Childcare costs are up to a third higher in London than the rest of the UK, with severe staff shortages and the soaring cost of living to blame, a study has found.
The report, by the London Assembly Economy Committee, found that London has the most expensive childcare costs in the country, with pressured parents forced to fork out between 25 and 33 per cent more in the capital.
Researchers warned the high costs mean it makes no financial sense for some parents to work and that this negatively affects women’s careers as well as London’s economy.
It comes after recent research by the Centre for Progressive Policy (CPP) suggested that the capital’s economy is losing out on around £5bn a year due to the high cost of childcare and the shortage of places. The study found between £27bn to £38bn could have been added to the wider economy each year if mothers had been able to work the hours that a lack of childcare had deprived them of.
The London Assembly Economy Committee said problems plaguing London’s childcare sector could be exacerbated by chancellor Jeremy Hunt’s new free childcare policy, warning that nurseries and childminders may not be able to handle the surge in demand that his new measures would ignite.
Mr Hunt unveiled a major expansion of free childcare to attract voters last year, with eligible working parents of two-year-olds told they could claim 15 hours of free childcare a week for 38 weeks. From September 2025, working parents who have children under five will be able to claim 30 hours of free childcare for 38 weeks per year.
The new report found Londoners are not just facing sky-high costs for childcare but there is also a lack of overall childcare spaces, with parents living in the capital more likely to find it hard to access spots for their children than in other parts of England.
Researchers warn the dearth of childcare places is especially bad for parents of children with disabilities or special educational needs, or for parents who do not work usual hours.
Our city is becoming increasingly unaffordable for families to live in. High childcare costs and other huge expenses such as housing are pushing family budgets to the brink
Marina Ahmad, chair of the Economy Committee, said: “Our city is becoming increasingly unaffordable for families to live in. High childcare costs and other huge expenses such as housing are pushing family budgets to the brink.”
Ms Ahmad, a London Assembly member, warned: “Soaring costs are causing serious concern among parents, who are worried about their ability to save and provide, as well as impacting major life decisions such as whether to have more children.”
She said if new measures were not taken to tackle this problem, even more families would be pushed out of London.
It comes after The Independent revealed last month that thousands of nurseries have shut their doors amid a staffing crisis, sparking fears the government’s promise to expand free childcare was “doomed to failure”.
The Independent also revealed warnings from experts that Mr Hunt’s Budget childcare pledge was fast unravelling amid “chaos” over funding arrangements. Some warned the sector has not been given enough cash or support to deliver the promise by April.
The new report noted there has been a substantial fall in the number of childminders in England but London has seen the sharpest decline.
Childcare providers tend to pay more on wages, rent or mortgages in the capital than in other parts of the country, researchers said.
The report has made a number of recommendations, including calling for ministers to re-examine London’s funding rates for early education entitlements to make sure they tally with the true cost of providing high-quality childcare.
Joeli Brearley, founder and chief executive of charity Pregnant Then Screwed, said: “The big issue with childcare in London is availability. Parents find it really difficult to secure a place, so much so that the demand for nannies in London is skyrocketing and we have heard from parents who say they try and poach nannies in the school playground.”
She attributed the shortage of nursery staff to low wages throughout the childcare sector but explained this is exacerbated by the “added problem of a higher cost of living in the capital”.
Ms Brearley added: “Because families cannot work without childcare, a lack of availability means the percentage of mothers in work is lower in London compared to the rest of the UK. Which of course is all contributing to a higher gender pay gap in London and it is also contributing to higher levels of child poverty.”
Neil Leitch, chief executive of the Early Years Alliance, said: “Of course, while it’s clear that the capital is on the brink of a childcare and early years crisis, we must not forget that providers across the remainder of the country are also grappling with the very same issues.”
The Confederation of British Industry has estimated that implementing the government’s expanded childcare plans will cost £8.9bn rather than the £4bn ministers have allocated to fund the increase in places.
A spokesperson for the Department for Education said: “We are confident in the strength of our childcare market to deliver the largest ever expansion in childcare in England’s history and have increased the hourly funding rates with a £204 million cash boost this year and over £400 million next year.
“The rates reflect extensive data gathering on the costs early years providers face and how they vary across the country.”