London childcare prices have dropped for the first time in 15 years but providers warned the reductions will not last.
The falling costs coincide with the government funding scheme launching in September which offers 30 hours of free weekly childcare to eligible working parents of preschool children in England. leading to a 22% reduction in childcare costs for them.
Previous funding was limited to three and four-year-olds, yet the sector faces significant challenges due to the stark disparity between government funding and escalating operational and staffing costs which providers say may leave them being forced to exit the scheme.
Early Years Alliance (EYA) CEO Neil Leitch said: “I will pay more to park my car locally for a day than I will get from the government to care for a two-year-old or a three-year-old.”
The current situation
According to Coram Family and Childcare’s 24th annual survey, London* remains England’s most expensive region for childcare.
However, Wales now faces the highest rates nationwide, with parents paying £155.04 pwe week for children under two, amounting to £15,038 annually for full-time nursery care.
In England, the prices of 25 hours at nursery for children aged under two were down by 55.8%, while Wales prices were up by 10.8%.
Despite the overall costs falling in London, the average cost for three-and-four-year-olds specifically has risen across England, Wales, and Scotland.
The East Midlands remains the cheapest region in England for childcare, while London continues to be the most expensive for three-and four-year-olds.
Providers put the reason for higher prices is clear down to staffing.
Childcare in the UK is expensive partly due to the required ratio of one adult to a maximum of three under-twos, which providers say is increasingly difficult to maintain amid staffing shortages.
Leitch said: “When people discuss why they ed the industry, they say ‘I love children, I want to change their lives, I want to them’.
“But you can only do that for so long when you can’t put a meal on the table for your own children.”
Nurseries face rising costs, with 96% planning to raise fees due to the government’s increase in employer National Insurance contributions.
Coram Family and Childcare’s head Lydia Hodges predicts families will see another price drop when the 30-hour government funding begins in September.
However, she warned costs may later increase if funding fails to keep pace with nursery expenses.
Hodges said: “In the past, nurseries could set their own charges and rates more freely because parents were the ones paying.
“Now the government is the biggest purchaser of childcare, they have less choice in the income they get.”
Pregnant Then Screwed founder Joeli Brearley said while the drop in childcare costs is a significant milestone, it brings challenges.
She warned: “A looming crisis in availability threatens to leave families stranded.
“Lower fees are a step forward, but without further investment, accessibility and quality remain at risk.”
A looming crisis
Staffing remains a critical issue for the sector, with early years practitioners earning around £13 per hour, while emergency cover costs nearly double at £25 per hour.
The industry has seen a surge in staff departures as 82% of undervalued.
Anya Navidski, director of Alba nurseries in London, Marlow, Slough, and Maidenhead, advocates for increased funding and higher pay for nursery workers.
Navdiski said: “My highest-paid manager earns around £28,000 [compared to London’s newly qualified teachers who typically earn £38,000].
“We’re paying these people less than we pay cleaners.”
At Alba nurseries, cleaners earn the market average of £18 per hour.
Leitch said: “People have just used up their goodwill.
“Why would you not work in a supermarket and know that you start at nine o’clock in the morning and you’ll go home at five o’clock, for more money?”
He described being an early years worker as financially disastrous and dreadful.
The situation appears particularly concerning for children with special educational needs and disabilities (SEND), with many linking issues to the sector’s staffing challenges.
Only 29% of local authorities in England report adequate childcare provision for SEND children.
The situation is particularly dire in inner London, where just 9% of councils can guarantee sufficient places.
Leitch pointed out early years providers received significantly less SEND funding than primary schools over the past decade.
He said: “Nobody seems to recognise that prevention is considerably better than cure.”
Navidski criticised local authority surveys for focusing only on current operating costs while ignoring the market rates needed to attract skilled staff capable of ing SEND children.
She said: “I’s really difficult to deliver on the standard that Ofsted expects from you.
“Our children deserve a lot better than that.”
She also questions the uniform funding approach for all nurseries.
Navidski said: “I have a setting where all of our staff are level three to level six qualified.
“Most of them are fully qualified teachers, and yet we get the same funding rate for that setting as a setting half a mile down the road where half of the staff are unqualified and the rest are level two or three qualified.”
To address these issues, Hodges advocates for a comprehensive workplace strategy and suggests rebranding nursery teachers as early years professionals to better reflect their educational importance.
Since COVID, nursery teachers reported increased expectations from potty training to teaching table manners and utensil use, but claimed government fell short of enabling them to meet these demands.
Hodges said: “We need to look at everything from pay and conditions to what training people get, how well ed they are in their roles, and what their progression opportunities are – all of the things you want for any sector.”
Future implications
Beyond staffing challenges, nurseries face severe financial pressures, with 92% reporting current rates don’t cover their costs.
National Day Nurseries Association (NDNA) policy and communications director Jonathan Broadbery indicated providers may need to increase fees by 10% to remain viable.
Some nurseries, including the Alba’s, have already faced 20% rent increases from landlords.
Navidski said: “If the government is not meeting that cost through funded hours, nurseries have to do it privately.”
NDNA’s recent Budget Impact survey of 728 nurseries revealed 96% plan to increase parents’ fees. Additionally, 69% will reduce spending on resources, 48% will cut premises expenditure, and 39% will offer fewer places.
In February, the Department for Education (DfE) informed nurseries parents eligible for funded hours should be able to opt out of paying traditional top-up fees for nappies and meals to prevent families from being priced out.
While nurseries understand families’ struggles with the cost-of-living crisis, they face identical challenges and cautioned that inadequate government funding will lead to increased costs to parents.
Leitch proposed transferring childcare funding away from the Treasury to provide fair financial for the sector.
He said: “Then providers wouldn’t be arguing, couldn’t argue, and the government certainly couldn’t shortchange either.”
Secretary of State for Education, Bridget Phillipson said: “Delivering a better early years system is a top priority.
“It’s as close to a silver bullet as we have in breaking down barriers to opportunity and giving young people the best start in life.
“This survey highlights the real difference the expanded childcare entitlements are making, with much more to come from September as government funding increases from 15 to 30 hours a week of funded childcare.
“Through our Plan for Change, we’re delivering much-needed improvements for parents, making childcare more affordable, expanding school-based nurseries, and improving early language and maths .
“With over half a million children already in a place this term, we’ll keep working with the sector to ensure even more families benefit.”
*Inner London boroughs are Camden, City of London, Greenwich, Hackney, Hammersmith and Fulham, Islington, Kensington and Chelsea, Lambeth, Lewisham, Southwark, Tower Hamlets, Wandsworth and Westminster.
Outer London are Barking and Dagenham, Barnet, Bexley, Brent, Bromley, Croydon, Ealing, Enfield, Haringey, Harrow, Havering, Hillingdon, Hounslow, Kingston, Merton, Newham, Redbridge, Richmond, Sutton and Waltham Forest.
Feature image: Alba Nurseries
