Childcare costs rise above inflation, as providers struggle to remain sustainable

Coram Family and Childcare’s 21st annual Childcare Survey found that childcare costs have risen well ahead of inflation and stand at £138 per week, more than £7,000 per year, for a part-time nursery place for a child under two.

A childcare place for a child under two has risen by 4 per cent, and is 5 percent more for two-year-olds.

This compares to the 5 per cent overall rise that was reported last year.

The highest costs are in inner London, where parents pay £179.86 per week for a part-time nursery place for a child under two. This is 57 per cent higher than the lowest costs seen in Wales, which are £114.76 per week. The full regional breakdown of costs is in the table below. 

Source: Childcare Survey 2021, Coram Family and Childcare

Impact of Covid-19

The report also includes data on the impact of the pandemic on the childcare sector, with 39 per cent of local authorities in England reporting that providers have increased their prices and 32 per cent reporting that some providers have reduced free early education entitlement places, in the challenge to remain sustainable through the crisis. 

An increase in shortages of childcare has not yet been seen, despite over a third of local authorities in England reporting a rise in the number of providers in their area permanently closing in the last year.

More than two-thirds (68 per cent) of local authorities in England reported having enough childcare available to meet demand for parents working full time, compared to 56 per cent last year. However, this is most likely to be due to decreased demand from families during the pandemic, rather than increases in the supply of childcare, and it is yet to be seen whether there will still be enough childcare places if and when demand returns to pre-pandemic levels.  

Megan Jarvie, head of Coram Family and Childcare, said that the pandemic has reminded us all of the vital importance of childcare, in enabling parents to work, boosting children’s learning and narrowing the gap between disadvantaged children and their peers.

However, she added, ‘The crisis has also exacerbated the issues that exist in the sector. For too many families the system simply isn’t working, and they are left struggling to make work pay after childcare costs or are forced out of the workplace entirely. 

‘There remains a risk that many providers could close, leaving more families struggling to find the childcare that they need, or that costs could further increase, at a time when family finances have already been stretched by the pandemic. 

‘Financial support from the Government has helped childcare providers to stay afloat, but we don’t know what the effects will be when this support ends.’

Coram is calling for the Government to take urgent steps to improve the system now and in the longer-term so that every child can access the high quality childcare that supports their early development.

Sector response

Purnima Tanuku, chief executive of National Day Nurseries Association said that it comes as ‘no surprise’ that the early years sector is suffering as a result of the pandemic with the twin challenges of low attendance and higher operating costs.

She added, ‘Nurseries only have two streams of income: parental fees and Government funding. The main reason for fee increases are to bridge the gap between the funding shortfall between Government paid rates and the real costs facing nurseries. Costs like staffing are due to rise again in April when minimum wages increase.

‘Parents and families need high quality reliable and flexible childcare – most of which is delivered by private, voluntary and independent nurseries. However, these cannot survive on thin air, they have staff and bills to pay. The Chancellor’s Budget offered some reduction to Business Rates but little other support to nurseries.

‘It’s clear from the report that those providers who cannot put up their fees to bridge the underfunding gap are sadly facing closure. Our own research has shown that tens of millions in early years funding is not reaching the frontline. Unless this problem is fixed, more childcare businesses will shut permanently and places will be thin on the ground.’

Neil Leitch, Early Years Alliance chief executive, said, ‘The Government continues to ignore widespread calls to base early years funding on pre-pandemic attendance levels during the spring term, but with 35 per cent of local authorities reporting an increase in closures, and attendance still low, it's clear that this decision must be urgently reversed. Given the significant and ongoing underspend on the tax-free childcare scheme, there is no doubt that the government has the financial means to provide the support the sector so desperately needs, should it choose to do so.

He added, ‘If ministers fail to step up and invest what is needed to protect the sector, there is no doubt that more providers will be forced to close, putting the ability of parents to return to work and in turn the recovery of our national economy, as well as children’s vital early development at risk.'

Tulip Siddiq MP, Labour’s Shadow Minister for Children and Early Years, said, 'The Government’s failure to support the early years sector is driving up the cost of childcare, which is soaring well above inflation at a time when family budgets are being squeezed by the pandemic. 

‘The Chancellor’s Budget last week offered nothing to support the childcare sector or help families struggling with the costs of childcare. Instead, Rishi Sunak is hitting families’ pockets by hiking council tax and freezing key workers’ pay.’

The Childcare Survey 2021 is based on surveys from local authorities in England, Scotland and Wales, that were returned to Coram Family and Childcare between November 2020 and January 2021. A total of 180 local authorities returned data generating a response rate of 91 per cent.