The Impact of Underfunded Childcare
If you work in the early years sector, you’ll know the financial strain nurseries are under. And if you’re also a parent, you’ve probably felt the impact too. The National Day Nurseries Association (NDNA) has been shining a light on these challenges through its Underfunded Childcare campaign—bringing attention to the rising costs and the urgent need for better government support.
At Connect Childcare, we stand firmly behind this campaign. We work closely with nurseries and childcare providers daily, so we see the difficult decisions they face first-hand. That’s why we’re using our voices to raise awareness and fight for a fairer system.
The issue at hand
It’s no secret—childcare in the UK has been underfunded for years. But with recent changes, the situation is reaching breaking point.
Employment costs will rise from April 2025, putting even more financial pressure on nurseries. While government funding rates for childcare places will increase, they won’t cover the rising costs, especially the changes to National Insurance Contributions (NICs).
According to the NDNA’s Sustainability and Budget Impact Survey 2025 (England):
- Nursery staffing costs will rise by an average of 15%.
- Government funding rates will rise by just 4%.
- Parent fees will need to increase by an average of 10%.
The impact of these changes is significant:
- 96% of nurseries will be forced to increase fees for parents.
- 69% will cut spending on essential nursery resources.
- 48% will reduce spending on their nursery premises.
- 39% will be able to offer fewer places.
The pressure is increasing—not just on nurseries, but on families and, most importantly, children.
It’s time for real change. The sector can’t sustain this level of underfunding without serious consequences.
The reality of underfunding
Higher parent fees
Nurseries are forced to increase parent fees. The government promotes ‘free’ childcare, but when funding doesn’t cover actual costs, providers are forced to raise fees elsewhere, causing confusion, frustration, and financial strain for parents and families.
Higher employer costs
With the rise in National Insurance contributions (NICs) and staffing costs, many nurseries are struggling to recruit, retain, and fairly pay their staff. This could lead to fewer childcare places, making it harder for parents to return to work.
More nursery closures
Some nurseries simply won’t survive. Instead of growing to meet rising demand, many may be forced to close their doors—leaving families with fewer options and children without the early years support they deserve.
The knock-on effect? Development delays reduced access to quality learning, and a struggling sector unable to meet the needs of the next generation.
How can you help?
The NDNA’s Week of Action was from the 10th-14th of February, helping to raise awareness, but the fight isn’t over. Nurseries, parents, and sector professionals can still make their voices heard by:
Downloading free resources – Posters, social media graphics, and MP letter templates to spread the word.
Writing to your local MP – The more voices we unite, the stronger our message.
Educating parents & carers – Helping families understand why this issue matters using these free resources.
Find everything you need on the NDNA campaign webpage here.
Why we care at Connect Childcare
At Connect Childcare, we’re more than just a software provider—we’re a team of people who genuinely care about the early years sector.
Why? Because…
- Many of us have worked in early years ourselves.
- Many of us are parents, relying on nurseries for our own children and seeing first-hand the incredible impact on their learning and development.
- We see the daily challenges our customers face—trying to balance rising costs while still delivering the best possible care.
- We believe in standing together to protect the future of childcare.
We know how much passion, dedication, and love you pour into this sector. That’s why we’re committed to fighting for real change—for nurseries, for families, and most importantly, for children.
Let’s keep pushing for fair funding, sustainable nurseries, and the best start in life for every child.
We know that right now, this might not be your top priority—but if and when the time is right, take a look at our new pricing page to see how we’re continuing to support nurseries through these changes with affordable nursery software.
Nursery managers, get your free calendar for 2025
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About the Author
Content Marketing Executive at Connect Childcare