Forty Per Cent Of Nurseries Say They Will Offer Fewer Places Due To National Insurance Rise

Education Secretary Bridget Phillipson taking part in an art activity with pupils

3 min read10 February

Four in ten nurseries say they will have to offer fewer childcare places as a result of the government’s increases to National Insurance employer contributions.

Chancellor Rachel Reeves in October announced that employers would see their National Insurance contributions rise by 1.2 to 15 per cent from April 2025.

Early years is one of the many industries that oppose the move, arguing that it will add to costs facing childcare providers.

Staffing makes up around 75 per cent of nursery costs, and the government has confirmed that it will not reimburse nurseries for the rise.

Of the more than 700 settings that responded to the new survey by the National Day Nurseries’ Association (NDNA), almost a fifth (17 per cent) said that their business would make a loss this year, while 14 per cent said that their business is at risk.

NDNA claimed that nurseries on average will make a loss of £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.

Thirty-nine percent of settings said they would off fewer places next year as a result of added costs.

Meanwhile, a large majority (96 per cent) said they would increase fees for parents as a result of the rise in NIC costs.

The findings shared with PoliticsHome suggest ministers face an uphill challenge in delivering their policy of expanding childcare through a larger workforce.

The early education minister Stephen Morgan told PoliticsHome last year that delivering the rollout — which was one of Labour's key election pledges — was keeping him awake at night.

Purnima Tanuku CBE, NDNA’s Chief Executive, told PoliticsHome: “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.”

Tanuku said that nurseries do not want to be in a situation where they are forced to choose between significantly increasing fees to parents or facing an uncertain future.

“From September, the government will be paying for 80 per cent of childcare places in England.

"Simply put, if the sector’s most significant customer is not paying their fair share, nurseries have to find this money from somewhere else or close their doors," said Tanuku.

A Department for Education spokesperson told PoliticsHome: “Giving every child the best start in life is central to our mission to break the unfair link between background and success, and our Plan for Change commits to getting thousands more children school-ready by age 5.

“That’s why despite having to take tough decisions to fix the foundations of the economy, we are raising early years funding by over £2 billion next year, including a targeted £75 million grant to support the increase to 30 government-funded hours from September.

“We will continue to work closely with the sector to make sure the funded childcare hours remain fair and accessible to all parents.”

PoliticsHome Newsletters

PoliticsHome provides the most comprehensive coverage of UK politics anywhere on the web, offering high quality original reporting and analysis: Subscribe