Original modelling by CPP shows that under the expansion of free childcare which both Labour and the Conservatives have committed to:

• There will be a 52% increase in demand for childcare for under-2s by late 2025. This is equivalent to 27,800 additional full-time staff.
• Local authorities will need to boost their workforce supply by an average of 14.5%.
• Some places face staff shortfalls of over 20%, with the biggest challenge in poorer urban areas – the cities of the Midlands, Hull, and outer London’s poorer boroughs.

The Centre for Progressive Policy (CPP), a thinktank that promotes inclusive economic growth, has modelled the impact of the childcare policy adopted by both the Conservative and Labour parties in its latest election briefing.

What does CPP’s new analysis show?

CPP has conducted an original analysis which shows that the planned rollout of childcare cost subsidies in England will lead to a 52% increase in demand for childcare for under-2s by late 2025 – equivalent to 27,800 additional full-time staff.

When we map this across the country, we find that local authorities will need to boost their workforce supply by an average of 14.5%, with some areas requiring more than 20% expansion of their workforce. The places that face the biggest challenge will be poorer urban areas – places like the cities of the Midlands, Hull, and outer London’s poorer boroughs.

What are the main parties’ childcare policies?

One of the Conservatives' flagship manifesto policies is the expansion free childcare. Parents will be able to claim 30 hours of government-funded childcare a week, over 38 weeks of the year, all the way through from nine months up to their child starting school. Labour has committed to taking this same plan forward, rolling out funding over the next year. But they have gone further, announcing a plan to open 3,300 new nurseries in primary school classrooms and add around 100,000 nursery spots. Over one in ten swing voters now rate childcare as a top-three issue.

Why is this a challenge?

Childcare providers face high costs and low margins, leading to large numbers leaving the market. The National Day Nurseries Association's 2024 State of the Sector survey painted a grim picture of the current childcare supply landscape. 54% of surveyed nurseries in England said they were either unlikely to offer additional places to two-year-olds or were uncertain if they can. 56% admitted they could not meet the local demand for places. The expansion of subsidies for childcare will make this provision gap even worse, in an already strained sector.

Previous CPP research estimates that the lack of affordable childcare costs our economy £27bn to £34bn annually, or about 1% of GDP, due to reduced female labour force participation.

What should happen next?

CPP recommends that the next government introduces:

• Emergency top-up funding for the most affected communities;
• ‘Skills for Childcare’: an independent body to provide practical support for recruitment, development, and leadership in the sector;
• Locally led cost audits to ensure the government pays a fair price;
• Treating childcare as an investment in human capital rather than a cost in national public spending frameworks;
• Using efficiency gains to make childcare available to all, not just working parents, so that children from the poorest families have better access to early years education and parents can have a better chance of getting into work.

Ben Franklin, interim CEO at the Centre for Progressive Policy said:

“It’s great to see cross-party support for expanded, state-subsidised childcare in this year’s manifestos. But our modelling shows real challenges ahead in implementation. Almost 28,000 new childcare workers will be needed to make these plans a reality – no small feat given the sector’s recent contraction. And some of the poorest areas are those facing the greatest shortfalls.

“The next government should take immediate practical steps to give this policy the best chance of success, like making emergency top-up funding available and setting up an independent childcare body to support recruitment in the sector. Longer term, we need to move towards universal childcare, including investing in early years provision for those families who are not in work. There will be no political or economic rewards for these policies if they do not lead to more affordable, accessible childcare.”

ENDS

Methodology:

How did CPP estimate demand and supply for childcare?

• Current demand estimation: for each local authority, we took the number of children in households where both parents are working, multiplied by the average number of hours of childcare demanded for the particular age group and rates of formal childcare usage.
• Regression model development: we created a regression model to analyse how factors like price, household income and demographics affect demand for childcare for both 1-year-old and 2-year-old children.
• Policy scenario simulation: we adjusted the regression models to simulate various policy scenarios introducing free childcare hours and estimate the new demand for each local authority by modifying the mean hourly fee based on the free hours provided.

Supply requirement estimation: lastly, we converted the additional childcare hours into full-time equivalent positions and adjusted for regulatory staff-to-child ratios to determine the number of additional early years professionals needed in each local authority to meet the increased demand.