Day nursery market trends

(last updated July 2019)

What has been happening in the childcare sector

Demand for childcare providers in the UK has been steadily increasing over the last few years because:

  • there are more households where both parents go out to work
  • women are having children later in life and want to return to a well-established career after having a baby
  • the number of single parent households is growing
  • lifestyles have changed - fewer people have a large extended family nearby that they can turn to for childcare support
  • people have generally become more affluent - although many parents still struggle to find affordable childcare
  • there have been many government initiatives to help people to afford childcare - these include Child Tax Credits (currently becoming part of the Universal Credit) and an employer-supported childcare scheme that allows employers to give £55 worth of childcare per week to employees, free from tax and NICs. (Note that for employees joining an employer's scheme after April 2011 this was restricted to basic rate taxpayers). A new scheme - Tax-Free Childcare - is being rolled out to enable working parents to get up to £2,000 government support per child per year towards childcare costs
  • the government has introduced funded free nursery education places for two, three and four year olds - and has recently doubled the entitlement to 30 hours per week in England, with Wales and Scotland introducing the 30 hour entitlement by 2020. (Bear in mind that many independent day care providers are not reimbursed the full cost of providing these places, affecting profit margins)

However the childcare sector has remained very competitive - in some areas demand for places has not kept up with the number of new places being offered and nurseries have several vacancies. The position became worse during the economic downturn that began at the end of the 2000s, as household incomes were squeezed.

During the opening years of the 2010s many day nurseries reported falling occupancy rates as working parents turned to family and friends for childcare. In some cases parents have restricted their use of nurseries to the free early years education entitlement. Many nurseries say that local authority reimbursement for these places is much too low and hasn't been increased to cover rising costs - staff costs in particular have gone up with the introduction of the National Living Wage for 25 year olds and over. Many nurseries are not planning to offer the new 30 hours of free early education and childcare because the funding available doesn't cover their costs.

Although demand for day care is likely to continue to be reasonably strong, you will have to decide whether:

  • there is sufficient demand in your area to support your proposed business
  • you will be able to compete with existing day nurseries and other childcare providers such as playgroups and childminders
  • you will be able to run a viable business if you plan to offer many free funded early years places

You will also need to give some thought to:

  • finding suitable premises
  • attracting and retaining good quality and suitable staff
  • offering parents more choice, and possibly staying open longer
  • complying with the requirements of the Early Years Foundation Stage (EYFS) framework - this must be used by all registered early years providers in England. You can find out more on the Gov.uk website. In Wales day care providers deliver early years education through the Foundation Phase framework. You can find out more on the Welsh Government website. The Education Scotland website contains national guidance for early years practitioners. Visit the Department of Education Northern Ireland website for details of the Learning to Learn Framework

Vetting and Barring Scheme

The Vetting and Barring Scheme was introduced in October 2009 to make sure that people who work with children are suitable to do so. The Disclosure and Barring Service (DBS) was set up to maintain lists of individuals in England, Wales and Northern Ireland who have been barred from working with children or vulnerable adults. In Scotland a similar scheme - the Protecting Vulnerable Groups Scheme - is run by Disclosure Scotland. It is an offence to employ anyone who is on the barred list.

Keeping up to date with developments

Joining a trade association is an excellent way of staying up to date with developments in your sector.

The National Day Nurseries Association (NDNA) represents day nurseries in the UK. You can contact the NDNA at National Early Years Enterprise Centre, Longbow Close, Huddersfield, West Yorkshire HD2 1GQ - or visit their website.

Day care providers must, by law, register with the appropriate regulator for the area in which they operate. Their contact details are:

  • Ofsted, Piccadilly Gate, Store Street, Manchester M1 2WD
  • the Care Inspectorate, Solway House, Dumfries Enterprise Park, Tinwald Downs Road, Dumfries DG1 3SJ
  • the Care and Social Services Inspectorate Wales (CSSIW), Welsh Government Office, Rhydycar Business Park, Merthyr Tydfil CF48 1UZ
  • the Early Years Teams of Health and Social Care Trusts in Northern Ireland. You can find contact details on the NI Direct website

You can also find out more about the childcare sector from the Family and Childcare Trust - the national childcare charity. They provide information on government childcare initiatives and also publish an annual summary of average day care fees. Contact the Family and Childcare Trust at The Bridge, 81 Southwark Bridge Road, London SE1 0NQ.

Early Years - the organisation for young children in Northern Ireland - is a non-profit making organisation which provides information for all those concerned with childcare, including providers.

Reading an industry journal is another good way of keeping up with developments in your sector. Industry journals include Practical Pre-School and Nursery World.

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