A survey of 430 childcare providers across the capital, including private and voluntary nurseries, childminders and after-school clubs, found that 39 per cent were worried about parents not being able to pay fees while 32 per cent said the ability of parents to pay was the factor putting most financial strain on their service.
One in three settings cited local authority cuts as one of the top five problems they face; while half reported increased running costs and decreased demand for places.
Anand Shukla, acting chief executive of the Daycare Trust, said: "A sustainable network of local, high-quality and affordable childcare throughout our capital is essential, not just for the finances of ordinary working families but also for the strength of the economic recovery.
"However, childcare costs in London are the highest in the UK and now childcare providers are joining parents in speaking out against this. The recent cut to the amount of childcare support available through tax credits means that childcare is becoming even less affordable.
"If the government truly wants a flexible labour market and for welfare reform to make work pay for parents, it needs to think again about the support it provides to parents for childcare costs."
The majority of nurseries and pre-schools (51 per cent) believed that the 15 hours of free entitlement to childcare for three- and four-year-olds has had a "very positive" or "positive" effect on their setting.
But the biggest concerns in the sector varied with different settings. For 55 per cent of childminders, implementing the Early Years Foundation Stage was the biggest issue, while out-of-school clubs worried most about staff recruitment, retention and pay. For nurseries the level of free entitlement funding administered through the Early Years Single Funding Formula was the biggest worry.
