Nine in ten UK nurseries are struggling with NMW increases ahead of the Budget
Early years settings across the UK are facing unprecedented financial pressures. Almost 90% reported that National Minimum Wage (NMW) increases are placing them under significant strain, according to a new sector-wide survey by NDNA.
Our pre-budget survey covered 545 settings across England, Scotland and Wales, highlighting the battling cost pressures on nurseries already operating on thin margins.
The November Budget on Wednesday 26 November is set to introduce even more new challenges, with the National Living Wage expected to rise and inflation stubbornly above targets. Nursery funding rates must go up to keep pace with these increasing cost pressures.
Rising costs are already threatening sustainability and quality care
Alongside the NMW estimated rise of 4.1% from £12.21 per hour to £12.71 in April 2026, nurseries report mounting pressures from different directions, including:
- 85% say they are struggling to maintain pay gaps for more experienced or qualified staff
- 82% agree that food inflation is a rising cost along with utilities
- 68% are seeing more children taking funded places, and 65% report fewer parent-paid hours
- 51% are facing additional administrative staffing costs
- Half of providers say increasing business rates from 2026 will worsen the situation.
The result of this has had a major impact on settings:
- 78% have limited their ability to offer staff pay rises or bonuses
- 77% are cutting back on resources, maintenance or repairs
- 41% have paused or reduced recruitment
- 37% expect to operate at a loss
- 39% fear business closure within the next 12 months.
Purnima Tanuku CBE, Executive Chair of NDNA, said:
“The voices of providers in this survey are heartbreaking. Early years leaders who have dedicated their lives to supporting children say they are exhausted, undervalued and fearful for the future.
“Staff are leaving the sector for better pay elsewhere, owners are reporting year-on-year losses and some are preparing to close their doors for good after more than 30 years.
“This cannot continue. Our nurseries are essential to children, families and the community.
“The Government must act urgently to ensure funding keeps pace with rising costs and that the system supports rather than burdens the people who deliver early education every day.
“The Chancellor with a stroke of her pen can ease nurseries’ financial burden by exempting them from paying business rates, a measure which school providers already benefit from.
“As we prepare for elections in Scotland and Wales next year, political parties must come forward with credible plans to deliver on policy promises in this area or risk further damage to our crucial sector.”
One UK nursery said:
“Please help us with funding so that we can pay our staff more and retain them. Many people are leaving childcare as they can work in supermarkets for more money and less stress!”
Quality has a cost, and nurseries say it is becoming increasingly unsustainable. It is the quality of early education and care that really makes the difference in supporting children with their development and improving outcomes, particularly for children from deprived backgrounds and those with additional needs.
Providers say that the ongoing impact of rising costs is threatening both quality and long-term stability:
- 92% say high quality provision comes at a cost that is no longer being met.
- 91% say financial pressures are harming staff wellbeing, management and owners.
- 87% say the Government must recognise that nurseries are business that need a surplus to remain sustainable.
- 57% warn that the stress on nurseries is directly affecting children and families.
Another UK setting said:
“I will be forced to close my nursery that I have operated for 34 years due to all of the above issues. I am absolutely heartbroken.”
Call for government intervention and support
NDNA is urging the Government and local authorities to take immediate action to ensure that funded entitlement rates reflect the true costs of nursery provision and that unfunded administrative burdens are at a minimum.
When asked what they needed the Government and their Local Authority to understand, providers said:
“I am a limited company that has made a loss over the last 5 financial years. I expect to continue on that trajectory with no hope of recovery.”
“We are expected to do the same amount of training as teachers for less money. We are undervalued as nursery workers.”
“The administrative burden of funding takes our time away from what matters; the time spent with children and staff and parents.”
Nurseries in Wales recommended:
“More of government money needs to go directly to providers and less should be allocated to the administration and onerous “quality assurance” activities carried out by local authorities of settings already registered with the Care Inspectorate Wales.”
“Funded places should be subsidised places. There should be parity between funding streams for different ages. Flying Start in different counties are funded at different levels, creating cross-border issues.”
And in Scotland, settings said:
“1140 (hours of) funding should be a set fixed rate in Scotland, and not decided by the local authority, as this rate varies immensely across Scotland and with this method every child is NOT equal, nor can they receive equal care.”
“We are continually torn in all directions with so many inspection frameworks, guidance, and wants from so many outside bodies.”
- Budget
- early years
- England
- funding
- Government
- NDNA
- Scotland
- Survey
- underfunding
- Wales
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