Revenue benchmarks: what a UK nursery should earn per child

Most nursery owners know what they charge per session. Fewer know what they actually earn per child per week once funded hours, discounts, absences, and additional charges are factored in. That gap between the headline fee and the real revenue per place is where financial problems quietly build.

Average nursery fees in the UK — 2025/2026

Fee rates vary enormously by region. London and the South East sit significantly above the national average. The following figures give a broad benchmark:

• Under 2s (full day, England average): £65–£90 per day
• 2–3 year olds: £55–£80 per day
• 3–5 year olds (private hours above funded entitlement): £50–£75 per day
• London premium: Add 30–60% to these figures for inner London settings
• Northern England and rural areas: Fees can be 20–40% below these averages

If your fees are significantly below these ranges for your area, you may be underpricing. Nurseries that haven't reviewed fee rates in two years are almost certainly not keeping pace with their cost base.

Funded hours — the income that confuses most owners

The government's funded entitlement (15 hours for eligible 2-year-olds, 15 hours for all 3–4 year olds, and the extended 30-hour offer for working parents) is paid to nurseries by the local authority at a fixed hourly rate. This rate — known as the local authority hourly rate — is set locally and is almost always lower than the nursery's private fee rate. For many nurseries, it covers roughly 60–80% of the actual cost of delivering that hour of care.

This matters because as a higher proportion of your children take up their funded entitlement, your revenue per child from the local authority is structurally lower than your private fee rate. Nurseries with a high proportion of funded children need to ensure their top-up charges (meals, consumables, additional hours) are appropriately priced — not as a way of circumventing the rules, but to cover the genuine cost of delivery.

The revenue per place calculation

For each child, the realistic revenue calculation looks like this:

• Funded hours claimed × local authority hourly rate
• Plus: additional hours charged at private rate
• Plus: meals and consumables charges
• Minus: absences for which you don't charge (if applicable)
• Minus: sibling discounts or other reductions

Run this calculation for a typical child on each of your session patterns. The output tells you your real revenue per place — which is what your financial model should be built on, not the headline fee rate.

What a healthy revenue position looks like

A private nursery running at 90%+ occupancy with well-managed staffing costs (typically 65–75% of revenue in a well-run setting) should be generating a modest but sustainable surplus. Many nurseries run significantly tighter than this — often because the fee rates haven't kept pace with cost increases, or because occupancy in specific sessions is lower than the overall average suggests.

The nurseries that struggle financially are usually those that price below cost on funded hours without enough private-fee income to compensate, run below 85% occupancy across the week, or have staffing ratios that are technically compliant but inefficiently deployed.

Fee reviews — when and how

Fees should be reviewed annually at minimum. Most nurseries do this in advance of the new academic year (August/September) or the new calendar year. Give parents at least eight weeks' notice of any increase — this is best practice and, in some local authority funded hour agreements, a contractual requirement.

Don't apologise for a fee increase. Your costs have risen — staffing, utilities, food, materials, insurance. A clear, brief letter explaining that fees are being reviewed to ensure the nursery continues to deliver the quality families expect is both honest and professional. Parents who choose your nursery and are happy with the care rarely leave over a well-managed fee increase.