Many childcare providers will struggle to meet demand for places, says charity

Many childcare providers in England will struggle to meet increased demand for funded places under the Government’s offer, early years leaders have said.

Families who do manage to secure a place are likely to face increased fees and extra charges outside the funded childcare hours because of financial pressures facing the sector, the Early Years Alliance (EYA) and campaigners have warned.

Some parents are considering leaving their jobs or reducing their working hours amid rising childcare costs despite being eligible for new funding which is being phased in from April, according to charity Pregnant Then Screwed (PTS).

Prime Minister Rishi Sunak said last month that all eligible children in England will be able to benefit from the expansion of Government-funded childcare provision which will begin to roll out this spring.

But with just six weeks to go until the first stage of the offer, the EYA has said providers will struggle to deliver enough places to meet demand for the new offer, and settings will be forced to increase fees because of funding challenges.

The EYA, which represents 14,000 members in the early years sector, has called on the Government to recognise the “scale of the crisis” and increase investment to ensure places can be delivered to families across the country.

Chancellor Jeremy Hunt announced in March last year that eligible families of children as young as nine months will be able to claim 30 hours of free childcare a week by 2025.

As part of a staggered rollout of the policy, working parents of two-year-olds will be able to access 15 hours of free childcare from April.

This will be extended to working parents of all children older than nine months from September.

From September 2025, working parents of children under five will be entitled to 30 hours’ free childcare per week.

A survey by the EYA, of 1,196 staff in early years providers in England, found that more than two in three (68%) said their settings are currently full – and just 3% said they had a large number of spaces available.

The EYA survey, of which the majority of respondents were managers or owners, suggested that 19% said it was likely that their setting would opt out of at least some of the early entitlement offers entirely by September 2025.

Among the early years providers planning to offer funded two-year-old places, 86% said they are expecting it to lead to an increase in demand, and of those, 71% are not planning to increase the number of two-year-old places they offer.

More than four in five (86%) of staff in nurseries and pre-schools said the increase in the national living wage from April will have a negative impact on their setting’s finances, and of those, 81% plan to increase fees to parents.

The survey, carried out online between January 25 and February 8, suggested that only two in five (41%) early years settings currently offering places to two-year-olds, and who are planning to continue to do so, had received confirmation of what their funding rate would be from the local authority.

Since the start of January, eligible parents of two-year-olds in England have been able to apply for a code to access the new 15 hours per week of Government-funded childcare which starts in April.

But a number of childcare providers have not yet committed to offering funded places to families as they remain in the dark about local funding rates.

A separate poll by campaign group PTS, of 6,256 parents eligible for the new funding for two-year olds, suggested that 48% have sent their code to their provider but have not had any response as to whether it has been accepted.

Just one in five (21%) parents said they have given their code to their provider and everything has been fine, according to the self-selecting survey by the PTS between February 13 and February 18.

Nearly three in four (71%) parents eligible for the new offer in April said childcare costs have recently increased or are about to increase – and a third (34%) said they were considering leaving their jobs or reducing their hours over increased childcare costs, the survey has suggested.

Danielle, a mother from Cheshire, said: “My little one is two, and we received a letter last week to say that fees will be going up from £65 a day to £86 a day. We are now paying £1,490 a month for four days a week. I’m going to have to leave my job as I simply can’t afford this.

“The 15-hour funding doesn’t kick in until April, which will help slightly, but what do I do right now as I simply can’t afford it. We’re not going to benefit in the slightest from the new government scheme. In fact, we’re now worse off.”

Neil Leitch, chief executive of the EYA, said increased investment and the development of a clear workforce retention strategy was the “only way” to ensure that providers can deliver accessible and affordable early years places.

He said: “With just weeks to go until the rollout of the extended offer, it is clear that despite the government’s continued promises, not all eligible families will be able to access the early years places they need.

“Years of sustained underfunding combined with a worsening staffing crisis and limitations on space means that many providers simply won’t be able to increase places to meet the surge in demand for the new offers, while others will have no choice but to limit the number of places they deliver under the expansion or opt out of the entitlements completely.

“And of course, with so many settings still struggling with the impact of inadequate funding rates in the face of sharp cost rises, even those parents who are able to secure a funded space are still likely to face sharp increases in fees and charges for anything outside of their entitlement hours.”

He added: “So as we approach the 2024 Budget, it is absolutely vital that the government acknowledges and recognises the scale of the crisis we are in and takes definitive action to turn things around. Continuing to deny there is a problem is simply not an option.”

Joeli Brearley, founder of PTS, said: “Unless the funding to providers increases, they will have no choice but to continue charging high fees to make up the shortfall.

“We are therefore calling on the Chancellor to increase the hourly rate, particularly the three-four year old entitlement, in the spring statement next month.”

A Department for Education (DfE) spokesperson said: “We are rolling out the largest ever expansion in childcare support in England’s history, set to save families using the full 30 funded hours an average of £6,900 per year.

“Our average, funding rates for new entitlements are expected to be substantially higher than the hourly fees paid by parents last year, and we are already seeing providers looking to expand their placements across the country.

“We are continuing 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.”