Financial Sustainability Health Check of the Childcare Sector in Scotland: Analysis and Evidence

Section 2: Analysis of Survey Responses

37. To inform the Financial Sustainability Health Check, separate detailed provider surveys were undertaken for day care of children services and for childminding services.

38. The surveys asked for information on areas including costs of delivery, income, capacity/demand, staffing and payment of the real Living Wage. The majority of the questions were designed to enable for comparisons to be made, where possible, between the position at the time of completing the surveys (for most this would have been in February 2023), and at the same point 12 months ago.

39. This section sets out detailed analysis of the surveys. Alongside some of the quantitative questions, respondents could also provide supporting written information to provide more context to their answers. These written comments have been summarised where relevant throughout the paper.

Survey design and response rate

40. The surveys were designed to capture detailed information on services' costs of delivery, income flows, capacity and demand, charges to family, staff recruitment and retention, and overall sustainability.

41. Drawing on lessons from the previous Health Check, the surveys have been updated and streamlined, to make them as straightforward as possible for respondents to complete. The survey questions were developed to allow for a level of comparability with the 2021 surveys, while limiting the ask on childcare providers. Similarly to the previous exercise, the questions were a mixture of multi-choice, numerical data entry (particularly for costs, income and charges), and optional text boxes to provide more information and context. We also worked to ensure that survey questions were neutral and balanced, so that respondents were able to present the factors that were key to their service (and to avoid leading respondents to a certain answer).

42. The surveys were live from 20 January until 27 February 2023. They were completed using an online platform called SmartSurvey, with links to the surveys sent out to the sector via various routes, including through the Care Inspectorate and the representative bodies. Feedback from the previous Health Check suggested that the lack of a 'save progress' function on the surveys prevented some providers from responding. We therefore used a platform that allowed respondents to save their responses and return to the survey later.

43. It is important to highlight however, that despite these efforts, the response rate to the surveys was lower than in 2021. There were 108 responses to the day care of children services survey. Based on the latest registration data for the sector, this represents around 6% of all registered private and third sector services. There were 58 responses to the childminding services survey, which represents around 1.7% of all registered childminding services.

44. We are aware that the surveys were issued at a busy time of the year for childcare services, when there were requests for information from other parts of the Government and other membership organisations. We will take learning from this exercise, to ensure that the need for collecting as much detailed information as possible is balanced with a proportionate time investment from respondents. We are very grateful to those who took the time to complete the surveys.

45. Scottish Government analysts undertook data cleaning of some of the data provided. This was predominately focused on removing outliers, which was defined as data that looked to be outside the plausible range of responses for a particular question. We also compared some numerical responses with comments when there was uncertainty around the values provided and removed responses for certain questions where the figures did not match the explanation. For example, a respondent may have written in the comments box that their costs have increased due to a number of factors but then the figures they have provided for this year and 12 months ago suggest a decrease in costs.

46. There has been no imputing of missing values in survey responses to inform the analysis presented in this paper.

Overview of responses to the surveys

47. As previously mentioned, the response rate to the surveys was lower than we had hoped for, and for certain questions responses needed to be removed as they did not seem plausible. Therefore, it is important that caution is used when interpreting the analysis set out in this report, as it may not be representative of the sector.

48. In order to disaggregate the data to capture evidence across different types of services we have had to ensure a high enough number of responses in each sub-category to ensure the data is not disclosive. No data based on less than five responses is included.

49. Where possible, the data is disaggregated by:

• Services delivering funded early learning and childcare (ELC);
• Services not delivering funded ELC;
• All private sector services;
• All third sector services; and
• Services delivering only school age childcare (SAC).

50. There are overlaps across some of these categories. For example, all private sector services will include both private services delivering funded ELC and private services not delivering funded ELC. However, the use of these broad categories allows for general variations across provider types to be identified.

51. Due to a low number of responses to the childminding services survey, a split into sub-categories (between services delivering funded ELC and services not delivering funded ELC) has not been possible.

52. The level of disaggregation that can be provided across tables in this paper will be dependent on the number of responses available (for example, not all respondents will answer all of the non-mandatory questions).

