Financial sustainability health check of the childcare sector in Scotland

Recent trends in childcare services

26. The supporting Financial Sustainability Health Check analytical paper provides details on the recent trends for childcare services in the private, third and childminding sectors.

27. There have been a number of factors in the childcare sector that provide important context, including:

• The total number of children registered with a childcare service – any day care of children and childminding services – has been gradually declining since 2017. The largest declines have been in the number of children registered with a childminding service^[1].
• Many providers – local authority, private, third and childminding services – have been preparing for the introduction of the expanded ELC entitlement of 1140 hours, which became statutory on 1 August 2021.

28. Table 3 sets out Care Inspectorate (CI) data on the number of registered services over the period June 2017 to June 2021.

29. The date covers the period to 30 June 2021. This allows for lags in registration cancellations that were made pre-pandemic to be reflected in the data (services should give the Care Inspectorate 3 months’ notice to cancel their registration).

30. Table 3 highlights 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.
• 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).
• Whilst there has 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).
• There has been an increase in the number of local authority services over the period, reflecting the increase in capacity in this part of the sector to support delivery the expanded ELC entitlement (of 1140 hours).

Source: Care Inspectorate

31. As with other sectors in the economy, in each year some degree of change would occur across all parts of the childcare sector as a result of both cancellations of existing services and registrations for new services. A key focus of the analysis has been to identify where there may be disproportionate impacts as a result of the pandemic, relative to previous broad trends, for some parts of the sector (for example, changes in the rate of cancellations, which can be measured as cancellations as a percentage of total services).

32. The analytical paper provides details of the recent trends in cancellations, and a broad summary of trends in presented in Table 4, which highlights:

• The number of day care of children services (the data is presented in aggregate for all 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 (although the cancellation rate was broadly in line with previous years).
• The number of childminding services being cancelled has declined in each of the last two years. However, the annual change in the number of registered services has been broadly stable in these years reflecting declines in the number of new childminding service registrations over this period.

Source: Care Inspectorate

33. The Analysis and Evidence paper also sets out changes in the overall number of registered places (which is a measure of capacity) across different types of services. This highlights that overall capacity in private sector services has remained broadly unchanged over the period 2017 to 2021. This indicates a small shift across this part of the sector towards, on average, services with slightly higher capacity (this could reflect some providers expanding their capacity, or for new entrants to the sector to have, on average, higher capacity levels than those leaving the sector).

34. Registered capacity across third sector day care of children services was broadly unchanged over the period June 2017 to June 2020. However, registered capacity declined by nearly 4% in these services over the year to June 2021.

35. It will be important to continue to closely monitor these trends particularly as two of the main UK Government financial support measures (i.e. the CJRS and the SEISS) come to an end in September 2021.