Of all the early years childcare settings in England, 89% are either probably or definitely increasing their fees this year, research revealed.

Around 70% are also planning on introducing fees for optional extras such as meals or trips. This is double the number that said they were planning to do so in 2019.

Rising costs have been blamed on inadequate Government funding by the Early Years Alliance, which carried out the study.

Yet, at the same time, parents are paying the highest fees of any developed country, according to the OECD.

One in three providers will close

A third of early years settings said it is likely that rising prices will force them to close in the next year. One in four said this was somewhat likely and 9% said it was very likely.

Half (51%) of providers said they recorded a loss in the last year with the average loss amounting to nearly £14,000 in the last 12 months. Two in ten said they broke even and just over a quarter (26%) recorded a profit.

Almost all providers said the Government isn’t providing enough financial support to early years settings.

It has been rumoured that an announcement will be made in the upcoming Budget around the childcare system, and many organisations are putting pressure on the Government to announce reforms to help this sector.

The proposals suggested so far include making the tax-free childcare system easier to use, changing the way those receiving benefits access childcare, and scrapping business rates for private nurseries.

Government funding doesn’t match free hours

One of the main reasons for the financial pressures faced by providers is that Government funding for free childcare places has not kept up with rises in the National Living and Minimum Wage, alongside other cost pressures such as rising energy bills and wider inflation, the Alliance said.

Most children aged three and four are entitled to 30 free hours of childcare a week during term time, and some two-year-olds from low-income families can also benefit.

But 83% of providers said the level of Government funding they receive for three- and four-year-olds for free hours is less than the cost of delivering these places.

A recent study by the Institute for Fiscal Studies (IFS) said providers face an 8% real-terms funding drop in 2024 to 2025 and they had seen no overall real-terms growth to funding in 14 years.

‘Enough is enough’

Neil Leitch, CEO of the Early Years Alliance, said: “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.”