Childcare providers are under fresh scrutiny after the Education Secretary asked the Competition and Markets Authority (CMA) to examine the additional charges parents face on top of funded hours, from deposits to everyday ‘consumables’ such as meals, snacks, nappies and suncream.
The CMA has said it is already monitoring the sector and that it will “put a specific proposal to its Board next month”, but recent action in industries such as veterinary and dental services suggests this could escalate into a more formal market study or a form of targeted consumer enforcement action.
An announcement from the CMA is expected in the coming weeks, so nursery and childcare businesses must consider how they can prepare for what’s to come now.
Why nurseries are in the spotlight
The expansion of funded hours to nine-month-olds has materially raised the political stakes of how childcare is paid for, and parental complaints about deposits, top-up fees and compulsory consumables have been a recurring theme in the press.
Many parents are left having to pay the additional costs that aren’t covered by the funded hours entitlement. At the same time, media reports have highlighted concerns about profitability in parts of the sector, particularly in larger, investor-backed groups.
A growing, fragmented base of independent operators competing against large, corporate groups has attracted the attention of the CMA in other professional services, such as vets and dental practices and has raised concerns with parents that profits are being put before their children’s needs.
What the CMA’s work in other industries tells us could happen here
Two recent CMA interventions help frame what may follow in the nursery market:
- The CMA launched its market study into private dentistry on 5 March 2026. This came off the back of a request from Chancellor Rachel Reeves compelling the CMA to act. The CMA is currently looking at hidden costs, transparency and overtreatment, as well as the impact of consolidation in the sector led by corporate groups.
- The CMA also concluded its market investigation into veterinary services for household pets recently, imposing sector-wide requirements including mandatory online price lists, written estimates for certain treatments, clear disclosure of corporate ownership.
Both sectors share features with early years: trusted-provider dynamics, practical difficulties in switching, obscurity around publicly funded and privately paid services, and a mix of independents alongside expanding corporate groups.
Whatever path the CMA decides upon, it’s sensible to assume greater focus on pricing transparency between what’s covered in funded hours and additional fees charged on top. Increased expectations around how easily parents can compare providers and understand total costs is also likely, while clear labelling of corporate ownership is another area likely to come into scope.
What can nursery operators do to prepare?
While it may be tempting to wait and see what action is ultimately taken, interventions of this kind tend to move quickly once formal action begins. The CMA will look at how businesses already operate, rather than giving time to adjust.
As this scrutiny increases, so does parental awareness, so being able to explain charges clearly and confidently will build parents’ trust and help them differentiate between providers.
For operators looking to prepare ahead of any potential investigation, some practical steps include:
- Conduct an internal review of parent-facing documents, including contracts, deposit and cancellation terms, and how you charge for consumables
- Also review any internal pricing papers, board materials and notes or emails relating to fee-setting. The CMA will likely request internal documents if it does open a market study or price investigation, so consider how these will read if shared externally.
- Refreshed training for senior management and setting managers on what can and cannot be said to other operators about fees, and on how charges are communicated to parents.
- Corporate groups and investors should add a further layer: a review of how pricing varies across settings, of how corporate ownership is explained to parents, and how planned acquisitions may attract regulatory interest. With greater scrutiny on the sector, it’s sensible to revisit this as soon as possible.
The cost of preparing is low compared to the cost of being unprepared – especially if you’re asked to be involved in a market study. Those who take early action will be better equipped to respond to whatever action the CMA decides to take and better placed against any consumer law risks that already exist today.
Knights advises businesses across a range of consumer-facing sectors on matters involving the CMA. This includes support on merger control, regulatory compliance, and engagement with market studies and investigations.
For more information, contact our Competition team.