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It was intended to make childcare more affordable, and more than 100,000 applications have already been submitted. It will be rolled out to babies from nine months in September.

But providers warn that the funding will not be enough to cover costs and risks putting them out of business, as the sector struggles with food and energy inflation, as well as staff shortages.

A survey of nearly 1,200 providers by the Early Years Alliance found most of those planning to offer the free hours were yet to hear what their funding rate would be from their local authority - with just weeks until it starts.

• For those which have, 60% of nurseries and pre-schools surveyed said the rate they had been offered would be less than the cost of delivering places - leaving them with a shortfall;

• A quarter - 24% - said it was very or somewhat likely they would close in the next 12 months due to cost pressures;

• There is already a crunch on places and most (71%) are not planning to increase the number of places they offer - due to lack of space, staff or financial constraints;

• Eight out of ten said they would have to increase their prices or charge parents for items which would ordinarily be included in their hourly rate such as food or activities.

One manager anonymously told the survey the government's policy was like "adding fuel to a burning building, and eventually it will come falling down".

Closures of nurseries increased by 50% in England last year, with 186 closing in 2022-23 compared with 124 the previous year - with closures concentrated in the most disadvantaged areas.

The closure of nurseries takes a toll on the youngest children and leaves parents with few options.

Sky News met three-year-old Frankie who has severe special needs. His nursery in Felixstowe, Suffolk was closed in December with parents being informed just hours beforehand.

It was one of 22 childcare facilities run by Alpha Nurseries which announced that the company was "regretfully" having to close immediately due to financial problems.

Frankie's mother Danielle Valentino, who had moved to be close to the nursery so that he could try to walk there, was left in limbo - as not all nurseries in the town can give him the support he needs.

She said: "When it closed, it felt like we were going through a period of grief. Suddenly, this huge, gaping hole of support, and love and family, was just gone. It really felt like somebody had died.

"Frankie has a form of brain damage, and he doesn't talk. He's non-verbal, so he can't express his feelings and his memory is only around eight months old. He needs to have someone who understands his needs, and he requires a lot more support than other children. It was a real shock to him."

She eventually found him a place at Play Pit in Felixstowe, a family-run nursery where he's settling in well. But staff there are preparing for a major increase in demand when the free hours for two-year-olds roll out in April.

Manager Sophie Conway said the rate they would get from the council for those children was £7.38 an hour - with slightly more for children with additional needs.

"It's going to cost us in excess of £10 an hour to offer the care, so that's quite a significant shortfall," she said. The nursery is already looking at increasing prices to cover it, as nearly 30 families of two-year-olds who attend have applied for the hours.

"It's going to be really difficult for us, from a financial point of view, to offer the spaces that the parents want. And from that point of view, parents are going to have to pay for their food and consumables, which at the moment when they're paying private fees, they don't have to pay for. It's included in the hourly rate. So, you know, it's not truly free."

Thirty free hours a week was offered to three and four-year-olds in England some years ago, but nurseries say over the years, the funding rates have been eroded and are consistently less than their costs - meaning prices go up for younger children.

Read more:
Having a kid feels 'like financial suicide' - report says

The sector fears that with the government funding even more of the 'free hours' they will be even more vulnerable to financial pressures. The government plans to offer 30 hours a week to all eligible children from the age of nine months from September 2025.

Neil Leitch, chief executive of the Early Years Alliance, which carried out the research said there would be "a lot of disappointed parents" finding they could not access the hours or that they would still be looking at a significant outlay as costs rise.

He 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."

A Department for Education spokesperson said: "We are confident in the strength of our childcare market to deliver the largest ever expansion in childcare in England's history, with our own data showing the number of early years staff and places increased in 2023.

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"Our average, funding rates for new entitlements are expected to be substantially higher than the hourly fees paid by parents last year, backed by hundreds of millions of pounds to reflect the increase in the National Living Wage and additional cost pressures facing the sector."