Free early years entitlement fails to rise enough to plug gaps, market analysis shows

The average level of nursery education grant funding went up to £3.41 an hour from £3.30.
Although local authorities were required by the Government last year to carry out a cost analysis of childcare provision to determine gaps in funding, the report said that 61.5 per cent of nurseries could not meet their costs – the same number as last year.
Author of the report and economist at Laing & Buisson, Philip Blackburn, predicted this would lead to 'heavy casualties' in the nursery sector.
'Although an increase of 11 pence an hour is in line with inflation, no real increases in the entitlement means there has been no change to the current loss-making position reported by most nurseries,' he said.
The recession is also starting to have an impact, with 53.5 per cent of the nurseries surveyed* predicting their businesses would suffer this year.
The National Day Nurseries Association is calling for interim funding for the nursery education grant.
Chief executive Purnima Tanuku said, 'Although there have been recognised issues with funding for the free entitlement for a number of years, we are concerned that there does not appear to be a step-change in funding levels that providers need.'
She added that despite reforms to be brought in, such as the single funding formula, an increase of 11 pence an hour was not sufficient  to cover providers' costs.
'NDNA is urging Government to consider additional interim funding, perhaps through allowing flexibility in existing early years funding streams held by local authorities.'
* Laing & Buisson surveyed 6,000 full daycare nurseries in November and December 2008 with a 15 per cent response rate.
Children's Nurseries 2009 is available for £595 from www.laingbuisson.co.uk.