Providers who took part in the survey, around 285, warned that these actions are not sustainable long-term and risk undermining quality and capacity.
It comes as the education secretary Bridget Philipson has asked the Competition Markets Authority (CMA) to investigate ‘hidden childcare costs’ parents may be charged to take up a funded early education place.
According to reports, ministers are concerned that additional costs for ‘extras’ are creating a barrier for parents to ‘get the childcare they need’.
Key findings from the survey include:
- For 9 in 10 nurseries funding rates for three and four-year-olds do not cover their costs, with an average funding shortfall of £2.61 per hour, per child, up from £2.36 last year.
- For more than half, the funding they receive for two-year-olds falls short of their delivery costs, with an average funding shortfall of £1.79 per hour, per child – a rise of 10p, per hour, per child compared to the previous year.
- Staffing costs are to increase by an average of 10.84 per cent due to rises in the National Living Wage and statutory employment costs, far outstripping the 4.95 per cent uplift in Government funding rates.
- PVI (private, voluntary and independent) nurseries face an average business rates bill of almost £23,000, which includes a discount for the vast majority. This is up from a cost of £21,000 last year.
- Many nurseries plan to keep fee rises below than the overall rise in costs to protect parents. Those that took part in the survey reported average fee increases of 6.1 per cent for 2026/27.
- Four in five nurseries said they have little choice but to increase fees to remain open.
‘We need an early years sector that is thriving, not just surviving.’
Tim McLachlan, chief executive of NDNA, said, ‘Across England, providers are facing relentless cost increases, particularly for staffing while funding rates remain well below the real cost of delivery. Nurseries are doing everything they can to shield parents from the full impact, but if Government funding does not meet costs, the gap inevitably falls on families or forces settings to scale back or close.
‘The Government has put giving children the best start in life at the heart of their mission, but this cannot be done on the cheap. Too much of the work being asked of nurseries is underfunded, or unfunded, and that must be addressed.
‘One expense ministers could deal with at the stroke of a pen is the unfair burden of business rates.
‘If the Government is serious about improving outcomes for children, supporting working families and boosting the earnings and recognition for our amazing workforce then it needs to fund nurseries fairly. We need an early years sector that is thriving, not just surviving.’
CCTV use
The survey also covered the use of CCTV in nurseries ahead of the Government’s decision on whether to make CCTV mandatory in early years settings.
A total of 36 per cent of survey participants said they already have CCTV in place, while a further 36 per cent don’t and have no plans to introduce it. The remaining quarter of said they don’t have CCTV, but are considering introducing it.
The factors affecting their decision included set up or maintenance costs, concerns around children’s and staff privacy and being compliant with laws and regulatory frameworks around CCTV footage.
