CMA review of day nurseries: what childcare providers need to know

Following its high-profile interventions in the veterinary and private dentistry sectors, where it proposed significant reforms around pricing transparency, consumer information and complaints handling, the Competition and Markets Authority (CMA) is now setting its sights on the early years childcare market.

On 25 May 2026, Education Secretary Bridget Phillipson wrote to the CMA asking it to examine hidden costs parents may be charged when accessing government-funded childcare.

What has prompted this review?

In England, eligible working parents of children aged nine months to four years old can access up to 30 hours per week of government-funded childcare. According to Department for Education figures, this equates to more than 1.7m parents in England now using funded childcare hours. However, ministers are concerned that families are still facing significant hidden costs for these places.

These additional charges may be undermining the government’s flagship childcare policy, and there are concerns that they may be creating a barrier for hard-pressed families. The CMA has also been asked to assess the role of ownership models, including private equity, and whether they are contributing to rising costs.

The provider perspective

The early years sector has pushed back against the framing of additional charges as unfair. Neil Leitch, chief executive of Early Years Alliance, has pointed to the government’s increase in National Insurance contributions, which was not reflected in the rate paid to providers, as evidence of a fundamental funding shortfall.

Government funding rates often don’t fully cover the actual cost of providing childcare, particularly once rising wages, higher energy bills, food costs and rents are factored in.

Practical steps for day nursery operators

While the precise scope of the CMA’s review remains to be confirmed, the regulator’s approach in the veterinary and dental sectors – where remedies were imposed through a legally binding order, with non-compliance potentially resulting in binding directions or financial penalties – suggests that nursery providers could face similar scrutiny.

Operators would be well advised to take proactive steps now. The following areas are likely to attract particular scrutiny:

• Pricing and fee transparency: consider fee structures to ensure that all charges are clearly communicated to parents before they commit to a place. Any charges beyond the funded hours should be set out in writing and be easily accessible
• Contract terms: deposit terms, cancellation policies and notice periods should be reviewed against consumer protection requirements. Terms that impose disproportionate financial burdens on parents, such as non-refundable deposits that bear no relation to the provider’s actual costs, may attract particular attention
• Complaints handling: providers should ensure they have a clear, accessible complaints procedure and that parents are made aware of how to raise concerns
• Ownership transparency: nursery chains and those backed by private equity should consider whether their ownership structures are sufficiently transparent to parents
• Record-keeping and compliance: providers should ensure that their internal governance, documentation and staff training reflect best practice. Clear records of what has been communicated to parents about costs and entitlements will be important if the CMA seeks information from providers.

What happens next?

We await the specific proposals the CMA has indicated it will develop for its board and an update following those discussions. The Secretary of State has asked for a report on childcare costs to be published next spring.

The early years sector is already under significant financial and operational pressure. A CMA review will add a further layer of regulatory complexity, but it also presents an opportunity for well-run providers to demonstrate that they are operating transparently and fairly. Those who take steps now to review their pricing, contracts and communications will be best placed to navigate whatever regulatory changes may follow.