eddy Groves
• Why ABC Learning boss Eddy Groves had to go
• Eddy Groves tells: Success has nothing to do with wealth