The cost of childcare: where are England's affordability blackspots?

New analysis of the childcare and early years providers survey reveals the locations in England where the cost of an hour’s childcare is highest. The analysis uses a ‘childcare affordability ratio’, which links the median cost of an hour’s childcare and the median hourly wage.

The median pre-tax cost of an hour of childcare in England is just under a third of the average hourly wage. London is England’s affordability blackspot where an hour of childcare in some London boroughs costs nearly half the average hourly wage. Pressure from the cost of childcare is not restricted to London, however. An hour of childcare in Manchester, Leicester and Herefordshire costs significantly less than an hour of childcare in London, but the median wage is also lower. As a result, childcare in these areas is as expensive relative to income as some of the most affluent parts of the capital.

Our analysis also shows a potential link between areas with higher childcare affordability ratios and lower uptake among eligible parents of funded childcare hours, indicating that even with the provision of free childcare, affordability is an acute challenge for disadvantaged families.

Childcare in the UK

In the UK, the total cost of childcare is around twice the average for the OECD as a whole and parents overwhelmingly believe childcare is too expensive. But formal childcare is a lifeline that helps parents to stay in work. Crucially, good-quality childcare helps children to develop and sets them up to settle in and thrive in the early school years. Good-quality childcare is particularly beneficial for children growing up in poverty – early years education for disadvantaged children under four has a positive impact on life chances.

The high cost of quality childcare can be a barrier for children getting the best start in life. There is also evidence that the cost of childcare in England is associated with increased poverty, gender inequality and economic inactivity. Recent data from the Office for National Statistics (ONS) show that the number of women not working in order to look after family rose by 5%, the first sustained increase in at least 30 years.

Mapping childcare affordability in England

For parents using formal childcare (all paid childcare like nurseries and childminders), costs are highest in London, averaging £7.31 for an hour’s care for a child under two. But when we look at the relative cost of an hour of childcare in relation to wages, it is clear that affordability is a challenge for parents in many parts of the country. For example, an hour of childcare in Manchester, Leicester and Herefordshire costs significantly less than an hour of childcare in London, but the median wage is also lower. As a result, childcare in these areas is as expensive relative to income as some of the most affluent parts of the capital.

Places in England where childcare for a two year old is most affordable in relation to local wages include Wokingham, Trafford and Swindon (0.26). Explore the data to find affordability scores for every local authority.

The same pattern holds for childcare costs for children aged between three and four. This is significant because a higher share (85%) of three and four year olds in England are enrolled in some form of formal childcare (and on average are enrolled for 21 hours), whereas 36% of one year olds and 57% of two year olds are in formal childcare.

Spotlight on London: the relationship between childcare fees and wages in the capital is stark

Local authorities in London are among the most expensive places in England when it comes to the cost of childcare relative to wages. While the cost of childcare varies quite a lot (£6.50 an hour in Barking and Dagenham and £9.50 in Kensington and Chelsea) the proportion of income spent on childcare is well above the national average even in areas where childcare is cheaper. In Kensington and Chelsea, an hour of childcare costs 45% of hourly parental income compared to 39% in Barking and Dagenham. There are also positive outliers. In Bromley, an hour of childcare costs 30% of the average hourly wage because wages are higher and childcare costs are lower.

Some London boroughs face particularly acute challenges due to the high prevalence of child poverty. In Richmond upon Thames, the childcare affordability ratio for three and four year olds is 37% – which is the same as in Islington. However, 37% of children in Islington are living in poverty, whereas in Richmond it is lower at 16%.

In Hackney, the affordability ratio is high at 36% and as many as 45% of children are estimated to be growing up in poverty once housing costs are considered.

Note: This article was published prior to the Spring Budget 2023 and therefore does not reflect changes that were announced and that are due to be phased in between now and September 2025.

Take-up of the 15-hour free childcare offer by eligible families is lower in local authorities where the hourly cost of childcare is high

All three and four year olds in England are entitled to 15 hours of free childcare as part of a government scheme that aims to support child development and school readiness. For two year olds, 15 free hours funded childcare is offered to families who are on certain benefits or who meet other eligibility criteria.

After the 15 free hours, parents of eligible two year olds have to pay for further childcare themselves. Parents on Universal Credit may be able to claim back up to 85% of childcare costs. This involves paying for the childcare up front and then claiming costs back through the childcare element of Universal Credit and the money is paid back once the childcare takes place. This means that low-income families face considerable initial financial outlay, especially in areas like Hackney that have some of the highest childcare costs in England.

