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• 68% of all respondents say they are currently full 
• Of the 86% of respondents planning to offer funded two-year-old places who are predicting an increase in demand, 71% aren’t planning to increase the number of two-year-old places they offer

• 86% of nurseries and pre-schools say that the upcoming increase in the national living wage  will have a negative impact on their setting finances, and of those, eight in 10 (81%) plan to increase fees to mitigate this
• 19% of all respondents say it is likely or very likely that their setting will opt out of at least some of early entitlement offers entirely by September 2025 
• 24% of all respondents said that it is likely that their setting will close over the next 12 months  

�°������ϲʹ������� across the country will struggle to meet increased demand for funded early years places under the upcoming entitlement expansion as a result of staffing and space shortages, a new survey by leading membership organisation the Early Years Alliance has found.  

In the March 2023 Budget, the government announced plans to expand the funded entitlement offer to children from eligible working families aged two-year-olds from April 2024 and to eligible children aged nine months onwards from September 2024. 

However, with under six weeks until the first phase of the rollout, an Alliance survey of 1,196 early years providers shows that unaddressed capacity and funding challenges mean than most nurseries, pre-schools and childminders planning to offer the expansion will be unable to increase places to meet demand, with a notable proportion considering opting out of offering the extended funded hours completely. 

CAPACITY CHALLENGES 

More than half (55%) of all survey respondents are already full with a waiting list, while a further 13% are full with no waiting list. Just 3% of respondents said they had a large number of spaces available. 

New two-year-old offer 

Overall, of the 95% of nurseries, pre-schools and childminders currently offering early years places to non-funded two-year-olds, just over two-thirds (69%) are planning to offer these places via the government’s early entitlement offer when the scheme is introduced, with nearly a third either remaining undecided (15%), planning to offer a limited number of funded places and charge privately for the rest (13%), or opt out of the funded offer completely (3%). 

Of those providers planning to offer all or some places for two-year-olds under the government scheme, 86% said they are expecting it to lead to an increase in demand – however, of these, seven in 10 (71%) aren’t planning to increase places. Just over one in 10 (11%) are planning to delay the rollout of funded two-year-old places to a later date, with the majority of those (63%) opting for September 2024. 

Funding rate confirmation: �°������ϲʹ������� also highlighted that delays in receiving confirmation of their funding rates for April have made it increasingly difficult for them to prepare for the rollout of the new two-year-old offer.  

Earlier this month, the government announced plans to introduce new regulations which would require local authorities to confirm funding rates to frontline providers eight weeks after local authority rates have been confirmed. However, at the time of the survey, just over two in five (41%) settings currently offering places to two-year-olds and planning to continue to do so under the government scheme had received confirmation of what their funding rate will be. 

Nine-month-old offer 

Of those providers (59% of all respondents) currently offering places to under-twos, two-thirds (67%) are planning to offer these places via the government’s early entitlement offer when the scheme is introduced, with 4% planning to charge for places privately, 12% set to offer a limited number of funded places and charge privately for the rest, and 17% undecided. 

Of those planning to offer places for under-twos when the scheme expands from September 2024, 84% are expecting an increase in demand, with around half (53%) expecting a significant increase. However, of these, three-quarters (76%) are not planning to increase places. 

Of the remaining providers (41% of all respondents) who do not currently offer places to under-twos, 93% are planning to opt out of delivering the entitlement scheme when the offer is extended to this age group, with a further 4% still unsure. 

FINANCIAL PRESSURES 

The survey painted a stark picture of the financial pressure on early years providers. Of the 41% of respondents who had received confirmation of their two-year-old funding rate at the time of the survey, over a third (35%) said that their new rate would still be less than the cost of delivery places, rising to 60% for nurseries and pre-schools. 

Of the 46% of nurseries, pre-schools and childminders who had received confirmation of their three- and four-year-old rate at the time of the survey, 76% said it would be less than the cost of delivery, with more than a third (38%) expecting it to be ‘significantly less’. 

In addition, 86% of nurseries and pre-schools warned that the upcoming increase in the national living wage would have a ‘somewhat negative’ (28%) or ‘very negative’ (58%) impact on their setting finances. Of those, eight in 10 (81%) plan to increase fees to mitigate this, while 52% intend to introduce or increase optional charges (for example: for trips, meals and snacks). 

