The Early Years childcare sector is facing a funding deficit of £662m in 2019/2020 as a result of rising costs and frozen funding levels.
And the upshot of this massive shortfall? More quality childcare providers anticipate having to close.
Independent agency Ceeda recently surveyed 356 private, voluntary and independent childcare settings - providing 603,510 hours of care and education for 27,500 children - about the cost of delivering quality childcare.
Almost one in five (17%) providers in the most deprived areas of England ‘anticipate closure in the next 12 months.
And those in the most affluent areas aren't immune either - 8% of those surveyed are also expecting to shut.
The research also found that the total shortfall in early years funding has risen by more than £50 million in the past year.
Drawing on detailed income, expenditure and occupancy data, the study found average delivery costs across England of £7.22 per hour for 2 year olds and £5.36 for 3 to 4s.
The gap between average funding rates and providers costs is now 37% for 2 year old places and 20% for 3 to 4s.
This meant providers said that they were forced to make cost savings as a result of the shortfall.
A huge 43% said they were cutting back on learning resources and 19% have had to lower the quality of food given to children.
Neil Leitch, chief executive of the Early Years Alliance, said: “This is what a sector in crisis looks like.
“Providers are straining to deliver quality childcare on funding levels set in 2001, leaving them forced to choose between reducing quality and charging ever higher fees or closing their doors.
“There’s only one conclusion to draw from this: the government can no longer afford to underfund the early years.
“It must invest properly in its flagship childcare scheme and review the funding annually to make sure it stays in line with rising costs.”
Dr Jo Verrill, managing director at Ceeda, said: “While a logical response to financial pressure, these actions have consequences, particularly for those families least able to pay for early education.”
The cross-sector campaign, The Fair Future Funding Action Week, running this week (from June 10) aims to ensure every MP in England is aware of the funding crisis.
With the Government’s Comprehensive Spending Review - where it sets out its spending priorities - taking place in the coming months the campaign is urging providers and parents to write to MPs warning them about what will happen to childcare provision in their constituencies unless action is taken on underfunding.
The Department for Education, meanwhile, has said its Early Years National Funding Formula allocates funding to local authorities fairly and transparently, recognising the need to keep its evidence base on costs up to date.