Financial Sustainability Health Check of the Childcare Sector in Scotland

Recent Trends in Childcare Services

32. We explore changes across the childcare sector by looking at trends in the number of registered services and registered places (which provides a measure of capacity). Table 1 sets out Care Inspectorate (CI) data on the number of registered services over the period March 2018 to March 2023. Table 2 shows the number of registered places over the same period.

33. There have been a number of factors in the childcare sector that provide important context to the recent trends in registered services across the whole childcare sector, including:

• The total number of children registered with a childcare service – any day care of children and childminding services – gradually declined over the period December 2017 to December 2020. Whilst numbers increased in the year to December 2021 the total number of children registered, for all types of services was still below December 2019 levels. The largest declines have been in the number of children registered with a childminding service. This reflects, in part, the gradual declines in the number of children in each age group each year (and which is projected to continue, according to the Registrar General’s Annual Review of Demographic Trends).
• Many providers – local authority, private, third sector and childminding services – had been preparing for the introduction of the expanded ELC entitlement of 1140 hours, which became statutory on 1 August 2021.

Source: Care Inspectorate Datastore

Source: Care Inspectorate Datastore

34. Overall capacity across the sector (including childminders) in March 2023 is at a similar level to March 2020, reflecting increases in capacity in local authority services as part of the delivery of 1140.

35. The number of registered private and third sector day care of children services has declined in each year over the period March 2018 to March 2023. The rate of decline for third sector services has increased since the start of the pandemic (March 2020). Over the 3 year period March 2020 to March 2023 there has been a 15.6% decline in the number of third sector services. Capacity across third sector services has also declined over this period, but at a lower rate (a fall of 9.4%).

36. Private sector services declined by 4.5% over the same period, whilst there was only a very small decline in the number of registered places in these services (a fall of 0.4%). This trend of larger rates of decline in the number of services relative to the number of places, indicates a move towards larger settings. This is explored further below.

37. The highest rates of decline have been for registered childminding services, which have continued their long-term trend of annual decreases. Since March 2020 there has been a 25.6% fall in the number of childminding services.

What is driving the changes in services and capacity?

38. Annual changes in registrations reflect the difference between the number of new services entering the sector and the number of services leaving the sector. We can monitor these trends using Care Inspectorate registration data. All new day care of children services and childminding services must be registered with the Care Inspectorate. When a service ceases to operate the registration for the service with the Care Inspectorate is cancelled.

39. Not all cancellations will reflect a service leaving the sector, as some may reflect changes in: (1) ownership; (2) classification of the business (for example from private to voluntary/not-for-profit); or (3) location/premises. However, for these situations the service will have to re-register and will be captured as a new registration.

40. Table 3 shows, for each type of service, the overall annual change in registered services and the annual cancellations and new registrations in the year to March each year. Table 4 shows the annual cancellation rates for each type of service for the same period – this measures total cancellations as a proportion of all registered services for each type of service. The tables highlight that for private and third sector services annual cancellation levels since the start of the pandemic have remained similar to previous years. The underlying cancellation rates –– for these services have also remained at similar levels (although there is more variability for third sector services). However, Table 3 highlights that a key driver of the declines in the overall number of third sector services has been a drop, over the last 3 years, in the number of new third sector service registrations. With regards to private sector services there was an initial fall in new registrations at the start of the pandemic, but new registrations have returned to similar levels as reported in the year to March 2019.

41. Similar to third sector services there has been a recent trend in childminding of lower numbers of new services being registered since the start of the pandemic. The cancellation rate for childminding services fell at the start of the pandemic (the year to March 2021) but have been higher in recent years.

42. There has also been a shift in the structure of the sector with a move towards larger services. Service cancellation rates of private and third sector services are higher for smaller services (in particular those with 25 or less registered places). Since March 2018 there has been a move - across private, third sector and local authority services - towards a higher proportion of services being accounted for by larger capacity providers (in particular 51 or more registered places). This has resulted in the majority of smaller services being delivered by local authorities, with local authorities delivering 59% of services with a registered capacity of 25 or less (and 81% of services with a registered capacity of 1-10 places).