As a result of these sustained pressures, a quarter (25%) of all respondents said that it was likely or very likely that they will start limiting the number of early entitlement places they offer by September 2025, while around a fifth (19%) said it is likely or very likely that their setting would have opted out of at least some of early entitlement offers entirely by this date. 

Around a quarter (24%) of respondents said that it is likely or very likely that their setting will close over the next 12 months. 

RECOMMENDATIONS 

Ahead of next month’s Budget, the Alliance is calling on the government to commit to: 

• commit to a further increase in early years investment to ensure that providers are able to meet rising cost pressures while keeping parent fees as low as possible 
• establish a mechanism to ensure that funding rates continue to increase in line with provider costs going forward 
• develop a clear workforce retention strategy to stem the flow of existing early educators out of the sector  

Commenting Neil Leitch, CEO of the Early Years Alliance, said: 

“These survey findings should send alarm bells ringing throughout government. With just weeks to go until the rollout of the extended offer, it is clear that despite the government’s continued promises, not all eligible families will be able to access the early years places they need.  

“Years of sustained underfunding combined with a worsening staffing crisis and limitations on space means that many providers simply won’t be able to increase places to meet the surge in demand for the new offers, while others will have no choice but to limit the number of places they deliver under the expansion or opt out of the entitlements completely.  

“And of course, with so many settings still struggling with the impact of inadequate funding rates in the face of sharp cost rises, even those parents who are able to secure a funded space are still likely to face sharp increases in fees and charges for anything outside of their entitlement hours.  

“We have long warned that no expansion of the early entitlement offers would be workable in practice unless pre-existing challenges were properly addressed. And while we recognise that ministers have taken some steps to try and address the sector’s concerns – including the recent recruitment campaign – there is still so much more to do to address the wider systemic issues with the current system. 

“If the extended entitlement policy is going to have any chance of success, the government needs to urgently address the financial and capacity challenges facing providers. This means increased investment and the development of a clear strategy for supporting not just recruitment, but also the retention of the existing early years workforce. Simply put, this is the only way to ensure that providers will be in a position to deliver the affordable, accessible, sustainable quality early education places that families need.” 

“So as we approach the 2024 Budget, it is absolutely vital that the government acknowledges and recognises the scale of the crisis we are in and takes definitive action to turn things around. Continuing to deny there is a problem is simply not an option.” 

Provider survey comments: 

“This expansion is going to put even more pressure on an already, stretched and underfunded sector … Adding more children to the mix will only be adding fuel to a burning building, and eventually it will come falling down.” 

“The funding for two-year-olds and under-twos is being rushed through by the government with no understanding or thought as to the impact this will have on settings. Parents think that there are spaces available, but our setting - like the majority of settings in our area - is having a staffing crisis with no suitable applicants coming forward to fill our vacancies which then in turn puts pressure on our staff. I am also worried about delivering the 30 hours from September 2025 and its financial impact on our setting.” 

“I can’t offer any more places as I’m working towards capacity.” 

“Chronic sector underfunding has zapped me of all innovation and enthusiasm to keep the plates of a PVI [private, voluntary or independent] early years setting spinning. Our loyal staff and our children deserve the best and we are unable to deliver that. It’s criminal.” 

EDITOR NOTES

The survey was carried out online between 25 January and 8 February 2024.

 

KEY SURVEY FINDINGS

 

How would you best describe where you work in the early years? 

Nursery, 18% 

Pre-school, 36% 

Childminding professional, 43% 

Maintained nursery school, 0% 

Primary school nursery class, 0%  

Out of hours club, 0%  

Children’s centre, 0%  

Specialist provision,0%  

Other, 2%  

 

How would you best describe your role within your setting?

Owner only, 7% 

Both owner and manager, 21%  

Manager only, 43%  

Deputy manager, 5% 

Early years teacher/professional/Level 6 educator, 4% 

Room leader, 1% 

Level 4 or 5 educator, 1%  

Level 3 educator, 2% 

Level 2 educator, 0%  

Level 2 assistant, 0% 

Unqualified educator, 0% 

Apprentice, 0%  

Other, 15% 

 

Does your setting currently offer early entitlement places to disadvantaged two-year-olds?  

