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NMa: market for day care services has grown substantially

Since the adoption of the Day Care Act in January 2005, demand for day care services in the Netherlands has increased considerably. In response, the number of day care facilities has subsequently soared as well. Numerous day-care-related organizations have since sprung up, and existing day-care providers have expanded their capacity. These are some of the findings of a study that the Netherlands Competition Authority (NMa) had commissioned, at the request of former Dutch State Secretary of Education, Culture and Science Sharon Dijksma.

The study, carried out by market research company Regioplan, has revealed that the day care market is a dynamic one. Although the supply of day care services has not been able to meet demand everywhere, waiting lists are slowly getting shorter. Based on its study, Regioplan has offered several recommendations for making the market function even better. For instance, pointing out to municipalities the options that are available that would make entry of day care providers easier. Municipalities and schools often have long-term contracts with just one day-care provider. This makes it difficult for new day-care providers to enter the market, Regioplan argues.

Other complicating factors include the necessity of having a network, finding the right location, attracting qualified staff, the long time it may take to earn back initial investments, and the uncertainty about future government policies. Having a network, in this context, means having connections with municipalities or with schools. Such connections help providers in hearing about opportunities at an early stage of when to enter the market or to expand their businesses, for example, when a new residential area or a new school is built. In addition, it is hard for businesses to apply for a bank loan, especially in times of economic crisis. In general, it takes quite some time for day care providers to recoup their investments. Banks therefore demand additional security when granting loans to day care providers.

The study also revealed that the rates that most day care providers charge do not differ from the subsidized and legally imposed maximum hourly rate of €6.10. There are indications, such as those from the February 16 broadcast of Dutch consumer-affairs show Kassa, that it is not so much that prices have increased as that parents have been faced with the number of contract hours being increased. However, the NMa study indicated that the actual number of contract hours charged per child (fulltime day care) has increased less than 1 per cent per year, for 2007-2008 and 2008-2009.

Finally, the study has also reported that parents found it difficult to compare performance indicators of different day-care providers, citing a lack of clarity. Regioplan therefore recommends to improve this situation, enabling parents to compare day-care providers on those aspects they value the most.