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Childcare costs rising faster than inflation

John Fitzsimons
Written By:
John Fitzsimons

The cost of part-time nursery places jumped by 4% last year for a child under two, the latest annual childcare survey from Coram Family and Childcare has revealed.

As a result, parents face having to pay £138 a week for 25 hours of childcare. That comes to an annual total of a whopping £7,000, with the increase coming at a rate higher than inflation.

For older children aged two, the increase is even bigger at 5%, putting more strain on family finances that are already stretched as a result of the pandemic.

The study found that more than a third (39%) of local authorities have seen childcare providers hike prices over the last year, while a similar proportion (32%) have reduced the number of free early education entitlement places on offer. Around 30% have seen local providers increase the number of children looked after by each staff member.

The report also questions whether there will be sufficient daycare centers in the future. While it highlighted that two-thirds (68%) of local authorities in England reported having enough childcare available to meet demand for parents working full time ‒ up from 56% last year ‒ it argued this was more down to decreased demand due to the pandemic rather than increases in supply. As a result it remains to be seen if there will still be enough places if and when demand returns to pre-pandemic levels.

Megan Jarvie, head of Coram Family and Childcare, said that for too many families the current childcare system simply isn’t working, leaving them struggling to make work pay after childcare costs are considered.

She continued: “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.”

Rising childcare costs will make the gender gap worse

Emma-Lou Montgomery, associate director of personal investing at Fidelity International, said that the report demonstrated how much the pandemic had exacerbated existing financial pressures within childcare providers.

She pointed to the firm’s own research which had found that a quarter of women had seen their incomes fall last year, at an average of £463 a month, which may mean that nursery costs become “unsustainable for most” and lead to one parent having to stop working in order to take over childcare duties.

In most cases, this often falls on the mother’s shoulders – and there’s a real risk this will be worsened by the pandemic. In fact, the IFS reported that British mothers were one-and-a-half times as likely as fathers to have lost or quit their jobs during lockdown. Women are being forced to give up work or work less and the fear is that we will only see the impact of this in two to three years’ time in a widening gender pay gap,” she concluded.

A study by the TUC earlier this year found that as many as seven in ten working mums with childcare issues have been turned down for furlough, while there are concerns that many grandparents who provide childcare for their loved ones are missing out on pension credits, putting their retirement income at risk.