One in 10 childcare providers in England likely to close, official report finds

One in 10 childcare providers in England is facing closure and more than half are struggling to cover their costs, according to the government’s research into the impact of the cost of living crisis on the sector.

The findings will fuel concerns about the capacity of the sector to grow to meet the government’s £4bn expansion to its free childcare offer, which was outlined in the budget this year.

Currently, parents who work more than 16 hours a week and earn less than £100,000 are entitled to 30 hours of free childcare a week for three- and four-year-olds. The government has pledged to expand the scheme to include all children over the age of nine months by 2027-28.

Neil Leitch, the chief executive of the Early Years Alliance, said rather than piling more pressure on the sector through ever-bigger promises of free childcare, the government should focus on fixing problems in the current system, created through years of underfunding and neglect.

The Department for Education (DfE) report, based on a survey last November of 1,857 providers, found 10% of those who took part thought it was “likely” they would have to close due to cost pressures, while 2% said they planned to close in the next six months.

Almost half (47%) said their income was not sufficient to cover their costs, up from just over a third (35%) in winter 2021. Staffing costs and energy bills were the main drivers of growing cost pressures.

Three out five providers (62%) had put up fees to help ease cost pressures, while nine in 10 (89%) tried to cut costs, with 70% reducing spending on food, materials, or equipment and 56% cutting energy consumption.

The DfE report also highlighted the recruitment crisis facing many in the sector. Two-thirds (64%) of providers who took part in the survey said they had experienced staffing issues in the past year, with the vast majority having to spend more time and money on finding staff.

The research was published on Thursday as another report by two national charities, Coram Family and Childcare and the Joseph Rowntree Foundation, warned the government’s childcare reforms would disproportionately benefit higher income families and risked worsening outcomes for disadvantaged children.

The report says: “The current proposals to expand childcare prioritise the provision of more care to support working parents but do not support disadvantaged children or improve childcare quality.

“Funding is spread too thinly to enable the step change in quality that is needed and is unfairly targeted towards higher income families.”

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Leitch said the DfE research showed “just how risky the government plans to expand the so-called ‘free childcare’ offers are”.

He went on: “When nearly half of providers say their income is not covering costs, one in 10 say imminent closure is likely and the vast majority are reporting staffing challenges, then it’s clear that the existing system simply isn’t working.

“Worse still, as the report highlights, despite providers’ very best efforts, continued cost pressures and an urgent need to reduce costs are now starting to impact the quality of education and care they are able to offer.

“While it’s true that providers have been hit hard by the cost-of-living crisis, there’s no doubt that it is the years of government inaction that have created the current catastrophic situation.”

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