The Bank of England has issued fresh warnings that the UK is approaching a “sharp economic slowdown” this year as it raises interest rates

The cost of living has continued to increase across the UK and interest rates rose to 1% from 0.75%, their highest level since 2009.

Despite this, the Bank of England stated that raising rates is necessary to avoid the possibility of letting inflation get out of control. Households now face soaring energy and food bills and this will directly impact the accessibility of childcare.

Purnima Tanuku OBE, chief executive of National Day Nurseries Association (NDNA) said: “The increase in interest rates and 9% inflation predicted for the coming months could spell disaster for many nurseries and childcare providers. The most providers can hope for from Government is a 3.8% increase which is nowhere near keeping pace with rising costs.

“Recently released government reports show that last year, half of providers were already only breaking even or making a loss while our research with providers suggests it could be much higher.

“With energy costs rising rapidly and inflation to hit a 10% high by the end of 2022, many more nurseries will either have to increase fees or risk closure.

“The government is their biggest customer, paying for funded places for eligible two-year-olds, and all three and four-year-olds. Last month, funding rates to local authorities increased by 17p – for those on the lowest rate, this was a 3.8% rise. We know that many providers won’t receive the full increase which is effectively a cut in income when face with wage rises of more than 6%. Bills for food, energy and other essentials have widened this shortfall.

“We really fear for the early years sector given these new financial forecasts. Nurseries are left with two options: to raise fees again to parents at a time when families especially are already struggling with the cost of living; or to shut up shop. As well as looking again at the funding rates we need the Government to take action where it can, reducing business rates and VAT bills for nurseries to ease these immediate cost pressures.

“All children deserve accessible, affordable care and early education. This will not be possible for all children unless the government pays providers a fair rate that at least covers their ever-rising costs.”