Four in 10 providers see fall in profits due to 30 hours childcare initiative

Research conducted for the Department for Education by Frontier Economics and the University of East London found that among more than 1,700 providers across 12 local authority areas, 39 per cent had experienced a reduction in their profit or surplus due to offering the extended hours, which are funded by the government.

Under the government's 30 hours childcare initiative, around 330,000 three- and four-year-olds have had their funded childcare entitlement doubled from 15 to 30 hours a week since September 2017.

Early years organisations and MPs have previously warned that government funding for the flagship initiative does not cover the full cost.

Researchers compiling the report on the first year found that 62 per cent of providers charged a higher hourly fee for parents than they received in funding. As a result, 41 per cent of providers had increased their hourly rate parents have to pay for childcare above the 30 hours.

The research also revealed more than half of providers (56 per cent) had introduced extra charges to make up for losses, for additional items such as lunch and snacks. Meanwhile, almost half of the settings offering the scheme (48 per cent) were also placing restrictions on when parents could take up the funded hours.

The report concluded: "The offer was not completely flexible or free for all parents."