I've seen this letter and agree this is terrible news and the decision should have been taken following more extensive consultation. What I find most striking is how the nursery was finding it couldn't fill all of its places. This is at a time, remember, where birth rates are increasing and there are long waiting lists at other nurseries. All the feedback I have heard said the nursery was providing excellent services. The only explanation I have is that the restrictive hours (4 short "half" days and one short "full" day) was not compatible with most parents work lives. I am pretty sure that if they could get round this and allow parents to pay the necessary amount to "top up" the days then more people would be able to make it work. I am sure this could go a long way to make the finances work.
Whatever happens this site must be retained for a nursery to ensure there remains sufficient places. Whether it is run by the council or some other provider matters less to me.