Many childcare businesses face significant financial challenges due to high business rates. NMT spoke to Jonathan Broadbery, director of policy at NDNA on scrapping business rates for the sector

Running a nursery, or nursery group, is a multifaceted endeavour that requires dedicated staff, safe facilities, and appropriate resources. Unfortunately, the burden of business rates has posed a substantial financial challenge for childcare providers across the UK.

With the rising costs of property and overhead expenses, providers are finding it increasingly difficult to strike a balance between sustaining their businesses and offering affordable childcare options. This
dilemma has far-reaching consequences, affecting not only the sustainability of the sector but also the accessibility and quality of childcare services available to working parents.

Earlier this year, research from the NDNA revealed the scale of the burden that business rates have on providers.

“In 2021 the revaluation exercise took place and updated business rates bills came in from April 2023 which followed after the Budget announcement in March,” Broadbery says. “We asked our members what their new rates would be and the impact of that on their nurseries. The average new bill is £21,000, significantly increased since the last average which was £13,260.

“We have also had reports of revaluations being calculated on headcount rather than on floor space. Where members had out-of-school clubs/ wraparound care, those headcounts were included although those children are not there for most of the time. This is a worrying development because it doesn’t reflect their day-to-day business model and this could be a factor in their bills being so high. A member told us her bill had been calculated using registered places even though she never had more than two-thirds of that number of children in the nursery at any one time.

“We presented our evidence to the Education Committee’s inquiry into childcare earlier this year. We are delighted that scrapping business rates for nurseries was one of their key recommendations in their report which came out this week.”

Invest more in the workforce

The cost of business rates is hindering the long-term sustainability of the sector and many providers would use the money they spend on it to invest back into their staff and childcare offerings.

Broadbery says: “Having to pay business rates is an additional burden. 58% said that their bills had risen this year. Previously 61% told us that if they didn’t have to pay business rates they would be able to increase staff wages, 50% told us it would reduce losses as a business, and 41% said it would help to mitigate fee increases to parents.”

Eligibility criteria for business rates relief

Broadbery states: “Charitable trusts can get up to an 80% discount, but this can still be a burden on them.

“Providers who have seen an increase can challenge the revaluation and ask for a review which would reduce their bills if successful.

“We have seen examples like in Harrogate and Calderdale where local authorities have worked to support providers with business rates. If nurseries are particularly struggling, it is worth speaking with your local authority to see if they can help.”

What would you like to see from the political parties?

The political party conferences this year all have a much bigger focus on early years than ever before. We already know the Conservative’s policy route for childcare, however, across early years and business sectors, concerns have been raised that it is simply not enough.

The Confederation of British Industry said the government urgently needed to announce extra funding and changes to childcare and early years support, arguing that a more accessible and affordable system was an immediate economic priority.

The lobby group, which represents more than 190,000 businesses across the country, said as much as £9 billion of investment is required to improve the system and expand free childcare to one-and two-year-olds.

Broadbery says: “NDNA has lobbied hard for members to secure business rates relief across England, Scotland and Wales because nurseries deliver funded places on behalf of the government and there should be a level playing field across all educational settings.

“We have secured this for nurseries in Wales and Scotland but the government is not listening to us for nurseries in England.

“We know the Labour party is reviewing business rates as a whole, but with the government soon to be purchasing 80% of childcare hours it makes no sense for them to be giving with one hand and taking away with the other.

“Business rates are not calculated fairly for nurseries, treating children’s early learning as a commodity. We need all parties to recognise this and the unique position nurseries are in and grant them exemption like they already do in Wales and Scotland.”