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There is a version of the childcare and early years market that is stable, sustainable and deeply rewarding without any expansion at all. A well-run single setting with strong occupancy, a good Ofsted rating, a loyal parent base and a team that delivers consistently is a genuinely good business. Not every owner needs to be running a group of ten settings to be successful.
But here is the uncomfortable truth. In a market where well-funded competitors are opening new settings, acquiring existing ones and investing in their offer, standing still is not the same as staying the same. It is falling behind, slowly, and then sometimes very quickly.
The numbers
The numbers make the point starkly. 199 nurseries closed in the 2023/24 academic year, following 216 the year before. Many of those were well-run settings that had simply been squeezed from every direction at once, funding rates that have fallen 3% in real terms since 2017, wage bills rising 14-15% in a single year, and employer National Insurance changes adding an average of£45,000 to £47,000 per nursery from April 2025.
These are not abstract figures. They represent settings that were running, that had children, staff and parents depending on them, and that could not sustain the financial pressure. The majority of closures, 38%, were in the 30% most deprived areas of the country, including parts of London, Birmingham, Liverpool and Leeds. The settings that depend most on funded hours and least on parent fees are the most exposed.
At the same time, the consolidation story is accelerating. Large groups, those with 21 or more settings, took 62% of completed deals in the market last year. The top three childcare groups combined still hold only around 7% of the market, but the direction of travel is clear. Well-capitalised operators are growing, and they are growing into the same local markets where independent operators are trying to hold their ground.
What standing still actually costs
The financial consequences of standing still in a consolidating market are not always visible immediately. Occupancy holds. Revenue looks fine. But over time, the picture changes.
A new group opens nearby and starts taking your enquiries. Your fee growth lags behind your cost growth because you are competing on price rather than on quality or distinctiveness. Your Ofsted rating, which was once a differentiator, is now table stakes, every serious operator in your area has a Good or Outstanding. Your valuation, if you ever want to exit, is lower than it would have been because you are a smaller operator in a market that increasingly values scale.
None of this is inevitable. But it is the direction of travel for operators who are not actively managing their position. The difference between a business that weathers consolidation and one that is swallowed by it is usually not the quality of the early years provision, it is the quality of the financial management behind it.
Consider this: roughly 70% of nurseries say they could offer more places if they could recruit more staff. The constraint for many operators is not demand, it is the ability to build and retain the team that would allow them to grow. That is a solvable problem, but it requires a plan, the right financial structure to support it, and an adviser who understands both the sector and the numbers.
The questions worth asking
- What is happening to occupancy in your local market and how does your setting compare? Healthy occupancy in the sector is considered 80% or above.
- Are your fees growing at least as fast as your costs, and if not, why not?
- What would your business be worth to a buyer today compared to three years ago? Average sale prices rose 3.8% in 2025, a second consecutive annual rise.
- If a well-funded competitor opened half a mile away tomorrow, what would your response be?
- Are you building the kind of business that could support a sale or transition on your terms in the future?
Standing still with intention
There is a difference between standing still because you have not thought about it and standing still because you have made a clear, informed decision that this is the right place for your business to be right now. The second is a perfectly valid strategy, but it requires just as much financial clarity as a growth plan does.
The childcare and early years market is not standing still. It is consolidating, evolving and repricing. The operators who understand their position in that market, who know their numbers, their occupancy benchmarks, their valuation and their options, are the ones who get to decide what comes next on their own terms.
If you know your numbers, you know your position. If you know your position, you can make the right call about what comes next - whether that is growth, consolidation or a well-timed exit.
Our role as advisors to the childcare & early years education sector is simple – ensure operators understand their numbers and financial position. In a consolidating market, value shifts towards those who are growing, investing or differentiating – doing nothing doesn’t preserve value, it quietly erodes it.
Robert Burns (Transaction Advisory Services Director, Ballards)
Join us at the Growth Clinic and the Nursery Management Show 2026, stand D58 at the NEC Birmingham, 26th June. Click here to register.
*Sources: NDNA Sustainability Survey 2025; Christie and Co Business Outlook 2026; Nursery World Groups Report 2026.
Disclaimer. This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.
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