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By Rachel Lawler

The Government should review funding rates for the 30-hours offer, according to a new by the Federation of Small Businesses (FSB).

 

The report, titled Handle with Care, considers the impact of recent childcare policies on the childcare sector. It said small childcare providers were “struggling to make ends meet” and recommended a review of funding rates for the 30-hours offer and annual reviews to reflect rising costs.

 

Increased staff wages, higher business rates and rising operating costs were said to weigh “particularly heavily” on small childcare providers.

 

The report says: “Rising staff costs and a significant shortfall between the funding they received from their local authority and the fees they charged parents, is leaving many providers having to find ways to address the gap and supplement their income.”

 

The FSB also recommended a 100% business rate relief for childcare providers, and reduced costs for mandatory training. It also called for improvements to the Childcare Service and Childcare Choices websites.

 

Mike Cherry, national chairman at the FSB, said: “The success of the 30 hours free entitlement depends on small childcare providers, which make up the majority of the marketplace, being able to provide an affordable, high-quality offer to parents.

 

“But many are struggling financially, hit hard by a heady mix of rising business rates, operating costs and staffing costs, driven inadvertently by different ministerial decisions. Changes to rates, the National Living Wage and the doubling of employer auto-enrolment pension contributions are now combining to undermine the viability of much of the sector.”

 

Neil Leitch, chief executive of the Alliance, said: “This report paints a stark picture of a government policy that has left many small childcare providers struggling to stay afloat.

 

“The fact is government’s 30 hours sums just don’t add up. Many providers have been left with the stark choice of charging parents to make up the shortfall or face closing their business, while others are dependent on voluntary contributions and fundraising to stay afloat. This is simply no way to run a business and it is unacceptable that so many childcare settings have been put in this impossible position.

 

“Until funding rates match the true cost of providing high quality childcare, the government’s flagship policy has little chance of succeeding. It is vital that ministers now face facts and commit to investing what’s needed to ensure the sustainability of the sector in the long term.”

 

, shadow minister for the early years, added: "This research is yet more evidence of the Tories underfunding their childcare policies, something that is fast becoming obvious to everyone except government ministers.

 

“The childcare system relies on small and independent providers to deliver high-quality care, which is being made more difficult as government funding shortfalls are leaving many facing financial challenges or going out of business altogether.”