The chart shows how this situation might be playing out across local authorities. On average, an estimated 72% of eligible two year olds in England are registered for the 15-hour entitlement. But take-up appears to be somewhat lower in local authorities where costs are highest. The data shows there is a negative correlation of -0.42 between the local cost of childcare and take up of the 2 year old offer. At a 5% significance level, there is sufficient statistical evidence to support a negative relationship between the two. However, further analysis into the causal relationship between the two would be needed to form strong conclusions.

Only 65% of eligible children are registered for free childcare in Leicester, which has one of the worst childcare affordability ratios in England (39%). Meanwhile, in Kingston upon Hull, which has a better childcare affordability ratio (30%), the share of children registered is higher – at 79%.

The data shows that there is a correlation between high childcare affordability ratios and low take-up of the two year old offer. One of the possible consequences of high costs of formal childcare could be a widening of the disadvantage gap between children on free school meals and their more affluent peers. We know from previous Nesta research that children on free school meals in the least deprived areas have poorer outcomes than those living in disadvantaged areas. There are multiple other potential factors at play that were not included in this analysis, including local efforts to drive childcare uptake (ie, high uptake may be driven by local initiatives rather than lower costs).

The share of working-age adults who are economically inactive and childcare affordability ratio in local authorities in England

Looking at the share of working-age adults who are economically inactive (due to caring responsibilities) alongside the childcare affordability ratio in each local authority shows a weak positive correlation of 0.32, which may merit further analysis.

In Torbay, 24% of working-age adults are economically inactive due to caring responsibilities. The area has an age two childcare affordability ratio of 36%. In comparison, Solihull has a better childcare affordability ratio (28%) and the proportion of adults economically inactive due to caring responsibilities is lower, at 19%. Furthermore, the take-up of 15 free hours of childcare for eligible two year olds is higher in Solihull (93%) than in Torbay (80%).

Further analysis is required to understand the range of factors from place to place that might be driving economic inactivity and take-up of free childcare hours.

Childcare fees have been rising in recent years and have increased much faster in some regions than others

The average hourly cost of childcare increased between 2018 and 2022.

Age	Mean hourly cost 2018	Mean hourly cost 2022	Percentage increase between 2018 and 2022
Children under two	£5.02	£5.68	13%
Children aged two	£5.01	£5.72	14%
Children aged three and four	£4.92	£5.60	14%

Between 2018 and 2019, average hourly wages grew at a faster rate than the average hourly cost of childcare for all ages. During the pandemic, the cost of childcare outstripped hourly wage growth in England. Between 2021 and 2022, the cost of an hour’s childcare for pre-school children aged two or above grew at around the same rate or higher than hourly wages. It was only slightly lower for children under two.

The cost of an hour’s childcare is rising more quickly in some areas than others

Indexing the average price of an hour’s formal care for a child under two by region reveals that while costs in the North East are some of the lowest in the country, they have risen much more sharply than other areas since 2018.

With many providers stating they will need to pass on rising costs to parents, prices look set to rise further in the coming year. Tracking the regions where costs have already risen the most steeply for parents in recent years points to hotspots, such as the East and West Midlands, where wages tend to be lower than the South East and where childcare costs have risen more steeply relative to 2018 levels.

The number of providers in England has fallen by 10% since 2018, driven by fall in number of childminders

Between 2021 and 2022, the total number of providers fell by 2,000 (3%), from 62,000 to 60,000. A decline in total childcare providers does not always mean a decline in childcare capacity; this will vary between areas due to the mix of providers in an area. Yet some local authorities have experienced a high number of closures.

The decline in the overall number of providers is explained by a fall in the number of childminders. Childminders make up the biggest group of providers in all regions, ranging from 40% in the West Midlands to 52% in the South East.

Childminders are often the most flexible option for parents in terms of the service they can provide. Yet every region in England saw its share of childminders decrease in 2022, with London, West Midlands and the South East seeing the greatest decrease.

A recent survey by Coram Family and Childcare found that 48% of local authorities have seen childcare providers' staff numbers reduced. It is reasonable to expect that the decline in overall numbers affects prices, as demand for a potentially smaller number of places increases. This is not good news for parents and their young children – especially as many providers have signalled they are already making cutbacks to services due to the cost of living crisis and expect to pass on further costs to parents through increased fees.

A national, regional and local look at childcare in England reveals a system that is struggling

For parents using formal childcare (all paid childcare like nurseries and childminders), costs are highest in London, averaging £7.31 for an hour’s care for a child under two.
Places in England where childcare for a two year old is most affordable in relation to local wages include Wokingham, Trafford and Swindon.
The data shows that there is a correlation between high childcare affordability ratios and low take-up of the two year old offer.
The data also suggests a weak positive correlation between economic inactivity due to caring responsibilities and the cost of childcare relative to wages.