This is an audio transcript of the FT News Briefing podcast episode: ‘UK childcare in crisis’

Marc Filippino
Good morning from the Financial Times. Today is Thursday, December 22nd and this is your FT News Briefing.

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Big US tech companies are ditching their European offices and investors have taken Tesla’s stock down a peg. Plus, childcare costs in the UK have become a crisis for families. We’ll look at the impact.

Claer Barrett
It just doesn’t seem like the government are doing anywhere near enough about it. And all the while, the birth rate is dropping.

Marc Filippino
I’m Marc Filippino. And here’s the news you need to start your day.

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American technology companies have been expanding for years. Now, they’re shrinking — or at least their office spaces. Sources tell the FT that top tech names like Alphabet, Meta and Salesforce are looking to abandon leases in London and Dublin. And Amazon and Microsoft have put their London expansion plans on hold. It’s all about cost-cutting right now. Tech giants are adjusting to a cooling global economy and drop in the value of their shares. The empty office space will add to a pretty big headache for landlords. Commercial real estate values have tumbled on both sides of the Atlantic because of rising interest rates and people continuing to work from home.

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[SOUND OF PROTESTERS SHOUTING “WHAT DO WE WANT? FREE CHILD CARE!”]

Marc Filippino
British families took to the streets this past autumn to protest the cost of childcare. Childcare in the UK is the most expensive in the world. That’s according to the Organization for Economic Co-operation and Development, the OECD. Parents spend up to two-thirds of their weekly take home pay on out-of-home care for toddlers, and availability for childcare is shrinking. The FT’s consumer editor, Claer Barrett, investigated her country’s childcare crisis and devoted an entire episode of her Money Clinic podcast to the issue. She joins me now. Hi, Claire.

Claer Barrett
Hi, Marc. Good to speak to you.

Marc Filippino
Good to speak to you too, Claire. So, what are childcare costs like for British families?

Claer Barrett
Well Marc, it’s a total nightmare. Three quarters of parents, according to a recent survey, are spending more on their monthly childcare bills than on their mortgage or rent. Now, while school, when your child reaches the age of five, is free, if they go to a statement facility, the care up till then at nurseries, preschools — parents have to pay for. Now there’s no financial support at all for the under twos. If you’re on a very low income, you can get some help when your child celebrates their second birthday. But for most parents, you’ve got to wait until your child is three before you get any assistance from the government. And then it’s not really very much money.

Marc Filippino
Well, that does sound like a nightmare. So you and your team went and investigated a little bit more into why costs are so high. Where did you go and what did you find?

Claer Barrett
Yeah, well, we went to visit a pre-school in north London called Little Jewels.

[SOUND OF TEACHER AND KIDS SINGING]

It’s a relatively low cost childcare facility. It’s attached to the back of a church. There’s a big open room with about 30 to 40 children and six or seven staff. They’re all in different groups. One group of ten kids is singing along with two staff members. One kid is on his own, making a cake out of Play-Doh, and another group is eating fruit with another staff member. We spoke to the manager of this pre-school. Her name is Vlora Arifi.

Vlora Arifi
And I have been working here for the last sixteen years.

Claer Barrett
A review says her costs have risen across the board. They’ve had to raise fees. But one of the toughest things is finding staff.

Vlora Arifi
Due to some choosing to work in a retail shop as they prefer to do an easier job, rather than work with children that is not paying as much as a retail job. Because working with children, as well as being such a wonderful job and such a proud job to do, at the same time is very challenging.

Claer Barrett
And part of the reason wages are so low is because of the way government funding for nurseries works. You see Marc here in the UK, parents of children over the age of three years old get government funding for 30 hours of childcare per week per child. Now that funding goes directly to the childcare centre or pre-school, but it’s not enough to cover wages.

Vlora Arifi
We are paid only £6 something per hour, which obviously that’s not even the minimum wage of a staff member’s pay.

Marc Filippino
That is insanely low. Like, how can someone survive on that salary Claire, unless they’re living at home or are living off someone else’s salary?

Claer Barrett
Well, the facility has to top it up, so that it is the minimum wage. But to do that, they’ve got to get the parents who are paying for more care to cross-subsidise the ones who are getting those free hours. And the thing is, during Covid, the government only gave out funding for places that were actually being occupied by children. And because so many children were kept out of nurseries during that time, the nurseries found themselves with way less government support.

Marc Filippino
Wow. So right now, Claire, how our parents coping with the rising cost of childcare and the shortage of childcare facilities, what kind of impact is all of it having on them?

Claer Barrett
Well, it’s having a massive impact and I have to say an outsized one on women who tend to do more of the primary care. Now, I spoke to one mother who was coming to the end of her maternity leave. Her name is Jess.

Jess
What are you monkeys doing? (children giggling)

Claer Barrett
She has got a three-year-old daughter Bea, and she told me that when Bea was one, her maternity leave ended and she planned to go back to her job at a charity. But then she calculated that she would have to spend almost all of her £30,000 a year salary on, guess what, the cost of childcare. So the only alternative she thought she had was to cut her working hours.

Jess
One of the reasons that we agreed I’d go back part time is because I’m kind of in the sweet spot where I pay minimal tax. I haven’t quite hit that student loan repayment threshold yet, so I’m kind of like maximising my income from that respect and obviously greatly reducing my childcare costs.

Claer Barrett
But it’s a sacrifice for her own personal career ambitions.

Jess
I really love having the time with my daughter, but actually really love my job as well. And I think I probably I’m quite maybe angry or hold some resentment about that because I feel like I don’t have any other choice.

Marc Filippino
So women have to make some really tough career choices. That’s something I know women in the US also have to deal with. Are there other effects of unaffordable childcare?

Claer Barrett
Unfortunately, yes. Now, another person who we interviewed on Money Clinic is Joeli Brearley, who runs an organisation called Pregnant then Screwed. Brilliant name. That’s the group that you heard at the top of the show who organised that protest march.

Joeli Brearley
One of the most devastating findings is that in a survey we did with 1600 women who had terminated a pregnancy in the previous five years, almost two-thirds said childcare costs were a factor in their decision. I mean, that that is devastating. And one in five said that childcare costs were the main reason that they had an abortion.

Claer Barrett
It’s just a truly horrific statistic, Marc, isn’t it? I mean, I had to take a moment after we recorded that interview with Jolie and just go outside and have a little cry, frankly. I mean, one in five people. These were children that were wanted. And for financial reasons, it just hasn’t been possible. Then you’ve got the parents who we spoke to on the podcast who had a child, but now their finances are absolutely up against it. It’s just a really awful situation. And for the amount of pain and hurt that it’s causing, it just doesn’t seem like the government are doing anywhere near enough about it. And all the while the birth rate is dropping.

Marc Filippino
Incredibly important topic to be reporting on right now. Thank you so much, Claire.

Claer Barrett
Thanks for having me on.

Marc Filippino
Claer Barrett is the FT’s consumer editor. She hosts the FT’s Money Clinic podcast, special thanks to the FT’s Persis Love, who helped produce this segment. We’ll include the link in the show notes to the whole episode that Money Clinic did on the cost of childcare in the UK.

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Before we go. Tesla’s market value has fallen below ExxonMobil’s for the first time since 2020. Analysts say the flight from Elon Musk’s electric car company to Big Oil is part of a wider pivot. Investors are turning from growth stocks like Tesla to value stocks like commodity producers. Exxon and other oil companies have enjoyed record profits this year because of high oil prices. Now, if this sounds familiar, it’s because this trend is one we’ve seen before. The shift to value is one that investors often make during economic downturns.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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