The child should be in full time education, certainly by September. The school have noticed the situation, and will pursue it if the child continues to miss school.
You are right to be concerned because your daughter's problems are affecting her daughter, and may develop into school refusal. I have seen this happen to the daughter- in- law, step- grandchild (who never attended school after the age of eleven) and grandchildren of a friend. The seven year old is now suffering school refusal, encouraged by her mother, but the school have put in place a contract whereby the child has to attend the school for part of every day, with a great deal of support, but serious consequences if the family do not participate. This is for the good of the child; during the lockdown all the responsibility fell on the grandmother, who has serious health issues, so home education is not a good option.