Gillian Paull, Visiting Senior Fellow at CASE, LSE, discusses the recent increase in the minimum wage and its implications for delivering Government-funded preschool places. Her article is being published by the Early Education and Childcare Coalition.

Impacts of Increases in the Minimum Wage on Delivery Costs for Early Years Providers

Following substantial rises in 2024 and 2025, the statutory national Minimum Wage (MW) will increase again in April 2026, rising by 4.1% for workers aged 21 and older. Given the significant proportions of low paid staff working in the early years and childcare sector, these changes have potentially large impacts on settings’ delivery costs and ability to deliver Government funded places for preschool children.

This report uses data from the large-scale and nationally representative Survey of Childcare and Early Years Providers (SCEYP) to estimate that the changes in the MW in April 2026 will increase gross pay in the sector by an average 3.1%, with a substantial part of the impact (1.9%) due to the need to maintain pay differentials for workers paid above the MW as well as a direct effect (1.2%) of bringing pay up to the new legal minimum. This rise in gross pay will increase providers’ delivery cost, on average, by 2.4%, which is in addition to an average 1.0% increase for general earnings growth and a 0.9% increase for inflation in non-staff costs. The 2026 cost increase will follow estimated rises of 5.3% in 2024 and 4.8% in 2025 due to previous changes in the MW and Employers’ National Insurance Contributions. 

You can find out more and read the report on the EECC website.