53. Tables 2.1 and 2.2 provide an overview of the respondents to each of the surveys.

Table 2.1: Summary of respondents to Day Care of Children Services Survey, total respondents=108

Type of Service	Number of respondents in group	% of respondents	Average Registered Places
Funded ELC service	64	59%	54
Service does not deliver funded ELC	44	41%	45
Private Services	53	49%	63
Third Sector Services	55	51%	38
School age childcare only	38	35%	48

Table 2.2: Summary of respondents to Childminding Services Survey, total respondents=58

Type of Childminding Service	Number	% of services
Funded ELC service	26	45%
Service does not deliver funded ELC	32	55%

Delivery Costs

54. This section explores the information from the surveys regarding the costs of delivering childcare services. It also sets out the responses to questions regarding the type of premises used to deliver childcare provision, and whether services anticipated further changes in their costs of delivery in the next six month period (from answering the survey).

Changes in Total Monthly Costs of Delivering Childcare Services

55. The surveys asked respondents to provide information regarding their total monthly costs of delivering childcare.

56. To capture any changes in the costs of delivery and to enable comparisons to be made, a number of questions asked providers to consider their current monthly costs of running their childcare service (in February 2023), and then to set out, if possible, their costs at the same point 12 months ago.

57. Respondents were also asked whether they anticipated any changes to these costs in the next six months (from answering the survey).

58. It is also helpful for us to understand how the estimated costs of delivering childcare can vary across age groups. The surveys therefore included a question about current estimated average costs of delivering an hour of childcare to different age groups.

59. It is important to note however, that the main focus of the analysis was on the changes in the total monthly costs of delivery, as the response rate to the surveys didn't enable a full analysis of how the estimated costs of delivering childcare varied across age groups. Some respondents to the surveys also had difficulties in presenting their average costs of delivery on an hourly basis.

60. The range of values (in terms of the gap between the minimum and maximum responses reported) provided in response to the questions on the average costs of delivery was large and indicated some variations as to how respondents answered the questions. There were a number of outliers with very high values, and some respondents (in particular childminding services) were not able to estimate their costs of delivery on an hourly basis.

61. As highlighted earlier, in order to improve the accuracy of the figures, Scottish Government analysts undertook data cleansing of the cost information. The key adjustment that has been made here is that the analysis set out in tables 2.4 to 2.6 is based on responses where the average hourly cost of delivery was in the range of greater than £0 and less than £20 for day care of children services. (No range was set for childminding services.)

62. The average costs in tables 2.4 to 2.7 are presented using both the median and mean. The dataset contains a small number of responses which are close to the maximum figure (£20 per hour) used in the range and are considerably higher than the majority of responses. They therefore exert a disproportionate influence on the mean. The median, which is less affected by outliers in the dataset, provides a meaningful measure of the average costs of delivery.

63. There are some figures in the table that are shown as an asterisk (*) as there were less than five responses for that category, and so the figure has not been included as it is unlikely to be representative of the sector.

Table 2.3: Comparison of average total monthly running costs (£) by different types of providers

Type of Service	Current Average Monthly Cost	Average Monthly Cost 12 months ago	Percentage change in average monthly costs
Funded ELC service	£37,327	£32,764	16%
Service does not deliver funded ELC	£9,172	£8,159	17%
Private Services	£39,233	£34,407	16%
Third Sector Services	£12,060	£10,709	16%
School age childcare only	£9,628	£8,483	19%
Total (all services)	£26,361	£23,181	16%

Table 2.4: Estimated average cost to deliver an hour of childcare (£) across different age groups (day care of children services only)

Age Group	Minimum	Maximum	Mean	Median
Under 2 years	£4.00	£19.32	£7.99	£7.28
Age 2 years	£3.85	£19.32	£6.96	£6.60
Children aged 3-5	£3.21	£19.32	£6.81	£6.46
School age child	£1.21	£14.00	£5.99	£5.40
Holiday cost	£2.17	£19.32	£6.16	£5.92

Table 2.5: Estimated average cost of delivering an hour of childcare across different age groups and by type of provision delivered (funded ELC services and services that do not deliver funded ELC; day care of children services only)

Age Group	Funded ELC Service - Mean	Funded ELC Service - Median	Service does not deliver funded ELC - Mean	Service does not deliver funded ELC - Median
Under 2 years	£8.06	£7.28	*	*
Age 2 years	£6.99	£6.60	*	*
Children aged 3-5	£6.82	£6.46	*	*
School age child	£7.41	£7.00	£5.10	£5.00
Holiday cost	£7.81	£7.00	£4.51	£3.30

