The poll of 1,500 early years providers by the Pre-school Learning Alliance also found that half were still unsure if they would offer the 30 hours of free childcare to three- and four-year-olds per week under the government's expanded scheme.
Just 30 per cent said they definitely planned to do so. By contrast, 98 per cent of the nurseries surveyed offer the current entitlement of 15 hours per week.
The findings reinforce concerns previously raised by early years leaders that lack of capacity and low funding levels will mean many providers will be unable or unwilling to deliver the 30 hours of free childcare when it begins from September next year.
The survey, which included nurseries providing full-time and sessional daycare, childminders and maintained nurseries, also found half of respondents feared the expansion of the free entitlement could force them to close because of the financial pressures it would put on their business.
A total of 58 per cent said they would be financially worse off, and a quarter said the financial implications of the expansion would be “very negative”.
A particular problem is that as demand for free childcare increases there will be less demand from parents for top-up care that providers charge more for to offset lower rates paid by councils and government for the free entitlement.
In addition, 48 per cent of providers said they would offer fewer places as a result of the free entitlement expanding, five times more than said they would increase provision.
Neil Leitch, chief executive of the Pre-school Learning Alliance, said the findings show that the government “has chosen to turn a blind eye to concerns over whether the sector has the capacity to deliver the offer”.
"Given that the move to 30 hours means that most providers will no longer be able to cross-subsidise in order to plug this gap, it’s no surprise that so many are fearing for their future," he said.
“The Department for Education seems to be working on the assumption that the sector will simply fall in line and roll out the offer, whether or not the funding is there to support it – but it cannot expect providers to put the sustainability of their businesses at risk to fulfil a manifesto promise that wasn’t properly thought through."
Last month the National Audit Office’s Entitlement to Free Early Education and Childcare report stated that some nurseries may reduce the number of disadvantaged two-year-olds they look after, as provision for two-year-olds is more expensive.