A poll of 816 early years providers across England, conducted by the Early Education and Childcare Coalition and shared exclusively with The i Paper, paints a stark picture of a sector under severe financial strain.
One in five (20 per cent) have had to dip into cash reserves to stay afloat, and a similar proportion are freezing recruitment or pausing expansion plans.
There are also signs that support for children with special educational needs and disabilities is being cut back, with nearly half of providers either already reducing intake for children with additional needs or considering doing so from September.
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Last month, many providers also warned that Labour’s expansion of free childcare will make the situation worse for many parents by forcing some nurseries to close and pushing up prices in others.
From September, working parents of children aged nine months and over in England will be eligible for up to 30 hours of government-funded childcare per week, a policy aimed at boosting employment by helping parents, particularly mothers, return to work.
The changes, launched by the previous Conservative government and continued by Labour, marked a significant shift from prior years when only 15 hours of funded childcare were offered per week for all three- and four-year-olds, and up to 30 hours for children in that age group if both parents worked.
According to the Coalition, which includes organisations such as Save the Children, the Federation of Small Businesses and Mumsnet, government funding rates have failed to keep pace with the rising costs of delivering childcare.
Frontier Economics, which conducted a separate economic analysis for the Coalition, found that the additional costs are hitting providers in disadvantaged areas the hardest.
“We welcome the increase in minimum wage, which is desperately needed, but government funding is simply not enough to cover this and the rise in [national insurance contributions],” she said.
With over a third of providers either limiting or considering limiting funded hours, the Coalition is urging the Government to increase support in the upcoming Spending Review.
Ronan warned that without immediate action, the new entitlements could collapse under the weight of insufficient funding, adding: “The Spending Review is the final opportunity for the government to guarantee the success of September’s roll out.”
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