Early literacy matters: Economic impact and regional disparities in England

A substantial number of children are being let down from an early stage and are not reaching their potential in communication, language, and literacy (CLL) skills. This not only impairs their development and prospects but costs the economy too. 

The early years are the most critical time for the development of a child’s abilities to master language, to read and to communicate. However, with early years settings under pressure and families not receiving adequate support, more than a quarter of five-year-olds in England - 187,000 children – did not meet the expected standard for literacy in 2022/23.

It is likely that many of these children could reasonably have achieved the expected level in literacy if they were provided with more tailored support. The current early years standards were only introduced in 2021/22. This means there is not yet robust evidence on the long-term impact of these children not reaching the expected level for the current standards. However, by linking previous versions of early years literacy assessments to later economic outcomes, it is possible to estimate that an additional 106,000 children could reasonably have achieved the expected level in literacy in 2018/19 if they had received the additional support they needed.

The economic cost of insufficient early literacy support is likely to be significant. Each year group of children who do not meet the expected early years standard generates lifetime economic costs of around £830 million. This equates to £7,800 for each five-year-old who could reasonably have been expected to meet the standard. Much of this loss stems from the knock-on effects on academic success and later employment outcomes. The typical child who does not meet the literacy standard at age five loses out on around £5,300 of earnings over their lifetime and costs the government around £2,500 more over their lifetimes through higher spending on education and welfare, as well as lower tax revenue.

These costs can be particularly important in more deprived communities. The connections between deprivation, literacy skills and long-term employment outcomes can create a cycle of disadvantage – the process by which the life outcomes of people born into disadvantage are worse, which impacts their children’s life outcomes too. For example, the long-term cost of children that do not meet the standard for literacy at age five in more deprived city areas such Birmingham, Liverpool and Manchester is approximately a combined £30 million for each year group of children. But the effects will reverberate within these areas for generations to come.

As a result, solutions to this challenge need to take into account deprivation, and its relationship to weaker home learning environments. There are many reasons for this, with lower income caregivers often possessing poorer literacy skills themselves, having fewer financial resources to spend on age-appropriate books, toys and days out, having less time, living in areas with fewer amenities, and having fewer role models – to name just a few. This weaker home learning environment means that solutions to low literacy among young children should consider the role of communities in supporting early childhood education and care settings.

Community solutions to low early literacy need to combine the best of the public, private and social sectors to make a sustained positive difference. Early years settings can bring expertise and structure, social sector organisations can reach out into the community, and employers can bring their resources to bear to unleash the potential of the next generation of learners.

The ‘Early Words Matter’ campaign from the National Literacy Trust provides an example of such a solution. This campaign targets two-fifths of the most deprived local authorities in the UK with some of the highest numbers of children not meeting the standard for literacy at age five. The National Literacy Trust takes a localised approach, engaging early years settings, employers and local community groups to reach parents and carers and empower them to support their child’s early CLL development. If such an approach is successful, the benefits could last for generations by breaking the cycle of disadvantage.

While the challenge of improving CLL skills for children born now and in the future is substantial, differences in outcomes between regions and local authorities provide hope that it is achievable. We can make a big difference by building on the lessons of what has worked in those areas that are performing well and using this to further shape evidence-based, tailored interventions in areas where children are struggling the most. There are potentially huge gains in creating a more even playing field; the number of children not meeting the expected standard for literacy could be more than halved if the worst performing areas in England were supported to reach the standards of the best performing areas.

Seizing that challenge now is critical. Improvements in children’s literacy performance in England had levelled off prior to 2020. The situation has since been worsened by the pandemic as lockdown limited access to education and care in formal early years settings. The cost-of-living crisis is also likely to have exacerbated this issue, as it has further reduced parents’ ability to support children’s learning at home and has led to fewer parents engaging in home learning activities with their children. Effective community interventions that target early literacy support to children in the most deprived areas of England are urgently needed.

Read the full report

Details on the cost of literacy by local authority

For further detail on Annex D, examine the data here.