Squeeze Yet to be Felt by Childcare Sector According to IFS

Squeeze Yet to be Felt by Childcare Sector According to IFS

It is no secret that as of the end of 2022, the UK’s economy is in a bad way. The knock-on effects of Covid, the impact of the war in Ukraine, the challenges of Brexit and the consequences of the short-lived Truss government’s economic plans have all combined to create a perfect storm. Although it is being reported that inflation peaked in October and is now declining, at the time of writing it remains above 10%. Higher prices are piling pressures on businesses and individuals across the UK and the childcare sector is no exception.

According to a report by the IFS, funded by the Nuffield Foundation, despite spending on early years having risen by 28% since 2010, rising costs will mean childcare providers seeing a drop of 9% in real terms funding over the next year. However, there is some mitigation to be found in the fact that the number of 3 and 4 year olds is also expected to be lower, meaning the real terms value per hour of core funding will drop by around 3%. Even so, with ever-present funding pressures still in place, coping with these conditions will be a real challenge for many settings.

At present there are no signs from the government that funding will be increased in the near future. However, the difficulties of the sector are not going unnoticed and there are few days where there is not a story in the national press discussing the issue. The Covid-19 crisis taught the government of the day that the childcare sector underpins the economy and so, if that lesson has been learnt, it is in ministers’ interests to avoid a complete crisis.