Increases to National Insurance contributions will force nurseries to raise fees by 10% and put one in seven settings at risk, according to research from the National Day Nurseries Association (NDNA).

 An NDNA survey of 728 nurseries in England found nursery staffing costs are set to rise by an average of 15%. Respondents said that more than half of this rise is due to increases in employer National Insurance Contribution (NIC).

NDNA is holding a Week of Action for its Underfunded Childcare campaign between 10 and 14 February, to raise awareness of these financial challenges. Nurseries are asked to share posters and other resources with parents and politicians.

Funding rates are set to rise by an average of 4%, which does not take NIC changes into account.

The majority of nurseries (92%) said current funding rates did not cover their costs, up from 83% in 2024. Around 40% of nurseries did not know their new rates, but 85% of those who did said they will make a loss on each place offered.

 Nurseries will make an average loss of £2.25 per hour on each three and four-year-old place and £1.64 on each two-year-old place. This equates to £2,565 for a 30 hour place for three and four-year-olds and £935 for a 15 hour place for two-year-olds for one year.

The vast majority (96%) of nurseries said they would have to put up their fees. Around two fifths (39%) said they would consider offering fewer places to reduce their losses, 69% would reduce spending on resources and 48% would reduce spending on premises.

Purnima Tanuku, NDNA chief executive, said: “Nurseries do not want to be in this awful situation where they are forced to either significantly increase their fees to parents or face an uncertain future, with 14% of nurseries saying their business is at risk.”

She added: “High quality comes at a cost and unfortunately the government appears to be unwilling to pay that price. Instead we are left with a situation where it is increasing statutory employment costs, which impacts hugely on nurseries because staffing makes up 75% of their expenditure, but not taking these increases into consideration when paying for childcare places.”

 “From September, the Government will be paying for 80% of childcare places in England. Simply put, if the sector’s most significant customer is not paying their fair share, nurseries have to find this money from somewhere else or close their doors.

Tanuku also called on the Chancellor to exempt nurseries from paying business rates for the hours of government-funded childcare they deliver.