Gary Harrison, commercial manager at Morton Michel Insurance, looks at how nurseries can balance quality, safety and financial sustainability following the introduction of new funding guidance

It’s been two months since the Department for Education introduced new guidance on how nurseries can charge for additional services, and the sector is still adjusting to the ripple effects. While these changes aim to create a fairer and more transparent funding model, the reality for many providers has been a challenging balancing act to keep quality high while managing rising costs and regulatory pressures. 

But, as always, the early years sector is proving its resilience. Many providers are finding creative ways to navigate these challenges, from exploring new funding models to building stronger relationships with families and local communities. 

The strain on providers and parents 

Financial pressures have been building for years. Government funding for free childcare hours has long been criticised for failing to cover actual costs, leading many providers to rely on additional fees to remain sustainable. The National Day Nurseries Association reported last year that 95% of nurseries feel underfunded, with over 14% already limiting funded places as a result. 

Last year the Women’s Budget Group estimated that properly funding early years education would require the government to invest an additional £5.2 billion by 2025/26. Without this, providers face difficult decisions, such as reducing services, increasing private fees, or, in some cases, considering closure. 

Parents are also feeling the strain. The latest Childcare and Early Years Survey of Parents found that 34% of parents with young children are struggling to afford their childcare costs (up from 24% just two years prior). This growing financial burden means that many families may be forced to compromise on the quality of care and early education their children receive. 

The risk of a two-tier system 

One of the most pressing concerns with the new charging restrictions is the risk of creating a two-tier system, where children from wealthier families receive additional services and experiences that others cannot afford. Historically, parental contributions have helped fund activities such as music sessions, language lessons, and enhanced outdoor play – opportunities that enrich children’s early years growth and development. 

Now, as providers reassess their pricing models, there is growing reluctance from parents to pay voluntary charges. In an environment where every penny counts, some families are understandably hesitant to commit to extras, raising questions about whether children from lower-income households will miss out on key developmental opportunities. 

Balancing growth with safeguarding 

Recent public and political conversations around school-based nursery provision have also brought attention to the issue of safeguarding in private settings. In recent months, there has been a noticeable increase in media narratives highlighting safeguarding concerns within private nurseries. For example, a recent BBC investigation reported that there were 19,000 serious childcare incidents reported to Ofsted between 2019 and 2024. 

While these figures are concerning, they must be viewed in context. During the same period, the estimated number of registered childcare places in England grew by approximately 3%, adding 44,400 spaces between 2023 and 2024 alone, bringing the total to 1,602,500. This growth inevitably brings with it increased scrutiny and reporting, as more families engage with early years providers and awareness of safeguarding best practices continues to rise. 

Of course, those who have dedicated themselves to the early years sector remain steadfast in their commitment to the safety, education and wellbeing of our future generations. This commitment sits at the very heart of the profession and remains the driving force behind every setting, regardless of size or structure. 

Food provision and nutritional challenges 

Another significant impact of the new rules is their effect on food provision. For many nurseries, providing nutritious balanced meals has been a cornerstone of their offering, helping to ensure all children receive the nourishment they need to thrive. However, tighter restrictions on additional charges have led some settings to explore alternatives. 

Packed lunches may seem like a straightforward alternative, but they bring their own set of challenges. Research from the University of Leeds in 2020 found that fewer than 2% of children’s packed lunches meet basic nutritional standards. While this may have improved in recent years, there is probably still considerable room for progress. 

Additionally, there are practical considerations around food safety. The Food Standards Agency has highlighted that incorrect storage of packed lunches can increase the risk of foodborne illnesses, adding another layer of complexity for settings trying to maintain high standards while balancing tight budgets. 

Some providers are addressing this by issuing clear guidance to parents on what constitutes a balanced lunch, investing in better food storage solutions, or even offering low-cost meal plans as an alternative. However, all these approaches require thoughtful planning and, often, additional resources. 

Managing allergy risks in a changing landscape 

The likely increase in parent-provided food also introduces new risks around allergies. Allergy UK estimates that between 1% and 10% of children have a diagnosed food hypersensitivity, while the Anaphylaxis Campaign reports that 4% of children under five have a food allergy. This makes robust risk management essential for nurseries, particularly as they adapt to these new regulations. 

Nurseries allowing packed lunches must now navigate increased challenges, including: 

• Cross-contamination risks – Preventing allergenic foods from being exposed to children with severe allergies. 

• Emergency preparedness – Ensuring staff are trained to recognise and respond to allergic reactions. 

• Clear communication with parents – Establishing clear guidance on safe food choices and allergy-friendly alternatives. 

While nurseries are well-practised in managing dietary requirements, this shift towards more parent-provided food requires an even greater focus on vigilance and policy enforcement. 

Practical risk management tips 

In light of these challenges, here are some practical risk management strategies for early years providers: 

• Regularly update safeguarding policies and ensure all staff receive ongoing training. Implement clear reporting systems and maintain accurate records. 

• Encourage open dialogues with families about policy changes, nutritional guidelines and safety measures. 

• Provide parents with clear guidelines on packed lunches, including allergen information and storage requirements. 

• Invest in appropriate storage solutions to maintain food safety standards.

• Periodically review all aspects of the setting, from physical environments to staff practices, to identify and reduce potential risks.

 • Invest in staff development and create a supportive work environment to retain experienced professionals. 

Looking ahead – advocacy and innovation 

While the challenges are real, so too are the opportunities for the sector to innovate and advocate for fairer funding. Many nursery operators are already exploring creative solutions, from developing partnerships with local food suppliers to running community-based fundraising initiatives that help offset costs without directly charging parents. 

Equally, this period of change is a critical moment for the sector to come together, share best practices, and raise a unified voice about the vital role private nurseries play in early childhood education. With the government’s school-based nursery agenda still in its early stages, it’s crucial that the voice of the private sector is not lost in the broader conversation about early years reform. 

The road ahead may not be easy, but the resilience, creativity and dedication of those working in the early years sector remain a powerful force for positive change. With the right support, private nurseries can continue to provide the safe, nurturing and enriching environments that every child deserves .