How The Childcare Crisis Impacts On Small UK Businesses

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7 March 2023 – Childcare costs in the UK are the highest in Europe, which results in a childcare crisis that costs the UK economy up to £38bn every year.

New data by the charity Pregnant Then Screwed shows that here in the UK parents use up to 75% of their income for childcare. This is a huge amount compared to other European countries, such as Austria or Germany where it only takes up 5% of parent’s incomes.

2022 saw the UK becoming the most expensive country for childcare in the developed world. And it will get worse, as childcare costs are likely to rise by another 10% in April, according to Joeli Brearly from Pregnant Then Screwed.

While childcare costs have been a problem for years, now there is a childcare crisis that is said to cost the UK economy between £27bn and £38bn a year, according to figures by the think tank Centre for Progressive Policy (CPP).

Childcare Crisis prevents 27% Of Mothers From Working More Hours

A survey of 2,545 mothers conducted by the CPP has shown that just over a quarter (27%) would like to work more hours. But due to childcare costs they cannot afford to do so.

If those mothers could work more hours, the CPP says this could translate into a minimum of £9.4bn of extra earnings per year. This would equate to an economic output of 1% of GDP.

From their results, the CPP estimates that 540,000 mothers don’t get back into work due to sky-high childcare costs.

The report further suggests that 800,000 mothers have cut their hours at work, and 470,000 have left their jobs as a result of the high costs.

Overall, the CPP estimates that the UK economy loses out on an economic output between £27bn and £38bn due to the childcare crisis.

Given the dire situation our economy is in, it can ill afford to lose that much money. That’s why the CPP calls on the Government to change its approach to childcare.

It should not be seen as a private problem anymore, instead it should be viewed as physical infrastructure.

At the moment, the government can borrow to invest in hard physical infrastructure, so railways and roads, but we think there’s a strong economic case for treating childcare in the same way. The gains to be made from supporting mums and employment are substantial.

Ben Franklin, Director of Research and Policy at the CPP

How Small Businesses Are Impacted

A strong economy means that small businesses can thrive. So anything that will weaken the performance of the UK economy is bad for small businesses.

But this crisis could have a much bigger impact on UK firms, because it will exacerbate the already challenging labour shortage.

According to latest figures by the Office for National Statistics (ONS), there are currently 1.134 million vacancies across the UK. Difficulties to recruit have been highlighted by businesses as a big challenge, as it means they are unable to meet orders, which impacts on their income.

Businesses are crying out for people to fill job vacancies at all skill levels, and this must be the number one focus for government if it’s serious about economic growth.

JAne Gratton, Head of People Policy at the British Chamber of Commerce

If parents with young children would have access to affordable childcare, a good portion of these vacancies could be filled.

The British Chamber of Commerce (BCC) is calling on the Chancollor to announce measures in the Spring Budget that will help parents with childcare costs to allow them to return to full-time work.

The Government’s own figures show that 49.7% of families have at least one adult that works part-time, many of which are parents of young children.

Apart from the impact on the labour market, the childcare crisis will also affect small businesses in other ways.

If staff leave or ask to work fewer hours, the workload of others will inevitably increase. This will create a more stressful work environment, which could lead to further loss of staff.

When parents leave work they take their skills with them, thereby increasing the skills gap that already exists. Having to train new staff does not just take time, but it also incurs costs.

While the Government is funding free childcare places, they don’t cover the time needed for parents to be able to work full-time.

The funding is also not enough to cover the costs of day nurseries, which means they have to put up prices to stay afloat. Which in turn drives more parents out of work.

And that the funding is not enough is evidenced by the closure of 4,000 childcare providers between 2021 and 2022.

So not only is childcare expensive, it is less and less accessible, which means more parents will have to leave work in order to bring up their children.

The industry hopes that the Chancellor will use the Spring Statement to help parents with childcare costs.

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The Business4Beginners news team consists of several writers who each have their own unique experience in businesses. By keeping their fingers on the pulse, they bring you the latest in news and trends impacting small UK businesses.
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