Table 2.6: Estimated average cost of delivering an hour of childcare across different age groups and by different types of day care of children services (private, third sector and school age childcare only services)

Age Group	Private Services - Mean	Private Services - Median	Third Sector Services - Mean	Third Sector Services - Median	School Age Childcare Only - Mean	School Age Childcare Only - Median
Under 2 years	£7.92	£7.25	*	*	n/a	n/a
Age 2 years	£7.04	£6.47	£6.69	£6.85	n/a	n/a
Children aged 3-5	£6.66	£6.46	£7.19	£6.59	n/a	n/a
School age child	£6.31	£6.20	£5.57	£4.80	£4.96	£4.90
Holiday cost	£6.22	£5.95	£6.03	£5.40	£4.23	£3.30

Table 2.7: Estimated average cost of delivering an hour of childcare (£) across different age groups (childminding services only)

Age Group	Minimum	Maximum	Mean	Median
Under 2 years	£0.50	£27.80	£4.71	£4.50
Age 2 years	£0.30	£27.80	£4.76	£4.40
Children aged 3-5	£1.00	£27.80	£5.31	£4.75
School aged children	£1.00	£27.80	£5.27	£5.00
Holiday cost	£2.00	£27.80	£6.01	£5.00

64. Respondents to the surveys were given the opportunity to set out more details as to what factors had driven any changes in their costs of delivery over the last year. The factors highlighted included:

• The cost of living crisis was the most commonly reported factor - covering a wide range of specific cost elements, including increased prices of energy, fuel, food, utilities, equipment and learning resources
• Staffing costs (higher wages due to pay rises, pension contributions, cost of accessing bank staff)
• Costs of paying staff the real Living Wage
• Costs associated with staff training and recruitment
• Increase in insurance costs
• PPE costs and cleaning resources
• Higher rental rates
• Rising mortgage interest rates (especially reported by childminders)
• Increased professional membership fees
• Cost of outings and transportation (again, relevant particularly to childminders)
• Some respondents highlighted it was the cumulative effect of all costs increasing that resulted in real challenges for their services.
• In addition, a number of providers reported continued reduced demand for the service as a lasting impact of the pandemic, in particular school age childcare and childminding services. Services delivering funded ELC were less likely to report falls in demand/occupancy.

Potential changes in delivery costs

65. Respondents were asked if they anticipated that their delivery costs will change in the six months following the survey. Table 2.8 sets out the responses for day care of children services.

66. 62% of the respondents to the childminding survey indicated that they anticipated increased costs of delivery in the next six month period.

67. The surveys offered respondents the opportunity to set out more information as to why they expected a change in costs. The factors highlighted were:

• Continued high cost of living and inflation
• Increase in the National Minimum Wage and the real Living Wage in April 2023
• Withdrawal of the UK Government energy support schemes
• Upcoming increase in rental rates, mortgage payments and utility bills.

Table 2.8: Anticipated changes in costs of delivery by different types of day care of children services

Do you anticipate that in the next 6 month period your costs of delivery will…	% of services that provide funded ELC	% of services that do not provide funded ELC	% of private providers	% of third sector providers	% of SAC only providers	% overall
Increase	83%	77%	81%	80%	79%	81%
Decrease	0%	0%	0%	0%	0%	0%
Remain broadly unchanged	17%	23%	19%	20%	21%	19%

Premises

68. Respondents to the day care of children survey were asked whether they owned or let the building(s) in which they delivered their service; and whether any of these premises were owned by a local authority.

69. Table 2.9 sets out for the different types of day care of children services the type of building in which their service is delivered, and table 2.10 shows what percentage of respondents let the premises from a local authority.

Table 2.9: Best description of building in which service is delivered (Day Care of Children Services)

Type of Service	Building/all buildings in which service is delivered are rented / provided for a fee from a private owner / charity or church	Building/all buildings in which service is delivered are rented from local authority / other public sector organisation	Other*
Funded ELC service	45%	16%	39%
Service does not deliver funded ELC	32%	43%	25%
Private Services	42%	17%	42%
Voluntary/not-for-profit Services	38%	36%	25%
School age childcare only	29%	45%	26%
Total	40%	27%	33%

*Note: (1) Other options included: Building/all buildings in which service is delivered are provided rent free; Building/all buildings in which service is delivered are being bought with a mortgage; Building/all buildings in which service is delivered are owned outright; or service is delivered over a mixture of owned and let buildings.

