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Published 13 February 2024
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6 minutes

Why the UK’s Childcare Sector is at Breaking Point Despite Roll-out of Extra Funding

The expansion of government-funded childcare seemed like great news for parents and a potential win for the economy, but nursery owners tell a different story. NerdWallet investigates the workforce crisis.

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Government-funded childcare is designed to get more parents (especially mothers) back into the workforce – part of Chancellor Jeremy Hunt’s plan to drive productivity in the UK. 

But the recently announced expansion of the Childcare Choices scheme won’t create additional places for children, nor will it secure a place for those on a waiting list from before they were born. What’s more, it won’t solve the staffing shortages which have been causing many nurseries across Britain to close. 

To understand the underlying challenges nursery owners are facing, NerdWallet spoke to senior leaders in the childcare industry about the “significant disconnect” between the expectations of parents and what childcare providers can actually offer. 

More funding doesn’t equal more places

After the Chancellor announced the changes to childcare funding in the 2023 Spring Budget, research was carried out by the Early Years Alliance which indicated that nurseries, pre-schools and childminders in England will not have enough places to match the rise in demand that the expansion of government funding is expected to create.

Helen Hobbs, manager of Wellies Day Nursery in North Crawley, told NerdWallet: “When the government first announced it, we had an influx of inquiries to see if we would have places from April 2024.” However, the preschool part of Helen’s setting is fully booked for the next two to three years. “I have a waiting list of over 100 people which we can’t fulfil. We can’t offer those places,” she warned.

Even if childcare providers like Hobbs could take on additional staff, the ability to provide additional childcare places still depends on having the physical space available in their setting. Hobbs told NerdWallet she will have to turn prospective parents away because she has “no scope to expand”.

Hobb’s business is not unusual, with 42% of providers surveyed by the Early Years Alliance saying their setting is full with a waiting list, citing lack of space as a key barrier, in addition to staffing.

The high costs making childcare businesses untenable  

Demand for more places aside, an increasing number of childcare providers are struggling to operate in the current climate. There were 186 nursery closures in England in 2022-23 according to the National Day Nurseries Association (NDNA), a 50% increase compared with 2021-22.

A 2023 survey looking at the pressure on childcare providers by charitable trust Coram Family Childcare (CFC) found that the rising cost of energy and food is negatively impacting businesses in more than half of the 131 local authorities it surveyed. 

Recruiting and retaining staff with the necessary qualifications and experience has also been “very difficult” for almost three-quarters of local authorities, and it appears that pay is a key part of the problem. The level of government funding has failed to increase in line with the rising cost of living, leaving many working in early years education feeling undervalued and “ready to give up”, according to the Early Education and Childcare Coalition.

NerdWallet spoke to Zoe Raven, founder and CEO of Acorn Early Years Foundation, a charitable social enterprise which operates nurseries, out-of-school clubs and holiday playschemes in Milton Keynes, Northamptonshire and Bedfordshire. Raven told us that the government has been “boasting about the fact that they’re putting all this extra money into the [childcare] sector, but it’s not getting through to the parents and the practitioners.” 

The threat to business owners was further highlighted in the Early Years Alliance survey, which found insufficient staffing levels will leave many providers unable to meet the increasing demand for funded places. 

One survey respondent commented: “Telling parents they can have all this [funding to help with childcare costs] to win votes and then not having any providers because their businesses have all gone under is not going to work.”

Is poor pay the problem?

On average, nursery practitioners in the UK earn between £19,000 to £22,000, equivalent to an hourly rate of £9.88 to £11.43. This will increase in April 2024 when the National Living Wage and Minimum Wage go up, but Raven believes the low rates of pay for childcare practitioners relative to other sectors’ jobs are behind the staffing crisis.

It used to be the case that childcare practitioners’ salaries were higher than wages in the retail sector, so you could earn more working in a nursery than working in Topshop, Raven told NerdWallet. “We’ve been overtaken by supermarkets,” she explained. 

Given the rising cost of living in the UK, it’s disheartening but not surprising that qualified practitioners are leaving the sector in search of jobs that offer better pay. Nursery staff are leaving to go and work in Amazon warehouses because they can earn more money – it’s heartbreaking, Raven added.

We sought the customer’s perspective on the issue of pay and asked 34-year-old mum-of-two, Emma, whether she would be willing to spend more on childcare if it meant retaining more qualified staff in her son’s nursery, which is in Staffordshire. She told us:

“I think if you’d have asked me that before I found out my mortgage goes up in February, I might have pushed [our childcare budget] a tiny bit more. But I’m going to have £1,000 of nursery to pay and an extra £500-£600 on my mortgage. It’s a lot of money. So, right now, no, I don’t think we would want to pay any more than we do.”

Government intervention needed 

Back in 2020, the Social Mobility Commission reported that “the early years workforce in England is underpaid, overworked and undervalued”. According to the nursery review website, daynurseries.co.uk, childcare businesses battling against financial hardships have “seen little improvement since”. 

Many childcare providers remain dependent on government funding to keep their doors open. The National Day Nurseries Association surveyed its members between September 2022 and September 2023 and found that some were facing an increase in staff costs of 14%, yet the rate of government funding had increased by just 3.4%, on average. 

For the managers and dedicated staff members determined to stay in the sector because they find their work rewarding, many are pinning their hopes on further support from the government to urgently address pay and turn childcare into a respected profession once more. 

With only 27% of providers feeling confident there will be enough places to meet demand come September 2024, parents keen to use their funding entitlement will be keeping their fingers crossed that providers in their area can stay afloat.

Image source: Getty Images

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