Parents could be spending up to 80 per cent of take-home pay on childcare – study

New analysis reveals the areas in England where childcare is the highest, by using a ‘childcare affordability ratio’, which links the median cost of an hour’s childcare and the median hourly wage. 

London is England’s ‘childcare affordability blackspot’, according to Nesta, which analysed Department for Education figures, and found that for a single parent on the national minimum wage childcare costs are 80 per cent of their take-home pay (without benefits).

The capital accounts for seven of the top ten least affordable places in England for childcare, with an hour of childcare costing more than 40 per cent of the median pre- tax hourly wage in four boroughs.

Nesta said the costs are ‘starker’ for lower earners. For a single earner on the London Living Wage (£11.95), the median cost of an hour’s childcare (£7.31) is equivalent to around 61per cent of median pre-tax hourly income, or around 72 per cent after tax.

For a London earner on the national minimum wage (£10.42), the equivalent cost rises to 70 per cent before tax and 80 per cent after tax.

However, in some areas costs are high outside London, relative to earnings. For example, an hour of childcare in Manchester, Leicester and Herefordshire, which all rank in the top ten least affordable areas, costs significantly less than an hour of childcare in London, but the median wage is also lower.

As a result, childcare in these areas is as expensive relative to income as some of the most affluent parts of London.

The analysis uses a childcare affordability ratio, which links the average hourly cost of childcare in every local authority in England with the median pre-tax hourly wage in the area. The report includes interactive maps to search by area.

Areas in England with the highest childcare affordability ratio

The cost of an hour's childcare is also rising more quickly in some areas than others.

Indexing the average price of an hour’s formal care for a child under two by region reveals that while costs in the North East are some of the lowest in the country, they have risen much more sharply than other areas since 2018. 

Decline in providers

The analysis also found that every region in England saw its share of childminders decrease in 2022, with London, West Midlands and the South East seeing the greatest decrease.

Tom Symons, deputy director of Nesta’s Fairer Start team, said, ‘We know that families are really struggling and for many that means tough choices between giving up childcare or giving up work.

'This has a big knock-on effect on children and the economy. Good childcare helps children develop a whole range of valuable early life skills including literacy and numeracy, social and emotional development and communication. There is agreement across the political spectrum that the early years are vital but our childcare system is broken, expensive and in desperate need of reform.’

How is the childcare affordability ratio calculated?

The ratio is a measure of the price of an hour’s childcare to income ratio in an area. The median cost of childcare by local authority is published by the Department of Education and comes from the Childcare and Early Years Provider Survey. 

This is divided by the median hourly wage for each local authority, taken from the annual survey of hours and earnings - resident analysis published by Nomis. Both are the latest available data at the time of publication (2022).

• Download The cost of childcare: Where are England's affordability blackspots?
• Full list of local authorities from highest to lowest affordability ratio for two-year-olds