Yes, 84%  

No, 16%  

 

[Asked to those who answered yes to the previous question] How does your current two-year-old funding rate compare to the cost of delivering places?  

Our funding rate is significantly more than the cost of delivering places, 3%  

Our funding rate is somewhat more than the cost of delivering places, 9%  

Our funding rate is slightly more than the cost of delivering places, 24% 

Our funding rate is the same as the cost of delivering places, 13%  

Our funding rate is slightly less than the cost of delivering places, 15%  

Our funding rate is somewhat less than the cost of delivering places, 17%  

Our funding rate is significantly less than the cost of delivering places, 19% 

 

Does your setting currently offer early entitlement places to three-and four-year-olds?  

Yes, 93%  

No, 7%  

 

[Asked to those to answered yes to the previous question] How does your current three- and four -year-old funding rate compare to the cost of delivering places?  

Our funding rate is significantly more than the cost of delivering places, 1%  

Our funding rate is somewhat more than the cost of delivering places, 1%  

Our funding rate is slightly more than the cost of delivering places, 6%  

Our funding rate is the same as the cost of delivering places, 7%  

Our funding rate is slightly less than the cost of delivering places, 14%  

Our funding rate is somewhat less than the cost of delivering places, 25%  

Our funding rate is significantly less than the cost of delivering places, 46%  

 

[Asked to those who answered any ‘less than’ answer in the previous question] What steps are you likely to take to cover this shortfall? Please select all that apply.

Increasing fees, 67%  

Introducing or increasing optional charges (e.g. for trips, meals and snacks), 58%  

Fundraising, 28%  

Extending opening hours, 5%  

Reducing opening hours, 4%  

Reducing staff numbers, 13%  

Temporarily closing rooms, 1%  

Permanently closing rooms, 0%  

Limiting the intake of children, 22%  

Move to term-time only (if currently all-year-round), 3%  

Temporarily closing the entire setting, 0%  

Permanently closing the entire setting, 4%  

Freezing or limiting staff pay (if applicable), 12%  

Reducing staff training (if applicable), 18% 

Reducing spending on equipment and resources, 49%  

Other, 7%  

 

Have you received confirmation of what your setting’s three- and four-year-old funding rate will be from 1 April 2024?  

Yes, 46%  

No, 46%  

Unsure, 8%  

 

[Asked to those who had received confirmation of their three- and four-year-old rate] What is your current three- and four-year-old hourly funding rate?

Average £5.10 

 

[Asked to those who had received confirmation of their three- and four-year-old rate] What three- and four-year-old hourly funding rate rate will you receive from 1 April 2024.  

Average £5.32 (4.3% increase) 

 

[Asked to those who had received confirmation of their three- and four-year-old rate]  When your new three- and four-year-old funding rate comes into effect, how do you think it compare to the cost of delivering places from April 2024 onwards?  

Our funding rate will be significantly more than the cost of delivering places, 1%  

Our funding rate will be somewhat more than the cost of delivering places, 2%  

Our funding rate will be slightly more than the cost of delivering places, 10%  

Our funding rate will be the same as the cost of delivering places, 10%  

Our funding rate will be slightly less than the cost of delivering places, 16%  

Our funding rate will be somewhat less than the cost of delivering places, 22% 

Our funding rate will be significantly less than the cost of delivering places 38%  

Unsure, 3%  

 

How does the overall number of places across all age groups you currently offer compare to demand at the moment?"  

We are full, with a waiting list, 55%  

We are full, but with no waiting list, 13%  

We have a small number of spaces available, 22%  

We have a moderate number of spaces available, 8%  

We have a large number of spaces available, 3%  

 

TWO-YEAR-OLDS

 

Do you currently offer places to non-funded two-year-olds?  

Yes, 95% 

No, 5%  

 

[If currently offering places to non-funded two-year-olds] Are you planning to offer government-funded places to two-year-olds from eligible working families once the early entitlement offer is extended to this group of children, or to continue to charge for these places privately? 

