Penfold investigates the growing cost of childcare across the UK

Whilst many parents look forward to a return to work after parental leave, the rising price of nursery and care fees are causing parents to reconsider their options. As childcare costs are on the rise it’s becoming harder for parents to continue in their chosen careers whilst having to fork out the cost to keep their child in full-time care. Childcare costs can take up a significant portion of a family's income and this is only expected to rise in 2023.

A recent survey of 1,156 UK nursery providers by the Early Years Alliance revealed that almost nine in ten said that they would "probably" or "definitely" increase their fees this year. This means that in April it is expected that early years providers will increase prices by an average of 8%.

With this in mind, private pension provider, Penfold has investigated the growing cost of childcare across the UK in 2023.

Considering the fees for under-twos in full-time nursery care at over 800 day nurseries across the UK, Penfold has found that the average cost to put your child into a nursery full-time is £55.39 a day or £1,106.52 a month.

Penfold has found that the average cost to put your child into a nursery full-time is £55.39 a day or £1,106.52 a month.

If we compare this to the average UK salary, according to ONS data, the median annual pay for full-time employees was £33,000 for the tax year ending on April 5th 2022. On a £33,000 salary, your take-home pay will be £25,851 after tax and National Insurance. This equates to £2,154 per month and £497 per week.

This means that if you worked full-time and required full-time nursery care for your child, this would cost you over 51% of your take-home pay before you’ve even considered the cost of your bills, monthly living costs and other regular expenses.

Rising Costs in 2023

The cost of living crisis is hitting individuals, families and businesses across the UK as the rising energy costs impact almost every aspect of everyday life. The rising energy costs are impacting everything from heating and electricity to food and everyday products.

The Alliance survey of over 1,000 nursery providers found that around half (51%) of locations surveyed recorded a loss in the last year with the mean average loss amounting to nearly £14k in the last 12 months, while around two in ten (22%) broke even and just over a quarter (26%) recorded a profit.

As a result, these costs are being carried over to parents in order for nurseries to recoup rising costs. If nursery fees rise as predicted by 8% this April, in London, parents could be paying over £85 per day, or £1,700 a month.

The Most Expensive Places to Have a Child

Whilst the average cost in the UK to put your child into a nursery full-time is £55.39 a day or £1,106.52 a month. The most expensive nation is England, with their average cost per day being £61.01 and £1220.19 per month. The cheapest nation to put your child into nursery was Wales, with an average of £46.46 per day and £929.38 per month.

The Top 10 Most Expensive Regions

Whilst England has the most expensive average costs overall, the most expensive county across the UK was London with an average cost per day of £80.35 and £1,607.08 per month, followed by Berkshire and Hertfordshire. All ten of the most expensive locations are in England.

Top 10 Cheapest Regions

Whilst Wales was the overall cheapest country to send your child to nursery, the cheapest region was Ceredigion in the west of Wales with an average cost of £34 per day and £687 per month. This was followed by Blaenau Gwent in South-east Wales and Neath-Port Talbot in South-west Wales. Eight out of the ten cheapest locations are in Wales.

Costs vs Wages

According to ONS data the median annual pay for full-time employees was £33,000 for the tax year ending on April 5th 2022. On a £33,000 salary, your take-home pay will be £25,851 after tax and National Insurance. This equates to £2,154 per month and £497 per week.

On average, if a single parent worked full-time and required full-time nursery care for their child, it would cost over 51% of their take-home pay before even considering the cost of bills, monthly living costs and other regular expenses. This is heightened if you live in London where nursery fees would take up 74% of the average monthly take-home pay. Even in Ceredigion in Wales, where Nursery costs are at their lowest, this would still be 32% of their monthly take-home pay.

Although women make up 52.7% of the UK workforce, 74% of women are the primary caregiver for their children, having to take short or long periods off work to look after the family, compared with just 26% of men. These spiralling costs mean that for women with two or more young children under two, childcare costs far outstrip their salary. According to a survey of 27,000 parents by Pregnant Then Screwed it was revealed that childcare costs had forced 43% of mothers to consider leaving their jobs and 40% to work fewer hours.

Not only is the rising cost of childcare an issue for parents across the UK but there are also inherent issues around being a parent whilst trying to navigate the corporate world. Many employers lack the flexibility required by parents, and women have found that their employers aren’t prepared to accept reasonable flexible working requests that would allow them to make childcare and working hours compatible.

Savings

This begs the question, if parents are forking out their hard-earned money on nursery fees and living costs how can they even begin to consider saving for themselves and their children’s future?

A survey of 26,962 parents of young children found that 62% say that the cost of childcare is now the same or more than their rent/mortgage. This rises to 73% for single parents, and 73% for parents who work full time, demonstrating that high childcare costs are a key driver for women being pushed into low-paid part-time work.

62% say that the cost of childcare is now the same or more than their rent or mortgage

How can parents be better supported?

Whilst support is offered, for parents of children under two, it barely scrapes the surface of these rising costs. Of the parents surveyed by Pregnant Then Screwed*, 70% said they would work more if childcare were available for free. Whilst, treasury insiders accept that childcare costs are one factor keeping some people out of the labour market, the option of extending 30 hours of free childcare to one- and two-year-olds in England at the spring budget has been rejected on cost grounds. The plan would cost about £6bn, roughly equivalent to a 1p increase in the income tax rate.

For now, many parents will have to make do with the limited support available from the government and employers, from Tax-free Childcare to free childcare services, but with rising costs, this may not be enough to ensure parents have the support to continue with their careers.

For a 30-year-old, £357 per month needs to be saved, or £4284 per year to save enough for retirement.

The cost of living will continue to increase, making it all the more important to start saving for a pension. Parents should not have to choose between providing for their children in the present and securing their retirement in the future.

Pete Hykin at Penfold comments,

“The increase in childcare costs is pushing parents, especially mothers, out of full-time roles which stunts their career options but also widens the savings gap as they’re less able to contribute to their pension pots. The maternal pay gap which measures the wage difference between mothers and non-mothers is growing and with this increase in nursery fees and lack of support, this will continue to grow.

The biggest contributor to the gender pension gap is that women spend more time than men outside of paid employment doing unpaid caring, for example looking after young children or taking care of elderly relatives. Women perform 60% more unpaid work than men on average. As a result, Mothers make up the majority of part-time workers; they frequently do so to care for their children or other persons. Unfortunately, they pay dearly for attempting to strike a balance between these two positions.”