New laws doubling the amount of free childcare parents can access for three- and four-year-olds could lead to many nurseries reducing the number of children they can take unless they receive further funding, a report warns.
Headteachers' union the NAHT says that many of its members are already running their nurseries at a loss, subsidising them from their mainstream budget.
The government's Childcare Bill, which will increase free hours from 15 to 30 for 38 weeks a year from September 2017, could put schools under further strain, the union says in its report.
General secretary Russell Hobby said the union's members welcomed the principle of extended free childcare for working families but that cross-subsidising nurseries was not sustainable.
"We support the aspiration to offer extra free childcare to working families and we believe the plan can work. But the government now needs to keep to the commitments it has made about looking at funding and consulting with providers – otherwise some families could lose out," Mr Hobby said.
Sarah Bagshaw, finance director at St Bede Academy in Bolton, said: “Within our school there is a small element of cross-subsidy of the school nursery classes. Each year the budget is getting tighter and tighter.
“We have put ourselves forward for the pilot scheme offering 30 hours a week of childcare, which will give us an opportunity to highlight any problems and work through them.
“This is also coming on the back of schools trying to take in two-year-olds. In terms of benefits to children, headteachers are welcoming this as a way of getting children school-ready, but they need the funding and tools to do it.”
The NAHT survey of nearly 800 members finds the majority (58 per cent) feel the funding they currently receive for three and four-year-olds does not cover their costs. The majority of schools (71 per cent) receive less than £5 per hour for a place.
And 40 per cent of respondents say that taking in more children will make the situation less sustainable; a further 45 per cent say they are not sure of the impact. Only 15 per cent think more children would improve their funding situation.
Extending free childcare for working parents of three- and four-year-olds was a Conservative manifesto commitment. The plan will launch in September 2016 and be fully implemented by September 2017.
Neil Leitch, chief executive of the Pre-School Learning Alliance, which represents private, voluntary and independent nurseries, said: "These findings clearly reinforce the concerns raised by the private and voluntary childcare sector about the potential impact of the 30-hours offer.
"The early years sector has been significantly underfunded for many years, forcing providers to find other ways to cover the cost of providing places.
"It's vital that government resists the temptation to rush out a policy that, while attractive on the surface, is simply unworkable in its current form."
A Department for Education spokeswoman said: "We know that childcare is one of the biggest issues affecting parents. This is why we are working closely with the sector to deliver 30 hours of free childcare, and innovative childcare providers are being asked to come forward as the first in the country to deliver it from September 2016.
"We have already committed to raising the average hourly rate providers receive, and are also undertaking a review of childcare costs to inform a new rate that is fair for providers and delivers value for money for the taxpayer."