·       Wasted potential of 106,000 five-year-olds in England who could have met expected standard of literacy with more tailored support

·       Two-fifths of these children live in deprived areas, highlighting the role early years literacy plays in driving social mobility

·       Research launches alongside the National Literacy Trust’s new campaign, Early Words Matter, calling on public, private and social sectors to commit to working together to drive change for our most vulnerable children

Cross-society failure to support early years communication and language development is leading to a literacy crisis for children as young as five. This could be costing the economy up to £830 million for every year group starting school through the loss of lifetime earnings and increased government spend, according to a new study.

The new research by Pro Bono Economics (PBE) was commissioned by KPMG UK in collaboration with the National Literacy Trust. It estimates that around 106,000 five-year-olds in England in a single year group did not meet the expected level of literacy, but could reasonably have achieved the expected standard if provided with the right support early on. 

The findings come as the National Literacy Trust launches its new five-year campaign, Early Words Matter, which offers early support to 250,000 children in the most disadvantaged areas of the country, while also raising awareness of the critical role the early years play in social mobility.

The PBE report found that insufficient literacy skills support early on will generate economic costs of around £830mn over the lifetimes of each year group of five-year-olds, or £7,800 per child on average. This comprises of a £5,300 loss in potential earnings per child over their lifetime, and £2,500 in additional education, social and welfare spending and reduced tax receipts for the government. For each school year group, the government will lose an estimated £270 million – £50 million in increased education and welfare spending and £220 million in lower tax take.

These costs are expected to increase without action, as the number of children impacted is likely to have grown in recent years. A greater number of families have been unable to access the right early years support in the wake of the pandemic and the cost of living crisis.

In certain areas of England with greater levels of deprivation, the economic costs were found to be particularly high. Two-fifths (43,000) of children not meeting the expected level of literacy live in deprived areas of the country. 

In Birmingham, Liverpool and Manchester, more than a quarter of five-year-olds have low levels of literacy. Across these three cities alone, the total lifetime economic cost of five-year-olds not meeting the expected standard for literacy is around £30mn for each school reception year group.

Families experiencing poverty work hard to get what is best for their children, but are less likely to have the resources, information and confidence to create the stimulating and engaging environment needed to develop crucial early communication, language and literacy skills. For example, lower income parents may be less confident in their own literacy skills, be less able to afford age-appropriate books, and struggle more with competing time pressures, among other factors.

National Literacy Trust’s Early Words Matter campaign calls on the Government and the business community to commit to working together to provide better early years support to families from disadvantaged communities. It is endorsed by members of the National Literacy Trust’s national Business Council, made up of senior leaders from businesses as diverse as KPMG, Greggs, WHSmith, British Land, and Very Group. 

Matt Whittaker, CEO of Pro Bono Economics, said:

“That so many young children are reaching Reception so far behind in basic reading and communication skills should raise alarm bells everywhere. Many of the costs of the cross-society failure on early literacy are borne by children from the most deprived areas of our country, reinforcing inequalities for the next generation. Cross-sector solutions are essential to support families, early years settings and communities to overcome the literacy crisis.”

Jonathan Douglas CBE, CEO of the National Literacy Trust, said:

“We know that experiencing poverty has a huge effect on a child’s early communication, language and literacy skills, and that this will have consequences for their learning, their confidence, their wellbeing, and their ability to thrive for the rest of their lives. Today’s research confirms the dire need for immediate intervention and the National Literacy Trust’s pioneering early years campaign, Early Words Matter, will get to the heart of the problem by working directly with the communities and families that need our help the most. That’s why we are urgently calling on both the Government and the business community to commit to supporting our campaign to reach 250,000 young children in the next five years with flagship programmes and local community outreach in areas worst hit by poverty and the cost-of-living crisis. If we act now, together we can help change the story for children across the country.”

Rachel Hopcroft, Partner and Head of Corporate Affairs at KPMG UK, said:

“The importance of early years language skills cannot be underestimated, forming the basis of children’s ability to read and communicate with confidence. At age five, far too many children are needlessly falling short of the expected standard, before they’ve even been given a proper chance in life. As Pro Bono Economics’ research makes clear, this not only impacts our economy, but it curtails access to career opportunities and earnings potential later in life - especially among those from deprived backgrounds. 

“As a firm, we are determined to drive opportunity in our communities, ensuring that where you’re from or your background does not dictate your life chances. Literacy forms a key building block of social mobility, and as a business we work with experts like the National Literacy Trust as we recognise the role we must play in making equal opportunities a reality for all.”

Read the full report