The Professional Association for Childcare and Early Years (Pacey) asked 2,219 early years practitioners - 85 per cent of who were childminders - about how the policy was working in practice.
It found that 41 per cent of childminders and 46 per cent of practitioners in group settings saw their profits fall as a result of taking part in the funded places scheme.
Introduced in September 2017, the policy entitles most working parents of three- and four-year-olds in England to 30 hours of funded childcare. Childcare settings that offer these free places are then paid an hourly rate by their local authority.
Around three quarters of practitioners who took part in Pacey's Building Blocks survey said the hourly rate their local authority pays is not sufficient. Some 44 per cent of childminders told Pacey they do not believe they can keep offering funded places long term and a third already plan to limit the number of free entitlement places they offer families in the future.
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