Table 2.10: Are any of the buildings in which your service is delivered owned by a local authority? (Day Care of Children Services)

Type of Service	Yes - local authority building subject to free let agreement	Yes - local authority building not subject to free let agreement	No - not local authority building
Funded ELC service	16%	9%	75%
Service does not deliver funded ELC	21%	44%	35%
Private Services	10%	13%	77%
Third Sector Services	25%	33%	42%
School age childcare only	22%	46%	32%
Total	18%	23%	59%

Note: (1) One response has been excluded where respondent did not know if the building was owned by a local authority

Occupancy and Demand

70. The questions relating to occupancy levels provide an indication of changes in demand for services across the sector. Respondents were asked to consider occupancy in terms of the amount of their registered capacity they were currently utilising and comparing this to the position at the same point 12 months ago.

Changes in Occupancy Levels

71. Table 2.11 shows the reported occupancy levels (measured as the percentage of registered capacity being utilised) for the different types of day care of children services at the time of answering the survey. Table 2.12 reports occupancy levels at the same point 12 months ago (from when providers answered the survey). Table 2.13 shows the data at both points in time for childminding services.

Table 2.11: Occupancy Levels (percentage of registered capacity) for Day Care of Children Services at time of survey

Percentage of registered capacity	Funded ELC Service	Service does not deliver funded ELC	Private Services	Third Sector Service	School age childcare only	Total (all day care of children services)
81-100%	55%	27%	42%	45%	24%	44%
61-80%	30%	27%	32%	25%	26%	29%
60% or less	16%	45%	26%	29%	50%	28%

Table 2.12: Occupancy Levels (percentage of registered capacity) for Day Care of Children Services 12 months ago

Percentage of registered capacity	Funded ELC Service	Service does not deliver funded ELC	Private Services	Third Sector Service	School age childcare only	Total (all day care of children services)
81-100%	63%	25%	53%	42%	21%	47%
61-80%	28%	34%	38%	24%	34%	31%
60% or less	9%	41%	9%	35%	45%	22%

Table 2.13: Changes in Occupancy Levels (percentage of registered capacity) for Childminding Services

Percentage of registered capacity	Childminding services (2023)	Childminding Services (2022)
81-100%	47%	59%
61-80%	21%	27%
60% or less	33%	14%

Income and Charges

72. The surveys collected information on changes in both overall levels of income that services received and in the proportion of total income that came from different sources.

Changes in total monthly income

73. In order to enable comparisons to be made, the surveys asked respondents to consider their total monthly income and different income sources at the time of completing the surveys (the column marked 'Current' in table 2.14), and then set out this information as at the same point 12 months ago.

74. Table 2.14 sets out the changes in average total monthly income for day care of children services and childminding services.

Table 2.14: Changes in total monthly income by type of provider

Type of Service	Current Average Monthly Income	Average Monthly Income 12 months ago	Percentage change in average monthly income
Funded ELC service	£38,006	£36,316	5%
Service does not deliver funded ELC	£7,068	£6,643	6%
Private Services	£40,832	£38,563	6%
Third Sector Services	£10,024	£9,932	1%
School age childcare only	£7,635	£7,183	6%
Total (Day Care of Children Services)	£25,284	£24,114	5%
Childminding services	£1,979	£1,983	0%

Income from delivery of funded ELC

75. The surveys asked respondents for the following information:

• What is the current monthly income from payments from your local authority for the delivery of funded Early Learning and Childcare (ELC) hours in your service?
• Of your total monthly income 12 months ago, what was the monthly income from payments from your local authority for the delivery of funded Early Learning and Childcare (ELC) hours in your service?

76. Table 2.15 sets out the changes in average total monthly income from delivery of funded ELC for day care of children services and childminding services.

