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New analysis of childcare and early years providers’ finances in England

The Department for Education has published Providers’ finances: Evidence from the Survey of Childcare and Early Years Providers 2018. Written by Frontier Economics and NatCen, the report presents an analysis of Early Years providers’ finances using data from the Survey of Childcare and Early Years Providers (SCEYP) for 2018.

The analysis has found that the mean unit cost for all settings was £3.70 per child per hour. This varied across group-based settings from £3.83 for private providers to £4.16 for voluntary providers, £4.28 for nursery classes and £7.23 for MNS, and was lower for childminders (£3.42). Even controlling for other characteristics, the mean unit cost is higher for MNS and lower for childminders than other types of providers. However, this measure may understate the hourly cost for childminders (because no rent or mortgage costs were recorded for them) and may overstate the hourly cost for MNS and nursery classes (because it includes costs for any additional and specialist services delivered by the setting).

The mean staff hourly pay for all settings was £10.19, but was considerably lower for private providers (£9.33), voluntary providers (£9.49) and childminders (£7.46) than for nursery classes (£16.96) and MNS (£15.66). This pattern could be observed even within qualification levels. Even controlling for other characteristics, the mean staff hourly pay was higher for nursery classes and MNS and lower for childminders than other types of providers.

The mean unit cost was considerably lower than the mean hourly parent-paid fees charged by providers, which is presented in the table below.

Commenting on the DfE’s latest findings on providers’ finances, PACEY chief Executive Liz Bayram said:

“This new study into providers’ finances contradicts research published by DfE less than a month ago. Whilst today’s research claims that the mean hourly cost for a childminder is £3.42, the report from earlier this month said it was £4.78 – a huge difference. It is a similar story for other types of providers. It is very troubling that DfE is publishing these reports without any explanation as to why they have come to such different conclusions, nor what they plan to do with the evidence.

“PACEY knows that the hourly rate most local authorities pay providers to deliver early years entitlement falls far short of the actual cost incurred. In fact, this is an issue on which the whole sector is united. Yesterday, Ofsted statistics revealed that the number of registered childminders in England has dropped by nearly a third (31%) since 2012. We have lost a thousand in the last quarter alone. Low funding rates, delayed payments and the inability to delivered funded hours to related children are all leading to more and more childminders leaving the profession.

“We need credible, reliable evidence on the cost of childcare to ensure the next Comprehensive Spending Review delivers the funding all early years providers need to ensure their future sustainability. Childcare businesses are all run differently with regional variations to their costs and the market rate for their fees. Confused and mixed messages based on statistical averages helps no one.”