The financial impact of the pandemic is weighing down hard on the childcare sector, from operators, to staff and to families.

According to Coram Family and Childcare’s 21st annual Childcare Survey, UK parents are paying 4% more for childcare for children under two, and 5% more for children aged two than they were one year ago.

On average, parents are now paying £138 per week – over £7,000 per year – for a part-time nursery place for a child under two.

The sustainability of the childcare market is under threat with 39% of local authorities in England seeing providers in their area raise their prices over the last year, and 32% reporting that some providers have reduced the number of free early education entitlement places they offer. Furthermore, 30% have seen providers increase the number of children looked after by each staff member.

Despite over a third (35%) of local authorities in England reporting a rise in the number of providers in their area permanently closing in the last year, the majority have not yet seen an increase in shortages of childcare. Over two-thirds (68%) of local authorities in England reported having enough childcare available to meet demand for parents working full time, compared to 56% 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.

In addition, availability of childcare for certain groups is little improved on last year, with less than one in four local areas in England reporting enough childcare for 12 to 14 year olds (13%), parents working atypical hours (16%) and disabled children (25%). These shortages for disabled children exist despite the fact that fewer disabled children are using childcare – a third (31%) of local areas thought that fewer children with special educational needs and/or disabilities (SEND) were using childcare than last year.

Megan Jarvie, head of Coram Family and Childcare, said:

‘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, 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. We’re 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.’

The pandemic has cast a light on how much the sector is struggling, both from new problems but also from old issues sych as funding which have never matched the needs of the industry.

The Government must take action and create an ambitious strategy to pull the sector through this year. The survey calls on all UK Governments to:

• Launch a funding review for the free early education entitlements to make sure that funding levels are
  sufficient to support the delivery of high quality education and care, including, but not limited to, issues resulting from Covid-19.
• Reform Universal Credit so it does not lock parents out of work, by increasing the maximum amount of childcare costs paid under Universal Credit and moving to upfront payments for childcare.
• Extend the 30 hours free childcare provision for three and four year olds in England and Wales to
  families where parents are in training, to help boost their employment opportunities.
• Double the early years pupil premium, to boost outcomes for the most disadvantaged children.
• Re-allocate any underspend budget for Tax-Free Childcare to other parts of the childcare system –
  prioritising the most disadvantaged children.

Commenting, Neil Leitch, Early Years Alliance chief executive, said:

‘It is no surprise to see the cost of childcare continue to rise above inflation, as providers struggle with increased Covid-related costs such as cleaning, overtime and staff absences – with no additional help from government. Added to insultingly low levels of early entitlement funding and a continued fall in the demand for places, it’s clear that many nurseries, pre-schools and childminders will have had no choice but to pass these costs on to parents.

‘The government continues to ignore widespread calls to base early years funding on pre-pandemic attendance levels during the spring term, but with 35% 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.

‘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.’

Purnima Tanuku OBE, chief executive of National Day Nurseries Association said:

‘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.

‘But this report lays bare the full extent of the damage as providers struggle to remain sustainable while carrying out their crucial work of supporting children’s development and enabling parents to work or train.

‘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.

‘The research echoes our own findings of lower demand for both funded places and fee paid hours. It’s clear that funding needs to be reviewed and fixed to support providers on the frontline. If the Chancellor was committed to doing ‘whatever it takes’ to support childcare providers and working families there would have been more support to the sector in the Budget. That’s what our children need to get the best possible start in life.’