According to findings from the National Day Nurseries Association’s (NDNA) survey, staffing costs for nurseries are to increase by an average of 15 per cent. Respondents said that more than half of this rise is due to the changes to NICs from April.
A total of 728 nurseries took part in the survey, findings of which have been released during the NDNA’s Underfunded Childcare campaign Week of Action (10-14 Feb).
As a result of the NICs rise, 96 per cent said they will increase fees, 39 per cent will consider offering fewer places, while 69 per cent will reduce spending on resources and close to half (48 per cent) will reduce spending on their premises.
On average, respondents said they will raise fees by 10 per cent. One in five plan to increase fees by 15 per cent or higher.
Funding rates
While funding rates are rising by an average of 4 per cent, the survey suggests they won’t cover the increased costs to NICs providers face. A fifth of respondents said they didn’t know their new rates, however.
The majority of nurseries (92 per cent) said their current rates do not cover costs. For those respondents who know their new rates for 2025/26, 85 per cent said they will make a loss on each place.
Nurseries on average will make a loss of £2.25 per hour on each three and four-year-old place and £1.64 on two-year-old places. The NDNA says this equates to £2,565 for a 30 hour place for three and four-year-olds and £935 for a 15 hour place for two-year-olds for one year.
When asked how nurseries will deal with the additional costs associated with NICs, 96 per cent said they will have no choice but to put up their fees.
As a result of rising costs, more than three quarters of respondents said they expect to make a loss or only break even, while14 per cent said their ‘business is at risk’.
The survey also found that 85 per cent of nurseries support a child with Special Education Needs or Disabilities (SEND) who are not properly funded by their local authority. This means that the nursery and parents have to find this money to pay for the support for to meet the individual needs of those children, the NDNA stressed.
'High-quality comes at a cost and unfortunately the Government appears to be unwilling to pay that price.'
Purnima Tanuku, NDNA’s Chief Executive said, ‘The alarming results of this survey come just months before the biggest phase of the Government’s funded childcare expansion, putting this policy at risk.
‘Nurseries do not want to be in this awful situation where they are forced to either significantly increase their fees to parents or face an uncertain future, with 14 per cent of nurseries saying their business is at risk.
‘High-quality comes at a cost and unfortunately the Government appears to be unwilling to pay that price. Instead, we are left with a situation where they are increasing statutory employment costs, which impact hugely on nurseries because staffing makes up 75 per cent of their expenditure – but not taking these increases into consideration when paying for childcare places.
‘Before the 30-hour policy for all those aged over nine months comes in from September, we urge the Government to reconsider decisions made that could cost families, children and providers. They must treat nurseries equally to other education providers by reimbursing the NIC increases on publicly funded places.'
She went on to say that another action the Chancellor could take is to exempt nurseries from business rates.
CASE STUDIES
Lilliput Kiddie Care, Blackpool
Lilliput Kiddie Care said the upcoming increase in the national minimum wage will have a ‘significant’ financial impact on the setting.
Around 95 per cent of children that attend the setting are in receipt of Government-funded places, so Lilliput Kiddie Care relies ‘heavily’ on funding rates, which it says do not always ‘align with rising operational costs’.
‘We are committed to fairly compensating our dedicated staff who play a vital role in supporting children’s development. However, this wage rise will substantially increase our overall staffing costs, placing additional pressure on our budget.
‘To manage this financial strain, we unfortunately have no choice but to increase fees. We understand that this may be challenging for families, but it is necessary to ensure the continued sustainability of our nursery. The additional costs will also affect our ability to invest in essential resources, equipment, and staff training, which are vital for maintaining the high standards of care and education we provide.’
The setting hopes it might be eligible for the Small Business Allowance.
Garden Cottage Nursery and Forest School, West Sussex
Jane Denman, owner/manager of Garden Cottage Nursery and Forest School in West Sussex says the increase to national minimum wage and NICs will cost the business around £27,000 extra a year.
As a result, the nursery owner/manager is having to increase fees.
The nursery employs 25 staff and looks after 90 children. It operates above minimum ratios to cover staff sickness and pays above minimum wage.
She said it comes a couple years after her business rates went up to £25,000.
‘I’ve been in business for 25 years now and it has got harder. My business rates are ridiculous’, she said.
‘Its not like staff can work from home or that we can close rooms to reduce our rates.
Being based on a farm, the nursery owner/manager says they also have to pay for their own bins and maintenance of the road.
She has called for business rate relief for nurseries.
