The Early Years Alliance (EYA) poll of more than 1,000 nurseries and childminders, predicts a stalling of the government's expansion of funded places that was initiated by the Conservatives and is being continued by the Labour administration.
“These survey findings should set alarm bells ringing across government,” said Alliance chief executive Neil Leitch, adding: “At a time when ministers are looking to significantly expand the early entitlement scheme, we have a huge proportion of providers warning that the exact opposite is likely, with many forced to limit funded places or opt out of the offers entirely due to unsustainable financial pressures.”
One in six providers responded that they could opt out all together of offering funded places for three- and four-year-olds.
Only a third of those offering 15-hour-a-week places for two-year-olds will extend these to 30 hours a week, when this element of expansion comes into force from September.
As well as facing a shortage of places, parents could see rising fees with more than nine in 10 providers looking to increase fees for non-government funded hours. Four in five are looking to introduce or increase optional charges, such as for food, nappies and activities.
Updated government rules on charging for extras is another factor in settings' decisions to cut funded places on offer and raise prices over the next year.
This impact was foreseen by the Alliance when the ban on mandatory charges, such as such as food, non-consumables and activities, was announced - with the government hoping that the changes would mean those less able to afford extras would not be deterred from accessing the entitlement.
Though the Department for Education's intention was to promote 'Cheaper childcare', the social media campaign angered providers who said the measures would have the opposite effect, because charging for extras went some way to subsidising the government-funding shortfall.
From next year, all providers must provide a breakdown to families on invoices of any optional charges, which are set to be increased by more than three quarters of settings surveyed.
Early years providers should either be exempt or compensated for increases to National Insurance employer contributions, says the early years body, adding that rates for funded places should be tied long-term to cost rises.
One provider told the Alliance: “We try and keep costs as low as possible as a charity pre-school, but with increasing expenses and a minimal funding increase, I do not know how the next year or two will go, adding: “If there is a similar increase of national minimum wage next year and the funding rate does not match this percentage, we will probably close.”
Another said: “We cannot run at a loss year on year. The increases this year in staffing costs (NI and living wage) plus the increases in energy, rent, food and resources mean the setting is no longer sustainable unless we reduce funded places and increase our fees.”
June O'Sullivan, chief executive of London Early Years Foundation (LEYF), which, like the Alliance runs settings in some of the most deprived areas, said that financial pressures are "reaching a critical point" for some providers and called for a sustainable funding solution to be found to ensure "all children can access quality early years education and care".
"Without immediate action, we risk losing essential early education spaces that families – particularly those from disadvantaged backgrounds – depend on, along with the critical availability of secure spaces for babies," she added.
