Low demand for places could lead to mass childcare closures, with deprived areas in England worst hit.
According to a new report by the Early Years Alliance, more than 2,000 nurseries, pre-schools and childminders found that 17% of early years settings could close by Christmas if their income does not increase, rising to one in four in the most deprived local authorities.
Only a quarter of providers expect to make any profit between now and March and more than half say they would need emergency funding to stay open over the next six months.
The alliance is calling for an emergency early years sufficiency fund targeted at childcare providers at risk of closure to ensure enough places to meet demand.
Based on analysis of responses to the survey, independent early years research analysts Ceeda estimate about £240m ($313.5m) would be needed for the fund over the next six months.
Early years providers have experienced a 21% fall in demand despite being allowed to open to non-key worker and vulnerable children since June.
Neil Leitch, chief executive of the Early Years Alliance, said: “We are now at a critical moment for the early years sector. With demand for places still significantly below what would typically be expected, and no sign of things returning to normal any time soon, many nurseries, pre-schools and childminders are reaching the point of no return. "
“Worse still, our survey shows that it is those early years settings providing vital care and education to families in the most deprived areas – who are already bearing the brunt of the impact of the pandemic – that are most at risk," he added.
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