Table 2.15: Changes in average monthly income accounted for by payments for the delivery of funded ELC, day care of children services and childminding services

Type of Service	Current Average Monthly Income from ELC	Average Monthly Income from ELC 12 months ago	Percentage change in average monthly income from ELC	Current Monthly Income from ELC as % of total income	Income from ELC as % of total income 12 months ago
Funded ELC service	£18,146	£18,199	0%	61%	65%
Private Services	£22,874	£22,127	3%	46%	48%
Third Sector Services	£10,960	£12,228	-10%	84%	91%
Childminding services	£722	£806	-10%	17%	18%

77. Respondents to the surveys were given the opportunity to set out more information regarding any changes in total monthly income (covering all sources of income) for their service over the last year. The key factors raised were:

• Sustainable rates for the delivery of funded ELC considered insufficient to cover current costs of delivery
• Limited possibility to fundraise due to the costs crisis
• Reduction of service users due to parents still working from home and wider costs crisis implications (particularly raised by school age childcare providers)
• A number of providers indicated that last year their shortfall was covered via the Coronavirus Job Retention Scheme and other Government support grants, which have now stopped
• Limited capacity to cross-subsidise income by funded ELC providers
• School age childcare providers highlighted that families were switching to using blended childcare (i.e., funded term-time only provision and family members delivering the childcare through school holidays or at the end of the day), rather than placing their children in formal settings
• A number of childminders reported that children moved to nurseries for their funded entitlement
• Some childminders highlighted that the number of funded hours they were being allocated didn't enable them to operate their services in a financially sustainable way.

Charges to families

78. The surveys intended to capture information on the charges in childcare services, and how they have changed over the last 12 months. We understand that many childcare services offer a variety of sessions, which will have different charges. Some services also offer the opportunity for families to purchase additional hours where they are required.

79. As such, respondents were asked to provide details of the sessions that they offer to children of different age groups across their service by setting out:

• The number of hours of childcare that they deliver in a session
• The total charge for the session.

80. These questions were not mandatory and not all respondents provided this information.

81. The response rate to the surveys didn't enable a disaggregation of the obtained data into different types of day care of children services. Table 2.16 therefore sets out average charges per session type offered to children of different age groups across all day care of children services. Table 2.17 sets out the responses from childminding services. There are some figures in the two tables below that are shown as an asterisk (*) as there were less than five responses for that category, and so the figure has not been included as it is unlikely to be representative of the sector.

Table 2.16: Average Charges per session type (Day Care of Children Services)

Type of Childcare	Morning Session - Total Average Charge	Morning Session - Estimated Average Charge per hour	Afternoon Session - Total Average Charge	Afternoon Session - Estimated Average Charge per hour	Full Day Session - Total Average Charge	Full Day Session - Estimated Average Charge per hour	Charge for Additional Hour of Childcare
Under 2 years old	£34.13	£7.23	£31.79	£7.15	£57.31	£6.21	£7.31
Age 2 years	£43.07	£6.37	£29.95	£6.84	£51.69	£6.83	£7.09
3-5 year olds	£26.44	£5.78	£27.32	£6.20	£49.38	£5.63	£6.95
School age child	£6.34	£4.56	£12.73	£4.51	£12.46	£5.45	*
Holiday childcare for children not yet at school	£24.87	£5.53	£26.52	£5.95	£34.90	£3.93	£6.13
Holiday childcare for school age children	£18.90	£4.06	£18.46	£3.95	£29.73	£3.15	£5.49

Table 2.17: Average Charges per session type (Childminding Services)

Type of Childcare	Morning Session - Total Average Charge	Morning Session - Estimated Average Charge per hour	Afternoon Session - Total Average Charge	Afternoon Session - Estimated Average Charge per hour	Full Day Session - Total Average Charge	Full Day Session - Estimated Average Charge per hour	Charge for Additional Hour of Childcare
Under 2 years old	£26.71	£5.59	£26.48	£5.52	£46.68	£5.06	£5.70
Age 2 years	£26.52	£5.62	£27.36	£5.62	£48.05	£5.04	£5.22
3-5 year olds	£25.17	£5.38	£25.36	£5.84	£46.95	£4.94	£5.22
School age child	£7.37	£5.15	£13.88	£5.03	n/a	n/a	n/a
Holiday childcare for children not yet at school	£27.80	£5.40	£26.00	£5.07	£44.64	£4.95	*
Holiday childcare for school age children	£24.57	£5.03	£26.00	£5.20	£45.86	£4.95	*

82. Respondents were also asked if they had made changes to any of these charges over the last year. Table 2.18 sets out the percentage of services which have increased their charges.

