Sector researcher Ceeda sets out the findings in its About Early Years Sector Skills Survey, based on research with 557 childcare providers employing 8,511 staff.
Some 55 per cent of private, voluntary and independent sector bosses are short of employees with the desired skills, compared with 13 per cent of employers in wider industry.
An estimated 35,600 early years staff (11 per cent), have skills gaps, compared with four per cent across all sectors.
Providers with skills gaps reported that this is having a negative impact on staff workloads (55 per cent) and making it harder to maintain quality standards (42 per cent).
Despite a clear need for training to increase quality, settings reported plans to decrease spending in this area in the coming year.
In the last 12 months, the training spend across the sector ranged from zero to £10,800, with an average outlay per setting of £600, even excluding staff cover and expenses, Ceeda said.
The forecast spend in the next 12 months averages £525 per setting, and Ceeda warns in the report: "These modest budgets will limit staff development in areas beyond statutory requirements.
The average staff turnover rate is 15 per cent, with more than one in 10 providers reporting rates of 26 per cent or higher, the report states.
One in four employers losing staff said pay was a factor in one or more cases, according to the survey.
Employers reported a more positive picture in other areas:
Following the reinstatement of functional skills equivalents to GCSE English and maths, the proportion of staff qualified to Level 3 or above rose from 71 per cent in 2017 to 76 per cent last year. These estimates remain below DfE estimates of 81 per cent, said Ceeda.
Vocational awards of all levels were up 11 per cent last year, compared with the same period in 2017.
Private and voluntary sector childcare providers employed an estimated 319,000 staff in 2018, up from 2017 estimates of 299,000.
Umbrella body the National Day Nurseries Association (NDNA), claimed that "study after study" was demonstrating the negative impact of insufficient investment in the sector, with low pay given as the main reason.
"Underfunding is undermining efforts to support the development of the workforce and will ultimately have a negative impact on children," said Stella Ziolkowski, the organisation's director of quality and training.
"The fact that over half of all employers have identified skills gaps in their staff and yet spending on training is predicted to fall 12.5 per cent shows just how underfunding impacts directly on the workforce," said Ziolkowski.
"This has a knock-on effect on other staff in nurseries, through increased workloads, but also the children in their care. Children form strong bonds with staff and with some nurseries seeing turnover rates above 25 per cent this impacts on continuity of care which is fundamental to their development.
"The main reason staff give for leaving is low pay.
"We know our members want to be able to offer better pay, conditions and benefits but chronic underfunding from the government is threatening businesses and making this impossible.
"With no increase in funding rates to account for inflation and minimum wage rises, the government is putting more pressure on the workforce and employers when what is needed is more investment and support."
The study comes more than two years after the Department for Education (DfE) unveiled its new early years national funding formula, intended to iron out unfairness in the system and increase the minimum rates allocated to councils for funding its 30-hour childcare offer.