The number of nurseries falling into insolvency is up 80 percent from last year.
Accountancy firm, Moore Stephens, found that 29 nurseries across England and Wales became insolvent for the year ending March 31 2016 compared to 16 that went bust for the same period last year.
The firm said this could be due to the introduction of the national living wage in April this year, meaning the minimum pay for over 25-year-olds is set to £7.20.
This could of increased staff costs at nurseries, which are already required to employ an average staff-child ratio of approximately 1:3 for two-year-olds and 1:6 for three and four-year-olds across England.
Mike Finch, partner at Moore Stephens, said: “The cost of nursery places is likely to increase for parents, as nurseries may have to raise fees in order to provide adequate care for children.
“Rising rents are also an issue for many in the sector and, combined with the increasing staff costs, many nurseries are facing a real struggle to stay afloat.”
Moore Stephens said that nurseries also face high costs in complying with local government administration.
Finch said: “There is a considerable burden on nurseries which only serves to further hit their margins. The considerable time and staff costs that are required to meet these obligations are putting more financial strain on nurseries across the UK.”