Businesses can support working parents and boost their bottom line too
The spiralling cost of childcare – particularly in the critical early years – is harming productivity and worker retention. Businesses can step up and feel the benefits, says Tim Pemberton
British business leaders are rightly focused on productivity, workforce resilience and long-term growth. Yet, there’s a structural issue hiding in plain sight that directly threatens all three: the UK’s spiralling childcare crisis.
In ReGenerate’s new report, we argue that the UK is now facing a generational emergency that should spur action for businesses across the country, as well as policymakers in Westminster.
Worryingly, fertility rates have dropped to 1.44 children per woman, which is the lowest on record and would result in a 48 per cent decrease in the number of adults within two generations.
At the same time, childcare costs remain among the highest in the developed world. Businesses are missing a trick by not going further in their support for working parents, particularly during the early years of 0-5.
This issue matters more than many realise. Without change, the combination of unaffordable childcare and a lack of workplace flexibility risks driving talent out of the labour market, reducing consumer demand and undermining long-term economic growth.
There is, however, a silver lining: British business is uniquely placed to lead the response and can benefit, in the short, medium and long term, from doing so.
£45.5bn in economic benefits
Research from the Royal Foundation’s Centre for Early Childhood finds that better employer support for working parents could unlock £45.5bn in annual economic benefits through improved workforce participation and productivity. That’s not a marginal gain; it’s a transformational opportunity.
And the benefits are not just theoretical. Among businesses that have already adopted family-friendly policies, 86 per cent report fewer unplanned absences. Retention improves, morale increases, and recruitment costs drop. When the average cost of replacing an employee is around £25,000, these are savings that add up fast.
That’s why we’re calling on employers to step up – not out of charity, but as a smart business strategy.
One idea we are proposing is “80-for-90” – allowing parents to return from parental leave on 80 per cent hours while receiving 90 per cent of their salary, until their child turns two.
One idea we are proposing is “80-for-90” – allowing parents to return from parental leave on 80 per cent hours while receiving 90 per cent of their salary, until their child turns two
For two-parent families this would mean 40 per cent more contact time during the working week. It’s a fair and feasible way to help parents reintegrate without compromising care during the critical years of early childhood, when language, attachment and cognitive development are taking shape.
For businesses, 80-for-90 would help retain the best talent by softening the cliff-edge that often emerges in the transition back into work. Shorter working weeks can lead to higher efficiency, lower absenteeism and minimal impact on output, while reducing payroll for parents on the policy by 10 per cent.
Another idea is “Banked Family Hours”, offering staff two additional hours a month to attend important family moments. It costs virtually nothing, yet signals trust and flexibility — two of the most prized workplace values for today’s talent.
When employers ease the pressure on working parents, children benefit too. Decades of evidence show that the early years are critical for cognitive, emotional, and physical development – by age three, a child’s brain has grown to around 85 per cent of its adult size. Business support during this window has a ripple effect far beyond the office.
This is especially vital between a child’s first and third birthdays when there is a significant policy gap for working parents; this is a period when parents still have additional need but no additional support.
It’s here that businesses can have the most impact and where targeted policies like flexible schedules, enhanced leave, or even on-site childcare partnerships can help working parents stay in and thrive in the workforce.
Supporting working parents isn’t a burden, it’s a real-terms investment in people, in productivity, and in the long-term prosperity and security of the UK.
Tim Pemberton is director at ReGenerate and lead author of “How Businesses Can Support Working Parents”