Early years providers are facing significant losses as low occupancy and funding shortfalls hit sustainability, according to analysis by Ceeda.

The Early Years Alliance commissioned the research and has published a new report, The Forgotten Sector, which examines the financial impact of coronavirus on early years providers in England. The report warns of a devastating impact on the sector and mass nursery closures without urgent Government intervention.

Although early years providers have been able to open to more children since the start of June, significantly reduced parental demand for places and limits on how many children providers are able to care for has placed huge financial pressure on settings.

The research shows that, as of 8 June, early years providers in England were operating at average occupancy levels of just 37%, based on data collected through Ceeda's Covid-19 tracker research, compared to 77% in spring 2019.

If the take-up of childcare places continues at this level on average over the next 12 months, providers would face estimated losses of £3.63 per funded two-year-old child per hour (a funding shortfall of 68%), and £2.53 per funded three and four-year-old child per hour (a funding shortfall of 55%). Even if average occupancy levels recover to the April 2019 average of 77%, providers would still be facing losses of £2.01 per hour for funded two-year-olds and 90p per hour for funded three and four-year-olds due to continued under-investment in childcare entitlements.

Early years providers have also not received any extra funding to help them with additional costs linked to Covid-19, such as extra cleaning and PPE.

The report outlines a number of recommendations and calls on the Government to commit to urgent transitional funding to support the sector and ensure that providers are able to remain sustainable during a likely prolonged period of reduced demand and limits on occupancy.

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

“The fact is that the early years sector is at a crunch point, and unless urgent action is taken, we are going to see many, many more settings forced to close their doors over the coming months. This could mean chaos for parents – and particularly mothers – trying to access childcare in order to return to work at a time when the Government is desperately trying to restart the economy.”

“Ministers must now commit to providing the financial support that childcare providers need to remain sustainable throughout this crisis and beyond. Anything less puts the long-term viability of the sector as a whole at risk.”

The full report is available here.

Last reviewed 26 June 2020