Nurseries located in economically disadvantaged areas are expected to be the first to reduce the availability of “free” childcare hours due to increasing operational costs, according to warnings from industry leaders. The Early Years Alliance has highlighted that childcare “deserts”—locations where finding nursery places is particularly challenging—are often situated in less affluent regions, where it is more difficult for providers to maintain financial viability.
Despite the Government’s initiative to expand state-funded childcare, a recent survey conducted by the trade body revealed that 59 percent of early years settings are likely to either decrease the number of places available for three and four-year-olds or completely opt out of offering these funded slots. Nursery leaders attribute this trend to the rising costs associated with new government regulations that prohibit nurseries from charging parents additional fees for non-voluntary meals and trips.
Industry experts have pointed out that these changes, compounded by increased employer national insurance contributions and the minimum wage adjustments announced by Chancellor Rachel Reeves in her October Budget, have rendered the provision of free hours unsustainable. In a survey involving 1,155 senior staff from nurseries, preschools, and childminders, over 90 percent (94 percent) indicated that their establishment is likely to raise fees for hours not covered by government funding in the coming year.
Moreover, more than three-quarters (77 percent) of respondents expressed their intention to introduce or increase charges for optional extras such as diapers, meals, and excursions, while nearly 30 percent (28 percent) signaled that permanent closure might be a possibility within the next year.
Who is Eligible for Free Childcare – and When
Starting in September, working parents of children aged nine months to four years will qualify for 30 hours of free childcare, an increase from the current 15 hours. Parents of children aged three to four are entitled to these 30 free hours, although nurseries receive less public funding for their care.
Neil Leitch, the chief executive of the Early Years Alliance, informed The i Paper that nearly all providers he has consulted are poised to limit available places, with the most severe impacts expected in the poorest regions of the country. In economically deprived areas, nurseries typically have fewer fee-paying parents and a higher number of families depending on government-funded hours. As these facilities grapple with a funding shortfall that fails to account for the upcoming increases in national insurance, they are likely to prioritize fee-paying clients and restrict funded places. In contrast, providers in more affluent areas can impose higher price hikes to offset the funding deficit.
Fees Set to Rise by Double-Digits for Hours Not Covered by Government
Many providers are forecasting significant increases in fees, with some anticipating hikes as steep as 25 percent. If a greater number of childcare providers decide to withdraw from offering funded places, it could lead to a situation where more parents will be compelled to bear the full cost of these services.
Research conducted by the New Economics Foundation indicates that families in deprived areas are already facing challenges in accessing early years education. The study found that local authorities with the highest number of children per childcare place also tend to be the most impoverished regions. Walsall, located in the West Midlands, has the largest childcare desert, with over six children under the age of five for every available childcare slot. This is closely followed by Sunderland in Tyne and Wear, Slough in Berkshire, and Hartlepool in the Tees Valley, where there are more than five children for each available place.
Leitch stated, “The situation will only worsen. There is a clear reason why these areas are classified as childcare deserts: it is simply not financially viable for providers to operate there.” He emphasized that the additional burden of higher national insurance contributions could make these areas even less appealing for providers, leading to further closures.
Nurseries Prioritizing Places for Parents Who Pay Fees
In one nursery managed by the Early Years Alliance, the necessary price increase to cover the elevated national insurance and minimum wage costs would have to be as high as 28 percent. However, this nursery is situated in a community where many parents cannot afford such a hike. Leitch remarked, “In economically deprived areas, providers are acutely aware that they cannot fully pass on the financial impact of insufficient government funding. Therefore, it is unlikely that they will implement drastic price increases; instead, they may find themselves with no option but to close their doors.”
While the Government is exploring the establishment of nursery places within schools in these regions, Leitch believes this will likely not compensate for the loss of private providers. Jonathan Broadbery, the director of policy at the National Day Nurseries Association, noted, “If nurseries are struggling or at risk of closing, it hampers efforts to enhance children’s educational outcomes and makes bridging the attainment gap even more challenging.”
A spokesperson for the Department for Education stated, “Providing every child with the best start in life is central to our mission to dismantle the persistent link between background and success. Through our Plan for Change, we aim to ensure that thousands more children are prepared for school by the age of five. Therefore, despite having to make difficult decisions to stabilize the economy, we are increasing our spending on early years entitlements to over £8 billion next year and announcing the largest ever uplift to the early years pupil premium, raising the rate by more than 45 percent compared to 2024-25. Additionally, we have recently introduced a targeted £75 million grant to support the expansion of government-funded hours starting in September, along with strengthened guidance to ensure that parents do not incur unfair charges when accessing a place.”
