Nurseries question ability to deliver on funded childcare expansion

The National Day Nurseries Association's (NDNA) 2024 State of the Sector survey, conducted in January, that 54 per cent of 448 nurseries in England are “unlikely to offer any additional places to two-year-olds or were still not sure if they could”. It also found that 56 per cent “could not meet local demand for places”.

The concerns come as the government is set to roll out its expanded childcare offer from April, which will allow all eligible two-year-olds of working parents to access 15 hours of funded care per week, increasing to 30 hours per week for children aged nine months and above from September 2025.

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The survey found that the offer is not aligned with rising costs, as 83 per cent of nurseries said their costs are higher than the funding for three and four-year-old places, with an average shortfall of £2.36 per hour per child.

Fees passed on to families have also increased by 8.5 per cent, according to providers, with staffing costs rising by 14.4 per cent pver the last year. Consequently, 73 per cent of nurseries in the survey expected to make a loss or break even this year.

Purnima Tanuku, chief executive of NDNA, has called on Chancellor of the Exchequer Jeremy Hunt to improve funding for providers in next week's spring budget. 

She said: “A week before this year’s budget, we now know that the majority of early years settings cannot commit to offering additional two-year-old places. We have been calling for the government to address underfunding for years. We can clearly see that increasing hourly rates can have a positive impact, with the numbers of providers saying they cannot cover their costs falling. However, for the vast majority the hourly rates are still not keeping pace with rising costs.

“The chancellor must address the huge challenges facing early years providers and focus on measures to support them. We need sustainable funding rates, the removal of unfair business rates and more capital support if providers are going to survive and thrive.”

Survey respondents said that a higher funding rate in the upcoming budget is needed to make the offer sustainable.

A spokesperson for the Department for Education said: "We are confident in the strength of our childcare market to deliver the largest ever expansion in childcare in England’s history, and we are already seeing providers looking to expand their placements across the country.

“Last year the Institute for Fiscal Studies independently reported that the national average funding rates paid by government for the new entitlements were projected to be substantially higher than the average market rate paid by parents last year.

“We will continue to support providers to deliver each stage of the rollout through increases to the rates we pay, our national recruitment campaign and establishing more qualification routes into the sector.”