The presence of complimentary croissants, Scandinavian-inspired furniture, and aesthetically pleasing pastel walls immediately set this nursery apart from others I had visited. It was slightly pricier, resembling a toddler-friendly version of a WeWork environment. At the time, I was eight months pregnant and exploring childcare options in southeast London for my future daughter. I was unaware that this establishment was not merely a nursery, but rather part of a larger, significant experiment unfolding across the United Kingdom.
This particular nursery is financed by private equity—an influential and often opaque sector of finance that has infiltrated numerous industries. Private equity firms and their affiliates own a diverse range of assets, including water utilities, residential properties, student housing, care facilities, children’s homes, and funeral services. The leaders in this field have developed a comprehensive investment strategy that targets essential services related to our living environments, workspaces, aging, and even mortality, consistently prioritizing profit extraction.
My concern does not lie with the complimentary pastries; it arises when financial managers determine the future of crucial societal institutions. Over the past five years, private equity-backed nurseries have proliferated across the UK, acquiring independent facilities and consolidating them into large chains. While many of these establishments appear similar to their predecessors, they report profits that can be seven times higher than those of non-profit nurseries, allocate up to 14% less on staff wages, and experience significantly higher employee turnover compared to nurseries operated by schools. Their relentless pursuit of profit often results in fewer locations in economically disadvantaged regions, and they can shut down suddenly, as parents in Hackney learned when their nursery unexpectedly closed. Such practices are untenable for an essential social service.
Over the past four years, I have delved into the world of private equity, and I have been struck by the extensive reach of its influence in our lives, as well as the insights it provides into contemporary power dynamics. The term “private equity” itself suggests secrecy, as companies under this model offer limited transparency regarding their operations and financial statements, complicating efforts to track how childcare fees are utilized or to determine the financial health of these companies.
As the notable Supreme Court Justice and reform advocate Louis Brandeis once stated, “Sunlight is the best disinfectant.” The lack of transparency diminishes accountability. The private equity ownership model appears to counter democratic principles by centralizing authority among a small group of affluent financiers who benefit from society’s inability to oversee their actions. It is not surprising that some political factions in the U.S. are advocating for laws that would further entrench this sector’s influence in the economy.
The term “private equity” can also obscure the significant debts often involved in these transactions. A common approach is the “leveraged buyout,” where a fund manager acquires a company using a minimal amount of their own capital while borrowing the remainder, subsequently placing the debt burden on the acquired company. If successful, the fund manager reaps the benefits; if not, the company bears the financial fallout. This debt is intended to foster more efficient operations, but it can have dire consequences for public services. In the nursery context, despite accumulating substantial debts, private equity-backed chains have made little progress in alleviating the shortage of childcare availability, potentially increasing the risk of collapse and leaving parents without care options and employees without jobs.
The intersection of high-stakes finance with everyday services can be traced back to the 1980s, a period when the Conservative government under Margaret Thatcher sought solutions to economic stagnation by looking to the United States. In 1987, a legislative decision was made to allow fund managers to benefit from lower tax rates on their profits compared to standard income taxes. This move was anticipated to usher in “venture capitalists” who could revolutionize industries, akin to the innovation seen in Silicon Valley. However, the reality was that fund managers simply acquired companies at low prices while burdening them with debt.
As I have spent more time researching this sector—through archival exploration, interviews with financiers, and examining the lives of past dealmakers—I have come to view the industry’s practices as a reflection of contemporary power structures in Britain, where personal wealth often stands in stark contrast to public austerity. While governments advocate for fiscal prudence by tightening public spending, owners of previously state-run services have amassed alarming levels of debt. Investors engage in risky maneuvers with critical infrastructure, while regulatory bodies have been so diminished that they no longer adequately investigate the ensuing issues.
This trend signifies a troubling shift towards an economy where debt-fueled speculation has become a prevalent method of wealth accumulation. Today, it is not only fund managers executing leveraged buyouts; a plethora of influencers on platforms like TikTok promote the idea of “passive income” and instruct followers on leveraging debt for real estate purchases aimed at renting to unsuspecting tenants. As academic Stefano Sgambati has noted, “The game is to borrow and have others cover your debts.”
For the past eight decades, capitalism’s primary justification has been the promise of continuous economic growth…
