The report from the National Centre for Social Research said that childcare providers were more sustainable in areas where affluent parents lived alongside lower income families.
'Local Childcare Markets' is the second wave of a longitudinal study involving interviews with 41 childcare providers and 19 local authority officers in London, a south-east commuter area, a north-east city area and the rural south-west.
Sarah Dickins, the centre's director of research and a co-author of the report, said there was real evidence that the Working Tax Credit was working, particularly in the urban north-east where providers were encouraged to set up. But parents' take-up of WTC in the south-west rural area where work is often more seasonal.
She said, 'One way providers can help themselves to be sustainable is to operate a mixed economy model, setting up in areas where there are affluent and lower income families or by securing commissioned places from the NHS, social services and other employers.'
The report concluded that the childcare market the Government envisages would need providers who 'see sustainability as both a financial and a social concept'.
Where childcare gaps had been filled, local authorities should have more discretion over the type and location of provision, to meet demand in 'relatively small geographical areas', possibly for atypical hours care.
Issues relating to flexible and atypical hours provision 'had become more acute'. According to the report, while childminders were well-placed to provide special needs or out-of-hours care, local authorities said they were reluctant to do so.
But Liz Bayram, director of policy and public affairs at the National Childminding Association, disputed this and said registered childminders were offering 'accessible, quality childminding that flexibly meets the varying needs of families'.
Purnima Tanuku, chief executive of the National Day Nurseries Association, said the report was right to point out the importance of three-and four-year-olds to the sustainability of day nurseries, which she said was 'a major concern for NDNA members.
The report can be seen at www.dfes.gov.uk/research.
'What we need now though is some reassurance for day nurseries that a level playing field will be created.'
