Capacity issues highlighted for early years providers

Many nurseries don’t feel they will be able to cope with demand for new childcare offerings as part of the Government’s extended childcare package, according to a new survey.

Child playing with toys whilst in chilcare


Most nurseries, pre-schools and childminders planning to offer the new expanded childcare provision for two year olds will be unable to increase places to meet demand, with a notable proportion considering opting out of offering the extended funded hours completely, according to a new survey.

The survey of 1,196 early years providers by the Early Years Alliance comes ahead of the Budget and on the same day as one by Pregnant Then Screwed which shows over a third of parents (34%) who are eligible to receive the new childcare funding for two year olds, are now considering leaving their jobs or reducing their hours due to increased childcare costs.

The Early Years Alliance survey found more than half (55%) of all survey respondents are already full with a waiting list, while a further 13% are full with no waiting list. Just 3% of respondents said they had a large number of spaces available.  The new policy is to be rolled out from April.

Overall, of the 95% of nurseries, pre-schools and childminders currently offering early years places to non-funded two-year-olds, just over two-thirds (69%) are planning to offer these places via the government’s early entitlement offer when the scheme is introduced, with nearly a third either remaining undecided (15%), planning to offer a limited number of funded places and charge privately for the rest (13%), or opt out of the funded offer completely (3%).

Of those providers planning to offer all or some places for two-year-olds under the government scheme, 86% said they are expecting it to lead to an increase in demand. However, of these, seven in 10 (71%) aren’t planning to increase places. Just over one in 10 (11%) are planning to delay the rollout of funded two-year-old places to a later date, with the majority of those (63%) opting for September 2024.

Providers also highlighted that delays in receiving confirmation of their funding rates for April have made it increasingly difficult for them to prepare for the rollout of the new two-year-old offer.

Earlier this month, the government announced plans to introduce new regulations which would require local authorities to confirm funding rates to frontline providers eight weeks after local authority rates have been confirmed. However, at the time of the survey, just over two in five (41%) settings currently offering places to two-year-olds and planning to continue to do so under the government scheme had received confirmation of what their funding rate will be.

Of those providers (59% of all respondents) currently offering places to under-twos, two-thirds (67%) are planning to offer these places via the government’s early entitlement offer when the scheme is introduced in September, with 4% planning to charge for places privately, 12% set to offer a limited number of funded places and charge privately for the rest, and 17% undecided.

Of those planning to offer places for under-twos, 84% are expecting an increase in demand, with around half (53%) expecting a significant increase. However, of these, three-quarters (76%) are not planning to increase places.

Of the remaining providers (41% of all respondents) who do not currently offer places to under-twos, 93% are planning to opt out of delivering the entitlement scheme when the offer is extended to this age group, with a further 4% still unsure.

The survey shows the financial pressure on early years providers. Of the 41% of respondents who had received confirmation of their two-year-old funding rate at the time of the survey, over a third (35%) said that their new rate would still be less than the cost of delivery places, rising to 60% for nurseries and pre-schools.

Of the 46% of nurseries, pre-schools and childminders who had received confirmation of their three- and four-year-old rate at the time of the survey, 76% said it would be less than the cost of delivery, with more than a third (38%) expecting it to be ‘significantly less’.

In addition, 86% of nurseries and pre-schools warned that the upcoming increase in the national living wage would have a ‘somewhat negative’ (28%) or ‘very negative’ (58%) impact on their setting finances. Of those, eight in 10 (81%) plan to increase fees to mitigate this, while 52% intend to introduce or increase optional charges (for example: for trips, meals and snacks).

As a result of these sustained pressures, a quarter (25%) of all respondents said that it was likely or very likely that they will start limiting the number of early entitlement places they offer by September 2025, while around a fifth (19%) said it is likely or very likely that their setting would have opted out of at least some of early entitlement offers entirely by this date.

Around a quarter (24%) of respondents said that it is likely or very likely that their setting will close over the next 12 months.

The Alliance is calling on the government to commit to a further increase in early years investment to ensure that providers are able to meet rising cost pressures while keeping parent fees as low as possible, to establish a mechanism to ensure that funding rates continue to increase in line with provider costs going forward and to develop a clear workforce retention strategy to stem the flow of existing early educators out of the sector.

Neil Leitch, CEO of the Early Years Alliance, said:  “These survey findings should send alarm bells ringing throughout government. 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.”

Rising costs

Meanwhile, the survey from Pregnant Then Screwed of over 11,000 parents with a child under five – including 6,256 parents eligible for the new funding for two year olds – found a third say the new funding for two year olds will save them less than £100 a month due to rising costs and nursery charges for extras such as nappies and almost half (48%) have not heard back from their provider since submitting their code to access the scheme.

Labour party research released earlier this week shows that the cost of early education and childcare has risen a third faster than inflation over the last 14 years.  Early years providers blame years of underfunding of Government subsidies. Meanwhile, the Women’s Budget Group has estimated that the gap between the £4.2bn a year allocated to the Government’s expanded childcare offer once fully rolled out in 2025/26 and the estimated cost of delivering the hours for providers. It says it estimates the funding gap to be £5bn a year from 2025/26.

Meghan Meek O’Connor, senior policy adviser at Save the Children UK, said: “Childcare prices have spiralled with fees the same as housing costs in some parts of the UK. This is leading to debt and career sacrifices for parents and a lack of access to early education for children. The system must change.

“First, the UK Government’s ambitious free hours expansion needs to be funded properly…Ministers must also work out how to create the right hiring conditions to recruit the 40,000 staff needed to hit demand.

“And crucially, the system must also work for parents studying or in training, who are currently completely excluded from accessing free hours.”

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