Table 2.18: Percentage of services that have increased charges over the last year (Day Care of Children Services)

Type of Service	% of services that increased charges
Funded ELC service	76%
Service does not deliver funded ELC	60%
Private Services	81%
Third Sector Services	58%
School Age Childcare only	61%
Total	70%

83. Respondents to both surveys were asked if in addition to fees charged for an hour of childcare, there were any other charges that parents and carers may have to pay. Providers were also given the opportunity to set out more information on these charges and whether they had, or planned to, make any changes to them.

84. The majority of day care of children providers indicated that they did not charge parents and carers for additional expenses. Due to a small number of responses to the survey of childminding services, it has not been possible to set out this data for childminders.

85. Where respondents provided further information on these additional charges, the main points raised were:

• Meals and snacks
• Trips and outings
• Registration fees
• Additional classes offered at the service (music, sports classes, and language classes).

86. Only a very small number of respondents indicated that they had made any changes to these charges over the past year. However, the majority of respondents to the day care of children services survey reported that they planned to increase these charges or introduce new charges over the next six months (from answering the survey).

Workforce

87. The surveys asked respondents to provide a range of information relating to their staff. We have also used this as an opportunity to capture more information on staff movement and as to how many services currently pay the real Living Wage, and how many intend to do so in the future.

88. The analysis in this section focuses on staff vacancies and those aspects from the surveys most closely linked to financial sustainability.

Vacancies and Staff Movement

89. Respondents were asked a range of questions relating to the movement of staff in their services including:

• How many vacancies do you currently have?
• Have any members of staff left your service in the last 12 months?
• Have you recruited any new members of staff to your service over the last 12 months?

90. Tables 2.19-2.21 set out the responses to the above questions for day care of children services. Due to a small number of respondents to the survey of childminding services, it has not been possible to set out this data for childminders.

Table 2.19: Do you currently have any staff vacancies in your service? (Day Care of Children Services)

Type of Service	% of responses with a vacancy
Funded ELC service	44%
Service does not deliver funded ELC	36%
Private Services	55%
Third Sector Services	27%
School age childcare only	37%
Total	41%

Table 2.20: Have any members of staff left your service in the last 12 months? (Day Care of Children Services)

Type of Service	Yes	No
Funded ELC service	91%	9%
Service does not deliver funded ELC	70%	30%
Private Services	89%	11%
Third Sector Services	76%	24%
School age childcare only	71%	29%
Total	82%	18%

Table 2.21: Have you recruited any new members of staff to your service over the last 12 months? (Day Care of Children Services)

Type of Service	Yes	No
Funded ELC service	89%	11%
Service does not deliver funded ELC	68%	32%
Private Services	87%	13%
Third Sector Services	75%	25%
School age childcare only	71%	29%
Total	81%	19%

91. The surveys also asked providers about details of movement of staff who had left their service in the last 12 months, as well as their new recruits. Tables 2.22 and 2.23 set out information on staff who had left services, while tables 2.24 and 2.25 provide details of new employees. Due to the sample size, it hasn't been possible to disaggregate the data in tables 2.23-2.25 into different types of day care of children services or set out this data for childminders.

92. The day care of children services survey also asked respondents how many of their new recruits were fully qualified and what method of training did they undertake. Table 2.26 sets out the responses in relation to staff qualifications from providers.

93. Respondents were also given an opportunity to provide more information on whether the need to train and support new recruits had any impact on service delivery in the last year. They highlighted effects on service delivery, including:

• On the quality of delivered care and experience for the children, though providers worked very hard to minimise this
• A financial impact and pressure on current staff members to support new recruits; more time required off the floor for training
• Increased senior staff and management time dedicated to mentoring and induction
• Significant levels of support for new staff members who joined straight from school or college.

Table 2.22: Destination of staff who have left a service in the last 12 months

Type of Service	Left to join another service in the childcare sector	Moved to another job (not in the childcare sector)	Retired / left the labour market	Unknown
Funded ELC service	52%	24%	10%	14%
Service does not deliver funded ELC	45%	38%	11%	6%
Private Services	54%	25%	9%	12%
Third Sector Services	41%	33%	14%	11%
School age childcare only	45%	41%	8%	6%
Total	50%	27%	10%	12%

Table 2.23: Destination of staff who have left a service in the last 12 months to join another service in the childcare sector

	Left to join a service mainly delivering to 0-5 year olds	Left to join a school age childcare service or childminding service	Left to join a private sector childcare provider	Left to join voluntary/not-for-profit sector childcare provider	Left to join a local authority childcare provider
Total	90%	10%	32%	4%	64%

