The UK spends less than 0.1% of GDP on childcare, the second lowest investment in the OECD. England is exceptional within Europe in the extent that it has deliberately shaped the childcare market to promote the provision of services by for-profit companies. 84% of childcare is delivered by for-profit providers, as opposed to 3% in Germany or 4% in France. The nursery sector in England is highly fragmented but international supergroups are now emerging and getting larger as consolidation continues. A key structural trend is the steady, continuing corporatisation of the market over time, as many providers have sought to expand their nursery brands locally, regionally and in some cases internationally. Major changes have occurred in recent years. Consolidation within the private market has been rapid. The two largest companies – Busy Bees and Bright Horizons – now have 8% of the market share and provide over 60,500 places. The childcare market in England was valued at £5.5 billion in 2017/18. Private sector (for-profit) nurseries generated an estimated income of £4.7 billion (85%). This is split between £3.3 billion generated by incorporated companies and £1.4 billion generated by sole traders/partnerships. The rapid privatisation of childcare in England has taken place without any meaningful discussion of the potential risks. However, numerous studies of early years provision around the world have concluded that non-profit settings offer better quality care. Childcare is a labour-intensive industry and therefore cost-cutting measures invariably centre on staffing costs, either employing fewer or cheaper staff. This, in turn, runs the risk of increasing turnover and lowering the quality of the care provided.

In 2016, the OECD highlighted that a market-based approach to childcare leaves public authorities with less control over fees and less control over when and where services are provided. It identified that market dynamics can result in for-profit providers drifting away from less profitable areas, so that very young children in poorer neighbourhoods are sometimes left without any provision at all.  This is certainly the case in England, where childcare is of high cost but relatively poor quality, as noted by the OECD. High-quality childcare is often only available to wealthier families because access to high quality provision is constrained by income and location. The regulatory framework focuses on how childcare is provided but not on its quality; it does not have a responsibility to ensure equality of access for children and parents or ensure fair terms and conditions for childcare workers. As a result, the childcare system is characterised by inequalities of access, poor quality, financial instability and poor working conditions. In September 2021, during the Westminster Hall debate on the call for an independent review into the cost and affordability of childcare in England, Steve Brine MP (Conservative Chair of APPG on Childcare and Early Education) spoke of ‘market failure in this sector’ and ‘urgent need for reform’. 

Lucie Stephens, nursery Director (voluntary), childcare researcher and campaigner and member of Women’s Budget Group Policy Advisory Group