Nursery costs leave parents struggling to make ends meet

Childcare: Demand for places is fuelling a boom in the industry ? but paying the fees is crippling, even for two-income families

For many women the choice is a stark one. Sacrifice the career to bring up baby. Or sacrifice everything else to afford the fees other people will charge to bring up baby.

For many women the choice is a stark one. Sacrifice the career to bring up baby. Or sacrifice everything else to afford the fees other people will charge to bring up baby.

A startling boom in the childcare industry, highlighted in a new report, has revealed what parents are discovering for themselves: that finding a nursery place is both exorbitant and almost impossible.

While it was once only Eton or Harrow's waiting lists that brimmed with names, now nursery waiting lists are bulging too. So much so that parents are paying up to £100 just to enrol for a nursery. Some parents are doing so before they have even conceived.

The new report reveals the childcare business is now one of the fastest growing in the UK, worth a staggering £2bn a year, a five-fold increase in just a decade. It has made some entrepreneurs very rich and hundreds of thousands of parents increasingly poor.

The average fee for a childcare place is now £113 a week, rising to £151 in London – on average more expensive than private schools. Some nurseries are charging as much as £300 a week. The average cost a decade ago was just £65.

"Childcare is definitely out of reach for most people," said Philip Blackburn, economist and author of the new report by Laing & Buisson, specialist analysts in the health and care industries. "Parents have to make a choice on how much they want to spend. Often that's not even a decision they can afford to make."

Laing & Buisson's findings, based on a survey of 1,500 nurseries around the country, estimates there are now almost half a million children under five going to nurseries. The cheapest average fees – at £95 a week – are in the north east and north of England, rising to £151 in London.

"This report shows the majority of parents in this country haven't a hope in hell of affording childcare," said Megan Pacey, spokeswoman for the Daycare Trust, a national charity that campaigns for affordable childcare.

Ten years ago, one-third of nurseries were run by local councils charging subsidised fees; now their share of the market has fallen to just 6 per cent. Local authorities have sold off or closed down nurseries while places provided by private nurseries have more than quadrupled since 1990. The expansion has been prompted by a huge rise in demand for places. That has been caused in turn by a rise in women in work and an increase in the average age of women giving birth.

All this has made childcare very big business. Last week, Leapfrog, founded four years ago but which now runs 34 nurseries across England, announced it would be the first nursery chain in the UK to float on the London Stock Exchange. The company is now valued at £70m to £80m, not bad considering Sue Husbands, its managing director, spotted a gap in the market while struggling to work as teacher and bring up two children on her own. "You only have to look at the top nurseries to see a lot of money being put in by venture capitalists," said Ms Husbands.

The former Liverpool footballer Rob Jones is now making his living out of his wife's childcare business. He invested £250,000 to fund the Laurels nursery in Warrington, Cheshire. In 15 months, it has doubled in value. "Most footballers go into pubs when they retire," said Mr Jones, 30. "But we saw this as a good investment."

The rising costs and waiting lists will make troubled reading for the Government which is seemingly making few inroads in providing affordable childcare. The Budget on 17 April is expected to set levels for a children's tax credit and follow proposals for baby bonds. But the Daycare Trust is not overly eager. "I don't think there will be anything specifically for childcare in this budget," said Ms Pacey.

According to the report, the Government spends £150m on places for three- and four-year-olds in nurseries – equivalent to 7 per cent of the total market. The subsidy does not pay for full-time childcare, however, but for five two-and-half hour sessions a week.

For new mothers, the message seems to be: dig deep into your wallets if you want to return to work.

'More than half of our joint net income goes towards paying the nursery fees'

Sarah Westcott is a senior editor at a prominent London publishing house on a salary of between £25,000 and £35,000. But she can't remember the last time she was able to pay for a holiday, and she's running her car into the ground because she dare not take it to the garage for fear of a large bill.

She's a successful professional woman and her husband, Euan, a builder in the booming London property market. Yet there is precious little in the bank every month after £1,300 is spent on childcare at the Happy Child Nursery, in Ealing, west London, for their two boys, Jim three, and Paddy, nearly two. "More than half our joint net income goes on paying the nursery fees. We just about manage until there is an unexpected bill like fixing the car or repainting the outside of the house. Then we're scuppered," Sarah says.

While happy with the nursery, the couple is constantly having to reassess the economics of Sarah continuing to work while full-time childcare costs so much. "After the nursery, there is very little left of what I earn. It is totally enraging that childcare costs have to come out of taxed income," she says.

And yet the nursery costs less than most nannies in London, who typically expect at least £350 a week plus their tax and national insurance paid on top. Overall, families can expect to pay at least £2,000 gross a month for a nanny, and then to pay out more for temporary childcare while she is away on paid leave for four weeks of the year.

"We started off with temporary nannies but they were killingly expensive, and then when we just had Jim we tried so many different arrangements to try to reduce the cost and find the right person. But the stress and uncertainty of it all meant that in the end a nursery was the only real alternative," Sarah explains.

Like many young couples, Sarah and Euan do not have any family living nearby to share the burden of childcare. They can only look forward to the days when both boys are in school, and the costs come down. Sonia Purnell

'We won't have any more children because we can't afford it'

Clare Russell, 30, had worked for the NHS for 11 years before she left a year ago to have Connor, now 10 months. Despite all that valuable experience and a desire to return to her job at St Bartholomew's hospital in London, it was simply too expensive for her to go back.

Clare worked out that she would have had just £70 a month left once she had paid the annual £3,500 costs of commuting from Stevenage and the £9,000 nursery fees for Connor.

"We couldn't afford to live in London, but after having Connor I couldn't afford to work in London either," Clare says. "Nor could I work locally, as the salaries are much lower. But I really want to work and in the end I took a paper round and did it pushing Connor round with me in the buggy."

Clare says she does not know how St Bart's will find a replacement for her. "You find that most people in the NHS either have grown-up children, a rich partner or no children at all".

Many young mothers, she believes, are forced out of the jobs market because of the lack of affordable childcare. "Employers should offer a free or subsidised crèche," she says. "We won't have any more children because we can't afford it." Sonia Purnell