Financial sustainability health check of the childcare sector: analysis and evidence

Section 1: Recent Trends in the Childcare Sector

Care Inspectorate Registration Data

6. This section presents analysis of Care Inspectorate data on registrations and cancellations of childcare services to provide an overview of broad trends across the sector. Detailed information on registered services is available from the Care Inspectorate datastore.

7. The analysis in this section covers the period up to 30 June 2021. This was the most recent monthly data set available at the time of preparing this report.

8. Changes in the overall number of registrations in the sector reflect the net effect of: (1) newly registered services that are now operating; and (2) services that have cancelled their registration with the Care Inspectorate and are now no longer operating.

9. As with other sectors of the economy the childcare sector experiences continued changes in the number of services operating, with new providers entering, and other providers leaving the sector throughout the year.

10. The analysis in this section explores annual changes to June in each year over the period 2017 to 2021.

11. Comparisons over the year to June also enables us to capture lags in registration cancellations that were made before the start of the pandemic impacts (from March 2020 when restrictions were introduced) as services should give the Care Inspectorate 3 months' notice to cancel their registration. As a result this means that any changes in the period March 2020 to June 2020 could reflect previously taken decisions and are therefore not necessarily directly due to the impact of the pandemic.

Summary of the Analysis

Change in Registered Services

12. Table 1.1 shows the number of registered childcare services at 30 June in each year over the period 2017 to 2021. Day care of children services are disaggregated using the Care Inspectorate registration classifications. As highlighted above the Care Inspectorate classify third sector services as voluntary and not-for-profit in their registration database.

13. Table 1.2 presents the annual changes in the number of services for each category, in the period to 30 June each year, and the corresponding annual percentage change in each service type.

14. Tables 1.1 and 1.2 highlight that:

• The highest rates of decline have been for registered childminding services which have decreased in each year over the period from June 2017 to June 2021, and annual rate of decline in overall childminding services has continued to increase;
• The number of registered private sector childcare services has declined in each year since June 2017, although the rates of decrease were lower in the two most recent years (the years to June 2020 and to June 2021); and
• Whilst there have been year on year decreases in the number of registered third sector services the highest rate of decline has been reported in the year to June 2021 (with the number of services declining by nearly 6% over this period).

Table 1.1: Number of registered childcare services, June 2017 to June 2021

Type of service	June 2017	June 2018	June 2019	June 2020	June 2021
Day Care of Children services
Health Board	3	3	3	3	3
Local Authority	1,725	1,718	1,722	1,741	1,772
Private sector	1,140	1,105	1,078	1,071	1,062
Third Sector	848	834	811	808	760
Total Day care of children services	3,716	3,660	3,614	3,623	3,597
Childminding Services	5,523	5,268	4,929	4,596	4,240

Source: Care Inspectorate

Table 1.2: Annual change in number (no.) of registered childcare services, and annual percentage (%) change, June 2017 to June 2021

Type of service	Change 2017 to 2018		Change 2018 to 2019		Change 2019 to 2020		Change 2020 to 2021
	No.	%	No.	%	No.	%	No.	%
Day Care of Children services
Health Board	0	0.0%	0	0.0%	0	0.0%	0	0.0%
Local Authority	-7	-0.4%	4	0.2%	19	1.1%	31	1.8%
Private sector	-35	-3.2%	-27	-2.4%	-7	-0.6%	-9	-0.8%
Third Sector	-14	-1.7%	-23	-2.7%	-3	-0.4%	-48	-5.9%
Total Day care of children services	-56	-1.5%	-46	-1.2%	9	0.2%	-26	-0.7%
Childminding Services	-255	-4.8%	-339	-6.1%	-333	-6.8%	-356	-7.7%

Source: Care Inspectorate

Cancelled Services

15. Annual changes in registrations reflect services both entering and leaving the sector. A key concern is whether the pandemic, to date, has resulted in an increase in the number of services (either in total or for specific types of services) leaving the sector – for example, above the normal levels of change that we would expect to see (based on recent trends).

16. Table 1.3 sets out the number of cancelled services in each year to 30 June. This information is presented in aggregate for day care of children services and for childminding services.

17. Table 1.3 highlights that:

• The number of day care of children services cancelling their registration had declined in each year over the period June 2018 and June 2020. However the number of cancellations increased in the year to June 2021.
• The number of childminding services cancelling their registration with the Care Inspectorate has declined in each of the last two years.
• Whilst the annual rate of cancellations of childminding services has seen a slight fall between June 2019 and June 2021, the overall rate of decline in the total number of registered childminding services in each of these years (as highlighted in table 2.2) has continued to increase. This indicates that there have been continued falls in the number of new childminding service registrations in each of these years.
• The rate of cancellations of registrations remains significantly higher for childminding services compared to day care of children services.

Table 1.3: Number of cancelled services in the year to 30 June in each year over the period 2017 to 2021

Type of service	June 2017	June 2018	June 2019	June 2020	June 2021
Day care of children services	160	166	136	118	139
Cancellations as a percentage of all day care of children services	4.3%	4.5%	3.8%	3.3%	3.9%
Childminding Services	837	679	695	610	522
Cancellations as a percentage of all Childminding Services	15.2%	12.9%	14.1%	13.3%	12.3%

Source: Care Inspectorate

Registered Capacity in the Sector

18. In addition to changes in the numbers of registered services in the sector we can also measure changes in registered places (capacity) across different types of services. Changes in registered places may vary from reported changes in the number of services. For example, existing services may increase their capacity, and/or average capacity across new services entering the sector may be higher/lower than that of services leaving the sector.

19. Table 1.4 shows the number of registered places by type of service, whilst Table 1.5 shows the annual changes (both number and percentage) across services. The tables highlight that:

• Total registered places (capacity) across both private and third sector services in June 2020 was broadly the same as in June 2017.
• Whilst there has been a small increase in total registered places across private services in the year to June 2021, there has been a nearly 4% decline in registered places across third sector services in this period.
• As a result of these changes the average capacity of both private and third sector services has increased between June 2017 and June 2021.

Table 1.4: Number of registered places by type of provider in each year over the period June 2017 to June 2021

Type of service	June 2017	June 2018	June 2019	June 2020	June 2021
Day Care of Children services
Health Board	170	170	170	170	170
Local Authority	71,384	72,583	75,077	79,316	85,337
Private sector	62,886	62,313	62,348	62,947	63,112
Third Sector	30,992	31,307	31,021	31,276	30,088
Total Day care of children services	165,432	166,373	168,616	173,709	178,707
Childminding Services	34,255	32,619	30,538	28,531	26,363

Source: Care Inspectorate

Table 1.5: Annual change in the number of registered places by type of provider in each year over the period June 2017 to June 2021

Type of service	Change 2017 to 2018		Change 2018 to 2019		Change 2019 to 2020		Change 2020 to 2021
	No.	%	No.	%	No.	%	No.	%
Day Care of Children services
Health Board	0	0.0%	0	0.0%	0	0.0%	0	0.0%
Local Authority	1,199	1.7%	2,494	3.5%	4,239	5.6%	6,021	7.6%
Private sector	-573	-0.9%	35	0.1%	599	1.0%	165	0.3%
Third Sector	315	1.0%	-286	-0.9%	255	0.8%	-1,188	-3.8%
Total Day care of children services	941	0.6%	2,243	1.4%	5,093	3.0%	4,998	2.9%
Childminding Services	-1,636	-5.0%	-2,081	-6.1%	-2,007	-6.6%	-2,168	-7.6%