Its it usual for children to drop a level in year 3. Dd got levels 3's for everything in year 2. She is in year 4 and has just come home saying she is on kangaroo level 3c, when I asked her about it she said she was 2a last year in year 3. She has targets to get to 3b level (ladybird).
It doesn't seem like she has made very much progress since year 2 really. Our school has recently had an ofstead and while it did very well, the weak area was years 3/4. The y3/4 classes are mixed, all the other year groups are single years.