I / we plan to offer these places via the government’s early entitlement scheme, 69% 

I / we will continue to charge for the places privately, 3%  

I / we plan to offer a limited number of places via the government’s early entitlement scheme and charge privately for the rest,13%  

Undecided, 15%  

 

[If not currently offering places to non-funded two-year-olds] Are you planning to offer government-funded places to two-year-olds from eligible working families once the early entitlement offer is extended to this group of children?  

Yes, 42%  

No, 28%  

Not sure, 30%  

Unsure, 9%  

 

[Asked to all respondents not planning to offer funded two-year-old places under the new entitlement] Despite deciding not to offer the new early entitlement for two-year-olds, have you received requests from parents to do so?  

Yes, 58% 

No, 42%  

 

[Asked to all respondents not planning to offer funded two-year-old places under the new entitlement] Why have you decided not to?

I / We would like to offer funded places to eligible two-year-olds but are unlikely to be able to, 36%  

I / We don’t want to offer funded places to eligible two-year-olds, 64%  

 

[Asked those who said they would like to offer places to eligible two-year-olds but are unlikely to be able to] Why do you think you will be unable to increase the number of places for two-year-olds at your setting? Please select all that apply.

Space limitations, e.g not enough space in certain rooms or the setting overall, 38% 

Staffing constraints, 54%  

Financial constraints, 69%  

Other, 8%  

 

[The following questions were asked to those who are planning to offer government/funded places to two-year-olds]  

To what extent do you agree with the following statement: “The government’s decision to introduce the 15-hour-offer for two-year-olds from 1 April 2024 has given our setting sufficient time to prepare to deliver places.”  

Strongly agree,11%  

Agree, 6%  

Neither agree nor disagree , 44%  

Disagree, 11%  

Strongly disagree, 28%  

 

Have you received confirmation of what your setting’s two-year-old funding rate will be from 1 April 2024?  

Yes, 41%  

No, 50%  

Unsure, 9%  

 

[Asked to those who answered yes to the previous question] Will your two-year-old funding rate increase or decrease in April 2024 compared to your current two-year-old rate?  

Increase, 78% 

Decrease, 22%  

 

What is your current two-year-old hourly funding rate?

Average £7.00  

 

What hourly funding rate for disadvantaged two-year-olds will you receive from 1 April 2024?

Average £7.73  

 

What hourly funding rate for two-year-olds from working families will you receive from 1 April 2024?

Average £7.69  

 

How will your new two-year-old funding rate compare to the cost of delivering places?

Our funding rate will be significantly more than the cost of delivering places, 9%  

Our funding rate will be somewhat more than the cost of delivering places,18%  

Our funding rate will be slightly more than the cost of delivering places, 24% 

Our funding rate will be the same as the cost of delivering places, 12%  

Our funding rate will be slightly less than the cost of delivering places, 15%  

Our funding rate will be somewhat less than the cost of delivering places, 11% 

Our funding rate will be significantly less than the cost of delivering places, 9%  

Unsure, 2%  

 

Are you expecting to start offering new two-year-old funded places in April 2024 or at a later date?  

In April 2024, 89%  

At a later date, 11%  

 

[Asked to those who answered previous question with ‘at a later date’] When do you expect to start offering funded two-year-old places under the new offer for working families? 

May 2024, 6%  

June 2024, 4%  

July 2024, 0%  

August 2024, 3%  

September 2024, 63%  

October 2024, 0%  

November 2024, 0%  

December 2024, 0%  

January 2025, 3%  

Later than January 2025, 3%  

Undecided, 19%  

 

Are you expecting the expansion of the early entitlement offer to result in an increase in demand for two-year-old places at your setting?  

Yes, a significant increase, 46%  

Yes, a moderate increase, 25%  

Yes, a small increase, 15%  

No, 5%  

Not sure, 9%  

 

[Asked to those who answered the previous question with any increase option] Are you planning to increase the number of two-year-old places offered at your setting to meet the expected increase in demand?  

Yes, 12%  

No, 71% 

Not sure, 17%  

 

[Asked to those who answered ‘no’ to the previous question] Why are you not planning to increase the number of places?  

