Plans to expand childcare are under threat from a lack of staff and funding, says the National Audit Office.
A report out today shows that the Government is on course to meet its targets to provide free part-time early education to all three and four-year-olds by the end of April. But it says that pre-school childcare is still less common in deprived areas than elsewhere, although the gap is narrowing.
The report Early years: Progress in developing high quality childcare and early education accessible to all, highlights a number of threats to future expansion, including high turnover of staff, training costs and the difficulty of finding premises.
The researchers also found many providers needed help with business planning. Many had no idea how many places they needed to fill to break even. Only half of those getting short-term funds knew how they would cope when their grants ended.
The report found that although 626,000 childcare places have been created since 1998, 301,000 have been lost. Most new places are in after-school and holiday clubs and 96,000 are for pre-school children.
Fewer early-years places are available in England's most deprived wards than in other areas - although the report said the Sure Start programme is likely to narrow this gap.
Sir John Bourn, NAO's head, said the Government had made impressive progress but added: "Its investment will be wasted if the new provision is not viable."
The report makes 10 recommendations including ensuring schools play a key role in expansion in deprived areas, giving business support to providers and setting targets based on local need rather than an overall increase in places.
There are 2.9 million children in England below compulsory school age.
Parents spend pound;3 billion a year on nurseries, childminders and playgroups.
A Department for Education and Skills spokesperson said: "Back in 1997, there was only one childcare place for every nine children and there is now one place for every five children. In 1997, there was no universal entitlement to free early education. By April this year, every three and four-year-old will be entitled to free, part-time early education."