Nurseries, pre-schools and childminders in England are warning of substantial increases in parent fees this year.

Rising costs alongside inadequate government funding has put significant and unsustainable pressure on the early years sector, a new survey by the Early Years Alliance has found.  

The survey which ran online from 10 to 23 January 2023 and received 1,156 responses from early years providers, found that an overwhelming majority of respondents (89%) are probably or definitely increasing their fees this year. Of those who have not yet increased fees, but have a rough or clear with an average planned fee increase of 8%. 

In addition, almost seven in ten (69%) are planning to either increase or introduce charges for optional extras, such as meals or trips – more than double the proportion of respondents who said they were planning to do so in an equivalent Alliance survey in 2019 (39%). 

The survey also found that more than a third of pre-schools, nurseries and childminders say it is likely that rising costs will force the closure of their setting within the next year, with a quarter (25%) describing this as “somewhat likely” and almost one in ten (9%) stating it would be “very likely”.  

Over recent years, government funding for the so-called ‘free childcare’ offers has failed to keep up with sharp increases in the national living and minimum wages, alongside other cost pressures such as rising energy costs and wider inflation. This has put considerable pressure on the sector, with the IFS recently warning that early years providers are set to face an 8% real terms funding drop for the early entitlement offer in 2024/25 compared with last year.  

More than four in five (83%) survey respondents stated that the level of government funding they receive for the three-and-four-year-old early entitlement offer is less than the cost of delivering places, while nearly three quarters (73%) said the same about the two-year-old offer. As a result, around half (51%) of settings surveyed recorded a loss in the last year with the mean average loss amounting to nearly £14k in the last 12 months, while around two in ten (22%) broke even and just over a quarter (26%) recorded a profit.  

Nearly all of those surveyed (99%) said the government isn’t providing enough financial support to early years settings. 

Commenting, Neil Leitch, chief executive of the Early Years Alliance, said:  

“The early years sector in this country is in crisis. As our survey findings clearly show, current levels of government funding are nowhere near enough to support the delivery of affordable, sustainable quality care and education. As a result, nurseries, pre-schools and childminders are being left with an impossible choice: substantially increase fees for parents and carers or go out of business altogether. 

“With inflation still sky-high, and the national living wage set to increase by record levels in just a couple of months, this situation is only going to get worse unless the government takes urgent action.   

“The government talks about the importance of education, of giving children the best start in life, of supporting families and of encouraging people back to work. What possible reason, then, do ministers have for continuing to completely ignore the very sector that does precisely that? 

“Enough is enough. Providers deserve better, parents deserve better and, crucially, children deserve better.  

“It is vital, therefore, that the upcoming Spring Budget includes a clear plan for the future of early education and childcare in this country, underpinned by the substantial additional investment needed to ensure the sustainability of the early years. The sector simply won’t survive anything less.”  

Participant comments

“For the first time since the setting opened, we are at risk of closure. I cannot keep paying my staff an appropriate wage when I have to balance increasing bills. I do not want to pass all the costs onto parents, and fear that if I do then their children will not attend so the end result will be the same. I do not understand how any business can be expected to support such a huge percentage increase in salaries. The other options are to reduce how much we spend on food and resources which goes against everything I believe in and the purpose of running the pre-school.” 

“We are a setting that has always paid staff above the minimum wage – this has helped us recruit good practitioners who have continued to be employed with us for a number of years. But we have a shoestring budget and have used all our resources to reduce outgoings. We are situated in a deprived area where our provision is very popular and used by the local community but if we don’t receive additional funding, we will have to make redundancies and will face potential closure. Local supermarkets are paying employees more than we can afford. How are our children supposed to get the best start in life if early years settings are not acknowledged?” 

“The pressures are increasing and the hourly rate rising in April puts another nail in the coffin – our rent has also increased by 25% an hour. We have reduced most things and are not replacing staff who have left. It is extremely difficult as we are in a deprived area and are the only lifeline for families who are struggling.”