New research led by Pro Bono Economics (PBE) and commissioned by KPMG UK, in collaboration with the National Literacy Trust (NLT), reveals a “literacy crisis” fueled by a lack of early years language and communication support. The economic impact is staggering, estimated at £830 million per school year group.

Each year, approximately 106,000 five-year-old children in England fail to meet literacy standards but could with proper assistance. The long-term cost of insufficient literacy skills is estimated at £7,800 per child, including a £5,300 loss in potential lifetime earnings and £2,500 in additional education, social, and welfare spending, along with reduced tax revenue per child. This translates to an annual £270 million loss for the government in increased spending and lower tax revenue per year group.

A significant proportion of these children live in deprived areas, where poverty greatly affects early communication, language, and literacy skills. This has far-reaching consequences for their learning, confidence, well-being, and future prospects.

To address this crisis, the NLT has launched the Early Words Matter campaign, aiming to support 250,000 children in the worst-hit areas and urging the government and businesses to invest in high-quality early childhood education. The PBE research underscores the urgent need for intervention, with the campaign focusing on the most vulnerable communities and families.

The report also highlights the prevalence of low literacy levels among five-year-olds in cities like Birmingham, Liverpool, and Manchester, with each cohort’s lifetime economic cost estimated at around £30 million. Lower-income families face greater barriers to supporting their children’s development, including limited financial resources, parents’ lack of confidence in their own literacy skills, and challenges in accessing amenities due to antisocial behavior or fewer resources.

The COVID-19 pandemic exacerbated these challenges by closing many early years facilities, and isolating parents from their usual support networks. Professionals believe this has worsened communication, language, and literacy skills among children.

Matt Whittaker, CEO of PBE, emphasized the urgency of addressing the issue, particularly its disproportionate impact on children from deprived areas. He stressed the need for cross-sector solutions to overcome this crisis and reduce inequalities for the next generation.