I / We already have enough capacity to meet the expected increase in demand, 12% 

I / We would like to offer more places but are unlikely to be able to, 43%  

I / We don’t want to offer more places, 11%  

Other, 35% 

 

[Asked to those who answered I/We would like to offer more places but are unlikely to be able to] Why do you think you will be unable to increase the number of places for two-year-olds at your setting? Please select all that apply.  

Space limitations, e.g not enough space in certain rooms or the setting overall, 62% 

Staffing constraints, 66% 

Financial constraints, 35% 

Other (please specify), 13%  

 

UNDER-TWOS

Do you currently offer places to under-twos?  

Yes, 59%  

No, 41%  

 

[Asked to those not currently offering places to under-twos] Are you planning to offer government-funded places to under-twos from eligible working families once the early entitlement offer is extended to this group of children?  

Yes, 3% 

No, 93% 

Not sure, 4%  

  

[Asked to those not offering places to under twos and not planning to when entitlement expands] Despite deciding not to offer the new early entitlement for under-twos, have you received requests from parents to do so?  

Yes, 21%  

No, 80%  

 

[Asked to those not offering places to under twos and not planning to when entitlement expands] Why have you decided not to? Please briefly explain your answer.  

I / We would like to offer funded places to under-twos but are unlikely to be able to, 18%  

I / We don’t want to offer funded places to under-twos, 82%  

 

[Asked if answered previous question with I/we would like to offer funded places to Under twos but are unlikely to be able to] Why do you think you will be unable to offer places for under-twos at your setting? Please select apply that apply.  

Space limitations, e.g not enough space in certain rooms or the setting overall, 77% 

Staffing constraints, 62% 

Financial constraints, 53%  

Other (please specify), 17%  

 

 

[Asked to those currently offering places to under-twos] Are you planning to offer government-funded places to under-twos from eligible working families once the early entitlement offer is extended to this group of children, or to continue charging for these places privately?

I / we plan to offer these places via the government early entitlement scheme, 67% 

I / we will charge for the places privately, 4%  

I / we plan to offer a limited number of places via the government’s early entitlement scheme and charge privately for the rest, 12%  

Undecided, 17%  

 

[The following questions were asked to those who are planning to offer government/funded places to under-twos]  

Are you expecting the expansion of the early entitlement offer to result in an increase in demand for places for under-twos at your setting?   

Yes, a significant increase, 53%  

Yes, a moderate increase, 21%  

Yes, a small increase, 10%  

No, 7%  

Not sure, 9%  

 

[Asked if answered any ‘increase’ option in previous question] Are you planning to increase the number of places for under-twos offered at your setting to meet any increase in demand?  

Yes, 10%  

No, 76%  

Not sure, 14%  

 

[Asked to those who answered ‘no’ to the previous question] Why are you not planning to increase the number of places offered to under-twos?  

I / We already have enough places to meet the expected increase in demand, 11% 

I / We would like to offer more places but are unlikely to be able to, 36%  

I / We don’t want to offer more places, 11%  

Other (please specify), 42%  

 

[Asked to those who answered: I/We would like to offer more places but are unlikely to be able to] Why do you think you will be unable to increase the number of places for under-twos at your setting? Please select all that apply.  

Space limitations, e.g. not enough space in certain rooms or the setting overall, 56% 

Staffing constraints 48% 

Financial constraints, 16%  

Please explain your answer, 43%  

 

Have you received confirmation of what your setting’s under-twos funding rate will be when the offer is extended to this age group in September 2024?  

Yes, 27% 

No, 64%  

Unsure, 9%  

 

[Asked to those who answered yes to the previous question] How will your under-twos funding rate compare to the cost of delivering places?  

Our funding rate will be significantly more than the cost of delivering places, 33%  

Our funding rate will be somewhat more than the cost of delivering places, 0%  

Our funding rate will be slightly more than the cost of delivering places, 0%  

Our funding rate will be the same as the cost of delivering places, 0%  

Our funding rate will be slightly less than the cost of delivering places, 33%  

Our funding rate will be somewhat less than the cost of delivering places, 0%  

Our funding rate will be significantly less than the cost of delivering places, 33%  

Unsure, 0% 

 

FINANCIAL CHALLENGES

In the Autumn Statement, the government confirmed that the national living wage is to increase from £10.42 to £11.44 an hour, and to be extended to 21- and 22-year-olds, on 1 April 2024.What financial impact do you think this increase will have on your setting? 

