By Jessica Frank-Keyes
London’s economy could be being held back by around £5bn a year due to issues with childcare costs and shortages.
Parents, especially women, being unable to work the hours they want – thanks to a “shortage of suitable childcare” – could be restricting growth in the capital amid the cost of living crisis.
A report by London’s City Hall has warned “here is some evidence to suggest that a shortage of suitable childcare is having a detrimental impact on London’s economy”.
“For some parents, and particularly for mothers, it still does not make financial sense to take on more hours and pay childcare costs for the time spent in work,” they wrote.
Joeli Brearley, founder and director of organisation Pregnant Then Screwed, said: “When [women] look at childcare costs it does not make financial sense for them to continue working the same hours. In many cases therefore, they take a step back from their career.”
Research from the Centre for Progressive Policy (CPP) found “if mothers had been able to work the hours they wanted to but could not because of childcare, it could have generated in between £27bn to £38bn extra in gross value added per annum in the UK”, the report found.
And Ben Franklin, CPP research and policy director, told London Assembly members this broke down “probably about £5bn per annum in lost output for London’s economy”.
The warnings come after City A.M. highlighted the Treasury’s changes to childcare support in the last spring Budget would leave working parents worse off earning £134,500 than if they were paid £99,000 – thanks to subsidy cut-offs, marginal tax rates and fiscal drag.
Assembly members on the Economy Committee released the report – titled ‘Early years childcare in London’ – which included the key findings that:
- London has the costliest childcare in England and parents pay 25-33 per cent more;
- Higher wages, rent and mortgages make it more expensive to provide in London;
- The capital is facing “severe staffing shortages” and the largest drop in childminders.
Parents on higher incomes spend a higher proportion of their salary on childcare than parents anywhere else in the UK, the report also found.
According to charity Coram Family and Childcare, in 2023 full-time nursery care for a child under two cost £395 in inner London, £360 in outer London and £285 across Britain.
While Christine Farquharson, from the IFS, told City Hall childcare in London is “just much more expensive than it is elsewhere in the country”.
City Hall is calling on the government to review the funding rates for early education entitlements in London in order to meet the costs of high-quality provision, including pay.
While Assembly members have also urged the mayor to lobby government to get action taken.
The Department for Education (DfE) has been contacted for comment.
