One in 10 childcare providers in England are facing closure and more than half are struggling to cover their costs, according to government research into the impact of the cost of living crisis on the sector.
The findings fuel concerns about the sector’s capacity to grow to meet the government’s £4bn expansion of the free childcare offer, outlined in this year’s budget.
Currently, parents who work more than 16 hours a week and earn less than £100,000 are entitled to 30 hours of free childcare per week for three and four-year-olds . The government has promised to expand the scheme to include all children aged nine months by 2027-28.
Neil Leitch, chief executive of the Early Years Alliance, said instead of putting more pressure on the sector by making ever bigger promises of free childcare, the government should focus on -fix the problems in the current system, created by years of underfunding and neglect.
The Department for Education (DfE) report, based on a November survey of 1,857 providers, found that 10% of those who took part thought they were “likely” to close due to cost pressures, while 2% said that they plan for almost the next six months.
Almost half (47%) say their income is not enough to cover their expenses, up from more than a third (35%) in winter 2021. Staff costs and energy bills are primary drivers of increasing cost pressure.
Three in five providers (62%) have introduced fees to help ease cost pressures, while nine in 10 (89%) have tried to cut costs, with 70% reducing spending on food, materials, or equipment and 56% to cut energy consumption.
The DfE report also highlighted the recruitment crisis facing much of the sector. Two-thirds (64%) of providers who participated in the survey said they experienced staffing issues in the past year, with most having to spend more time and money finding staff.
The research was published on Thursday as another report by two national think tanks, Coram Family and Childcare and the Joseph Rowntree Foundation, warned that the government’s childcare reforms would not benefit higher incomes. families and risk worsening outcomes for poor children.
The report states: “Current proposals to expand child care focus on providing more care to support working parents but not on supporting poor children or improving the quality of care. – child care.
“Funding is spread too thinly to make the quality step change needed and is unfairly targeted at higher income families.”
Leitch said the DfE’s research showed “how dangerous the government’s plan to expand so-called ‘free childcare’ offers is”.
He continued: “When almost half of providers say their income does not cover costs, one in 10 say imminent closure is likely and the majority report staffing challenges, then it is clear that the existing system does not work at all.
“Worse, as the report highlights, despite the best efforts of providers, continued cost pressures and an urgent need to reduce costs are now beginning to affect the quality of education and care they can provide.
“While it is true that providers have been hit hard by the cost of living crisis, there is no doubt that years of government inaction have created the current catastrophic situation.”