Childcare funding failing to keep up with rising costs, new DfE statistics reveal

The cost to nurseries and pre-schools of delivering childcare is far outstripping increases in government childcare funding, new statistics released today by the Department for Education reveal.
Underlying data from the Survey of Childcare and Early Years Providers 2019 shows that in 2019, the average annual cost of delivering childcare for private and voluntary group based providers was £240,333. This marks a 20% increase on the previous year’s average annual cost of £199,708.
In comparison, the increase in local authority early years funding for 2020/21 recently announced by the DfE will only amount to up to 2% - and even these small increases may not be fully passed on from councils to childcare providers.
The statistics also reveal that staff wages account for the highest proportion of childcare delivery costs for nurseries and pre-schools (73%), following by rents and mortgages (10%), and food costs (4%).

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

“These figures show just how woefully inadequate the recently-announced increase in early years funding truly is. With ongoing increases in the national living and minimum wages, the cost of running a childcare business has increased hugely over recent years, and yet government investment into the sector has completely failed to keep up.
“With plans to both increase statutory wage requirements and expand so-called ‘free childcare’ offers being mooted by various political parties, it’s clear that, whoever is successful at next month’s general election, a significant increase in childcare funding will be needed if the early years is to remain viable and sustainable.
“We urge every political party to include a commitment to ensure adequate investment into the sector in their election manifesto. With the sector already facing a funding shortfall of £662m, and hundreds of providers closing every month, we cannot allow the current situation to continue.”


Editor notes 

  • Figures published by the Department for Education revealed that local councils will receive an additional 8p per hour for two-year-old places and up to 8p more per hour for three- and four-year-old places (though some areas are seeing no increase in three- and four-year-old funding) in 2020/21.
  • The Early Years Alliance is the largest and most representative early years membership organisation in England. A registered educational charity, it also provides high-quality affordable childcare and education to support children and families in areas of deprivation throughout the country.
  • The Alliance represents 14,000 members and supports them to deliver care and learning to more than 800,000 families every year. We deliver family learning projects, offer information and advice, produce specialist publications, run acclaimed training programmes and campaign to influence early years policy and practice.