Table 2.24: Previous location of staff recruited to service over the last 12 months

	Joined from another service in the childcare sector	Moved from another job (not in the childcare sector)	Joined direct from school/college/university	Unknown
Total	26%	28%	31%	15%

Table 2.25: Location of staff recruited over the last 12 months who joined from another service in the childcare sector

	Moved from a service mainly delivering to 0-5 year olds	Moved from a school age childcare service or from being a childminder	Moved from an unknown location
Total	50%	12%	38%

Table 2.26: Qualifications of new recruits who joined the service over the last 12 months

Qualification	% of new recruits
Foundation or Modern Apprenticeship	9%
Technical Apprenticeship	0%
Graduate Apprenticeship	0%
SVQ	25%
HN	9%
BA or Masters	3%
Other	4%
Not fully qualified	50%

Payment of the real Living Wage

94. In order to capture information on payment of the real Living Wage across the childcare sector, the surveys asked respondents:

• Do you currently pay at least the real Living Wage to staff in your service?
• Do you intend to pay the real Living Wage to all staff in your service by August 2023?

95. Tables 2.27 and 2.28 provide a summary of the responses to these questions from day care of children services.

Table 2.27: Do you currently pay at least the real Living Wage to staff in your service? (Day Care of Children Services)

Type of Service	Yes - all staff	Yes - staff delivering funded ELC	No
Funded ELC service	56%	25%	19%
Service does not deliver funded ELC	43%	n/a	57%
Private Services	47%	*	*
Third Sector Services	55%	*	*
School age childcare only	39%	n/a	61%
Total	51%	15%	34%

Note: (1) Figures in the table shown as an asterisk (*) indicate that there were less than five responses for that category.

Table 2.28: Do you intend to pay at least the real Living Wage to all staff in your service by August 2023?

Type of Service	Yes	No
Funded ELC service	73%	27%
Service does not deliver funded ELC	59%	41%
Private Services	60%	40%
Third Sector Services	75%	25%
School age childcare only	58%	42%
Total	68%	32%

96. Reasons set out by respondents for not paying all their staff the real Living Wage were:

• The hourly rate that they received from their local authority for delivering funded ELC did not enable payment of the real Living Wage to all staff (sustainable rates paid to services delivering funded ELC include funding to enable payment of the real Living Wage to those staff delivering funded ELC, and it is a business decision for funded providers as to whether they provide the additional resource to uplift the salaries of all workers in their settings, including those not engaged in delivery of the funded entitlement, to the real Living Wage).
• Some respondents indicated that staff working towards qualification were paid at least the National Minimum Wage; with respondents reporting that paying more to staff operating at this level, given the amount of supervision and training support required, would make the business unsustainable.
• Some providers highlighted that this would not be affordable without increasing fees and passing on the cost to parents and carers, which they were reluctant to do.

97. The survey for childminders asked respondents:

• Do you currently pay yourself at least the real Living Wage?
• Please provide an estimate of the average hourly rate that you currently pay yourself in £X.XX per hour.

98. 72% of childminders who responded to the survey reported that they did not currently pay themselves the real Living Wage. Childminders estimated that, on average, they paid themselves £8.21 per hour.

99. The main reasons offered by childminders for not paying themselves at least the real Living Wage were that they were not making enough profit (which determines their overall pay) and limited ability to increase parental charges, as some respondents felt that would result in families leaving their service for a cheaper alternative.

Sustainability Self-Assessment

100. As in the 2021 Health Check, the updated surveys asked respondents to provide an assessment as to how sustainable they viewed their service on a scale of 1 to 10 (with 1 indicating very unsustainable/potential need to close in near future and 10 indicating very sustainable/no concerns). Following this question, respondents were then able to explain the reasons that led them to make their assessment.

101. We compare the provider sustainability assessments at the time of completing the current surveys (February 2023), with the results from the previous Financial Sustainability Health Check (for the majority of respondents this would have been during May 2021).

102. It is important to note that the compared samples vary in size and make up. There were 167 responses to the day care of children services survey in 2021, which represented around 9% of all registered private and third sector services at that time. In contrast, there were 108 responses to the day care of children services survey informing the 2023 update (which represents around 6% of all registered private and third sector services). In addition, in 2021 there were 203 responses to the childminding services survey, which represented just under 5% of all registered childminding services at the time of completing the 2021 survey, as opposed to 58 responses in 2023 (which represents around 1.7% of all registered childminding services).

