Interim results from its 2007/2008 Children's Day Care Nurseries Survey also showed that at the start of 2008, nurseries were receiving an average of just 34p more for delivering a 2.5 hour session than they did in 2007 - a rise from £7.92 to £8.26.
While this estimated 4.3 per cent rise is above the rate of inflation, fewer than a third - 30 per cent - of the nurseries surveyed said that the funding covered costs, and 9 per cent said they did not know if costs were covered or not, leaving 61.5 per cent losing money.
Laing and Buisson, which surveyed managers at 6,000 nurseries and received responses from 15 per cent of them, was set to release more findings at its annual Children's Nurseries Conference in London this week.
Full survey results will be published in Laing and Buisson's 2008 Children's Nurseries: UK Market Report, which will be available in early May.
Purnima Tanuku, chief executive of the National Day Nurseries Association, which supported the survey, said Laing and Buisson's findings 'indicate that although nurseries do value the principles behind the free entitlement, real funding issues continue'.
She added, 'These interim figures highlight that funding has not kept pace with rising costs in terms of staff salaries, utilities, business rates, interest rates and food. An average 34p rise per session equates to just over an extra 13p per hour, and many nurseries are not receiving enough to even cover increases, never mind make a contribution to covering the gap between funding and the cost of delivery.'
Philip Blackburn, senior economist at Laing and Buisson, warned, 'Unless nurseries earn enough profit from other services to subsidise this loss and make a normal trading profit overall, delivering funded sessions is not economically viable.'
The results, which were collected prior to the recent cost-analysis process carried out by local authorities, also revealed that nearly two-thirds of nurseries - 64.5 per cent - want to see the free early years entitlement extended to two-year-olds.
FUNDING FOR FREE 2.5-HOUR SESSION
The North: £8.01
Yorkshire and the Humber: £8.18
North West and Merseyside: £8.06
West Midlands: £8.09
East Midlands: £8.45
East Anglia: £8.13
Northern Home Counties: £8.36
Greater London: £8.26
South East of England: £8.48
South West: £8.29
England average: £8.26
Source: Laing and Buisson.