The Government's latest provider costs analysis concludes that more than half of private, voluntary and independent (PVI) nurseries are only breaking even or, worse still, making a loss.
The report 'Providers Finances: Evidence from the EY provider survey 2018' shows 54% of private providers were only breaking even or making a loss, with this figure a shocking 74% for the voluntary sector.
The findings echo those of the NDNA annual survey when 57% of the sector said they would be making a loss or breaking even.
In the light of the new findings from the provider survey, NDNA Chief Executive Purnima Tanuku OBE is calling on the Government 'to get to grips' with the real picture of childcare costs.
She says: “We have seen several attempts in recent years from the SEED survey in 2015, to Frontier Economics and now this. All give very different answers to the question of how much the delivery of childcare and early education costs.
"Take maintained nursery schools as an example, just four weeks ago Frontier Economics suggested the hourly cost was £5.28 but the Government provider costs analysis report puts it almost two pounds higher at £7.23.
“Providers are not being able to invest in their nurseries or staff and owners are not able to take a wage from their business or being forced to close.
“Across every type of provider the feedback was that the hourly funded rate for three and four year olds was below the hourly fees parents would otherwise pay. Time and again we have warned that underfunding this policy puts providers at risk or pushes costs into other areas.
“It’s clear that the Government must undertake the more detailed analysis this report calls for and link the funding rates it pays to providers to subsequent cost increases like minimum wage increases and business rates rises.”
In the meantime, new research by the Early Years Alliance found frozen funding levels have left two in five providers fearing closure in the next 12 months.
The survey, which received over 1,600 responses, also found that 9 in 10 providers planned on increasing fees either entirely or in part because of upcoming increases to the national living and minimum wages.
Current Government funding levels for Early Years education are based on a cost analysis in 2015 using data from 2012-13, and don't take into account any subsequent cost increases, such as business rate hikes, new employer pension contribution rules and consecutive annual minimum wage rises.
The survey revealed
- Over two thirds of respondents (70%) say their funding rate is lower than the cost of delivering the ‘free’ entitlement to three and four-year olds
- Two in five providers (44%) say the increase in the national and minimum wages may mean they may have to close in the next 12 months
- Providers are paying a heavy price for underfunding with 81% of respondents reporting worries about financial viability having a negative impact on their stress levels and mental health. Six respondents said they had had thoughts of ending their own life.
Neil Leitch, Early Years Alliance Chief executive, said: “The Government has walked the Early Years sector to a cliff-edge and only the Government can pull us back.
"This survey lays bare just how disastrous Government inaction on childcare funding has been: it’s led to increased prices for parents and continues to leave providers with no choice but to close.
"Beneath these headline figures there are hundreds of stories of people at risk of losing their livelihoods having dedicated their career to giving children the best possible start in life and thousands of families simply being priced out of quality childcare.
"It’s now inevitable that, without urgent action on funding, the Early Years workforce and families will suffer: parents will pay more and more for childcare and even more settings will close.
"If ministers want to talk about the importance of a quality early education then they need to put their money where their mouth is and start making sure funding keeps pace with rising costs.”