Early years settings to cap funded hours from September to cut costs, new poll finds
by Jess Gibson
One in 10 early years settings in England warn they are at risk of closure in the next two years due to rising costs, while more than a third of settings are limiting or considering limiting the number of government-funded hours they offer, according to a new poll conducted by the Early Education and Childcare Coalition (EECC).
The EECC poll of 816 early years settings across England also reports that 18% of settings are currently operating at a loss, while 20% have had to use financial reserves to continue running, 27% have paused plans to recruit more staff – with 21.4% of providers considering this in September – and 9% say they are likely to close permanently in the next two years.
The poll also found evidence that support for children with special educational needs and disabilities is being cut back, with nearly half of settings either reducing intake for children with additional needs or considering doing so from September.
The survey results support carried out by Frontier Economics, which has found that measures from the recent budget – including the National Insurance contributions rise – have significantly increased costs for providers, with settings serving disadvantaged children most affected.    
The EECC is calling for the government to use the upcoming Spending Review to properly fund providers to take account of these rises, describing it as the “final chance for government” to act before September’s rollout of the next stage of the early entitlement funding programme.
EECC director Sarah Ronan said: “These results of this survey make for bleak reading. The early years sector has been one of the hardest hit by the Autumn Budget because it has a huge proportion of staff on or close to the minimum wage. We welcome the increase in minimum wage, which is desperately needed, but government funding is simply not enough to cover this and the rise in NICs. In essence, childcare’s biggest customer is short-changing the sector, and it will be families that pay the price. 
“Many providers are telling us that they are operating at a loss, freezing recruitment, and accepting fewer children with SEND. One in ten are likely to close their doors for good in the next two years. And that will hit the wider economy as more parents will be forced out of work. 
“Crucially, over a third are saying they have either limited the number of government funded hours they can offer or are about to do so. And this comes just as demand for childcare is set to peak in September when working parents of nine-month-olds become entitled to 30 hours of provision.  
“The upcoming Spending Review is the final opportunity for the government to guarantee the success of September’s roll out and properly fund providers to take account of their recent Budget measures.” 
Neil Leitch, CEO of Early Years Alliance, said: “We in the sector have long warned that the combined impact of national insurance increases and minimum wage rises would place significant – and unsustainable – financial pressure on early years providers, and so we welcome this comprehensive independent analysis from Frontier proving just that.
“While the government continues to point to increases in early years pupil premium and the new early years expansion grant as proof of its support for providers, we’re clear that these measures, while welcome, don’t come close to addressing the additional costs that settings are now incurring.
“At a time when government is looking to increase funded places, these cost pressures risk achieving the exact opposite, as more and more providers are forced to limit their participation in the entitlement schemes, if not withdraw altogether – and in the worst cases, close permanently.
“We welcome the government’s positive rhetoric on the importance of the early years, but the fact is that warm words won't bridge the widening funding gap. We therefore urge the government to work with the sector to ensure providers receive the investment they urgently need to deliver quality, affordable and accessible provision, both now and in the future."