103. Responses to the 2023 surveys comprised of a higher percentage of funded ELC settings (across both day care of children services and childminding services) in comparison with responses to the 2021 surveys. Table 2.29 sets out a summary of respondents to the provider surveys for both the 2021 and 2023 Health Check exercises.

Table 2.29: Comparison of respondents to the provider surveys in 2021 and 2023 by type of service

Type of Service	% of respondents to 2021 surveys	% of respondents to 2023 surveys	% change in sample make up
Funded ELC service	46%	59%	13%
Service does not deliver funded ELC	54%	41%	-13%
Private Services	51%	49%	-2%
Third Sector Services	49%	51%	2%
School age childcare only	44%	35%	-9%
Childminding service delivering funded ELC	30%	45%	15%
Childminding service not delivering funded ELC	70%	55%	-15%

104. Table 2.30 sets out a summary of the provider sustainability assessments at the time of completing the current surveys (February 2023), and how that compares with the results from the previous Financial Sustainability Health Check (for the majority of respondents this would have been during May 2021).

105. The sustainability assessments have been grouped into three categories depending on their sustainability rating: (1) services with significant concerns regarding sustainability – ratings between 1 to 4; (2) unclear on overall sustainability - ratings of 5 and 6; and (3) sustainable services – rating of 7 or higher.

Table 2.30: Summary of provider sustainability assessment by type of service according to the FSHC 2021 and at time of completing the current surveys (February 2023)

Type of Service	1 to 4 - FSHC 2021	1 to 4 - FSHC 2023	5 to 6 - FSHC 2021	5 to 6 - FSHC 2023	7 to 10 - FSHC 2021	7 to 10 - FSHC 2023
Funded ELC service	9%	31%	27%	28%	64%	41%
Service does not deliver funded ELC	26%	36%	28%	30%	47%	34%
Private Services	19%	42%	30%	28%	51%	30%
Third Sector Services	17%	25%	25%	29%	58%	45%
School age childcare only	29%	42%	25%	26%	47%	32%
Childminding services	28%	22%	27%	38%	46%	40%

106. The key factors raised by respondents to explain their current sustainability assessment were:

• Increased costs of delivery over the last year due to the costs crisis, particularly in relation to significantly higher energy and food prices; and increased mortgage interest rates.
• Whilst income has, on average, increased this has not kept pace with rising costs. Some services are facing pressures on income levels due to reduced occupancy levels (particularly school age childcare providers and childminders).
• Concerns about limited ability to generate additional income streams, as some providers indicated that increasing fees has only had a limited impact on their overall income. A number of respondents also reported feeling reluctant to pass on cost increases to families through higher fees. Some respondents also emphasised that they did not have the capacity to increase the numbers of children attending their service due to the additional staff they would need to employ to keep within the required ratios, or not having the physical capacity in rooms for more children.
• Continued concerns about staffing – in particular providers in the private and third sectors reporting that they could not match levels of pay offered in local authority services, resulting in the loss of practitioners and challenges in recruiting suitably experienced new staff members. Some providers also reported that their current income levels prevented them from having additional staff to cover absences.
• Being a funded ELC provider was considered by a number of respondents as being positive for sustainability – however, some providers felt that the hourly rate that they received from their local authority for delivering funded ELC did not cover their current costs of delivery. A few respondents also noted that a higher contribution of ELC funding to their total income meant they had less direct control of overall income levels, and that any uncertainty over future rates setting timescales and decisions by local authorities would have a greater impact on the overall business. The average reported share of income from funded provision, for services delivering ELC, was 46% for private sector services and 84% for third sector services.
• Payment of the real Living Wage, in particular given the scale of the most recent increase, was highlighted as one of the main challenges for providers delivering funded ELC.
• Concerns about the lasting impacts of the pandemic which have put a significant pressure on financial reserves and the ability to create funds for some providers. A number of respondents indicated that they were currently sustainable but had no surplus for contingency, investment or replacement of resources.
• Some specific challenges for third sector providers were raised, such as costs that are difficult to be quantified in voluntary led, committee based settings.
• A number of childminders highlighted concerns about additional administrative requirements, paperwork and preparation needed.