Very positive, 1%  

Somewhat positive, 2% 

Neither positive or negative, 26% 

Somewhat negative, 23%  

Very negative, 38%  

Unsure, 11%  

 

[If answered any negative answer to the previous question] What steps are you likely to take to mitigate this negative impact? Please select all that apply and briefly explain your answer. 

Increasing fees, 80%  

Introducing or increasing optional charges (e.g. for trips, meals and snacks), 52%  

Fundraising, 38%  

Extending opening hours, 7%  

Reducing opening hours, 5%  

Reducing staff numbers, 24%  

Temporarily closing rooms, 2%  

Permanently closing rooms, 1%  

Limiting the intake of children, 16% 

Move to term-time only (if currently all-year-round), 1%  

Temporarily closing the entire setting, 0%  

Permanently closing the entire setting, 5%  

Freezing or limiting staff pay (if applicable), 20%  

Reducing staff training (if applicable), 25% 

Other (please explain below), 8%  

 

Based on your current forecast for the upcoming financial year, how likely is it that, by September 2025, you will start limiting the number of early entitlement places you offer and charge privately for some children who might otherwise have been offered funded places?  

Very likely, 12%  

Likely, 13% 

Unlikely, 23%  

Very unlikely, 15%  

Unsure, 34%  

We have already started limiting funded places, 3%  

   

Based on your current forecast for the upcoming financial year, how likely is it that, by September 2025, you will have opted out of some or all of the early entitlement offers completely?  

Very likely, 7% 

Likely, 12%  

Unlikely, 24%  

Very unlikely, 19% 

Unsure, 34%  

We have already opted out of some or all early entitlement offers, 3%  

 

[Asked the following three questions to those who had already opted out of some or all of the early entitlement offers] Have you opted out of offering any of the early entitlement offers within the last two years?  

Yes, 50% 

No, 50% 

 

Please indicate using the table below which of the existing entitlement offers you: a) never previously offered; b) currently offer; c) stopped offering within the past two years; d) stopped offering more than two years ago  

 

 

&�Բ�����;	Three-and four-year-old (working families) &�Բ�����;	Three- and four year -old (universal) &�Բ�����;	Two-year-old (disadvantaged) &�Բ�����;
Never previously offered	86%	71%	57%
Still offer	56%	78%	67%
Stopped offering within the past two years	50%	33%	67%
Stopped offering more than two years ago	80%	40%	80%

 

 

Why have you already you opted out of some or all of the offers? Please select all that apply.

Staffing constraints, 23%  

Inadequate funding rates, 82%  

Negative impact of LA funding payments timings, 41%  

Administrative burden of offering funded places, 27%  

Lack of demand from families, 5%  

Other (please explain below), 27%  

 

[Asked the following two questions if planning to opt out of some of the early entitlement offers] Please indicate using the table below which of the existing entitlement offers you: a) do not currently offer; b) currently offer and are likely to continue to offer; c) currently offer but likely to stop offering in the future  

 

 

&�Բ�����;	Three-and four year old (working families) &�Բ�����;	Three- and four year -old (universal) &�Բ�����;	Two-year-old (disadvantaged) &�Բ�����;
Do not currently offer &�Բ�����;	67%	58%	82%
Currently offer and likely to continue to offer &�Բ�����;	74%	79%	80%
Currently offer but likely to stop offering &�Բ�����;	71%	71%	30%

 

 

Why are you considering opting out of some or all of the early entitlement offers? Please select all that apply.

Staffing constraints, 31%  

Inadequate funding rates, 89%  

Negative impact of LA funding payments timings, 28%  

Administrative burden of offering funded places, 35%  

Lack of demand from families, 5%  

Other (please specify below), 6%  

 

[Asked to all respondents] How likely do you think it is that your setting will close over the next 12 months?  

Very likely, 5% 

Somewhat likely, 19%  

Somewhat unlikely, 38% 

Very unlikely, 37%  

We have already confirmed we will be closing, 1%  

We have already closed, 0%