How to open a nursery in the UK in 2026

Providing childcare without Ofsted registration is a criminal offence, and registration costs £220 and takes around 12 weeks. What decides whether a nursery pays is set elsewhere: the ratios fix the staff cost of every child-hour, and councils set the hourly rate for funded places, which since September 2025 cover children from nine months for eligible working families.

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A nursery is regulated twice over. Ofsted registers the provider and approves each set of premises, and the Early Years Foundation Stage framework then governs how the setting runs, down to how many adults must be present for each age group. The rules below are those of England; Scotland, Wales and Northern Ireland register and fund childcare under their own systems.

What is a nursery business?

A day nursery provides care and early education for children from birth to school age, on premises that are not someone’s home. Ofsted calls this childcare on non-domestic premises, the category covering nurseries, pre-schools, playgroups and holiday clubs. A full-day nursery joins the Early Years Register, which covers children up to 31 August after their fifth birthday and requires the EYFS framework to be met; the Childcare Register, for older children, can be joined free at the same time. Its income comes from two sources: council funding for entitled hours, and fees parents pay for everything else.

How to open a nursery in the UK, step by step

The checklist, in the order openings usually run:

• Capacity and staffing worked out from the ratios, age group by age group
• Funding and fees modelled: council rates for funded hours, parent prices for the rest
• Premises found and the planning position confirmed
• Manager and nominated individual appointed
• Company formed, with VAT treated as a cost
• Suitability checks completed under the September 2026 rules
• Ofsted application made, allowing at least four months for a September start
• Rooms fitted out to the safer sleep and space requirements
• Staff recruited to ratio, with every DBS check back before day one
• Places filled room by room, with occupancy tracked weekly

Stage	What typically happens
Months 1 to 3	Local demand and council funding rates checked, premises found, planning confirmed, company formed
Months 3 to 6	Conversion works, manager and nominated individual appointed, Ofsted application submitted
Months 6 to 8	Ofsted decision within around 12 weeks, registration visit, staff recruited and checked
Months 9 to 24	Rooms filled one age group at a time until occupancy covers the staffing

1. Work out the capacity and the staff cost per child-hour

The EYFS sets minimum ratios: one adult to three children under two, one to five for two-year-olds, and one to eight for three- and four-year-olds, or one to thirteen where a Level 6 qualified practitioner works directly with the children. Under the framework in force from 1 September 2026, ratios apply across the whole provision rather than room by room. Dividing an hour of a practitioner’s cost by the ratio gives the staff cost of every child-hour, before any other expense:

Age group	Ratio	Staff cost per child-hour	Council funded rate, 2026/27	Left after ratio staff
Under two	1:3	£4.79	£11.34 to £12.42	£6.55 to £7.63
Two-year-olds	1:5	£2.87	£8.32 to £9.03	£5.45 to £6.16
Three and four	1:8	£1.79	£5.98 to £6.49	£4.19 to £4.70
Three and four, Level 6 practitioner	01:13	£1.10	£5.98 to £6.49	£4.88 to £5.39

The ratio is the reason funded rates for babies are almost twice those for three-year-olds, and the table shows the consequence: after the ratio staff, an under-two funded hour leaves more than a three- or four-year-old hour does. What is left still has to pay the manager, the cook, cover for breaks and holidays, rent and everything else, which is why the age mix a nursery takes shapes its margin as much as its prices do.

2. Model funded hours against fees

Since September 2025, eligible working parents in England receive 30 funded hours a week, over 38 weeks, from the term after their child turns nine months until school; all three- and four-year-olds receive 15 universal hours. Councils pay providers an hourly rate they set each year within the government’s formula, and must pass at least 97% of the funding for the entitlements to providers. Rates differ by council: for 2026/27, North East Lincolnshire pays £5.98 for three- and four-year-olds and £11.34 for under-twos, Buckinghamshire £6.49 and £12.42. Everything outside the entitlement is paid by parents. The Coram Childcare Survey 2026 puts the average price of 25 hours a week at a nursery in England at £188.75 for a child under two before any funding, about £7.55 an hour, and £174.85 for a two-year-old.

The split matters for cash flow and for value. One 86-place nursery advertised for sale took about 59% of its income from council funding and 41% from private fees. Funding arrives on the council’s schedule, and from April 2026 councils fund all the entitlements on termly headcounts. Many providers also offer the entitlement stretched across the year, fewer hours over more weeks, which evens out income for both sides.

3. Find premises and confirm the planning position

In England a day nursery falls within Use Class E(f), so a move from another Class E use is not a material change of use. A conversion from anything else needs planning permission, and recent conversions show what is involved: a former police station bought for £915,000 in 2026, a former social club approved for up to 80 children and 20 staff with part of its car park turned into a garden, and a disused church given a £250,000 redesign for 70 places. Ofsted approves the premises themselves, and operating from premises it has not approved is an offence in its own right.

Rents are substantial. A semi-fitted former nursery building of 7,216 square feet was advertised at £87,500 a year, about £12 a square foot, and a 2,830 square foot London nursery was let at £84,498, about £29.86 a square foot, on full repairing and insuring terms with uncapped RPI reviews every five years and a rent deposit of about £39,400. Nurseries are not retail, hospitality or leisure properties, so the standard business rates multipliers apply: 43.2p below £51,000 rateable value and 48.0p above it.

4. Appoint the manager and the nominated individual

Two roles are filled before applying. The manager holds at least a Level 3 childcare qualification, and an organisation appoints a nominated individual, accountable for the registration, who cannot be the appointed manager unless they also sit on the governing body. Both are paid before a nursery has any income, which is why pre-opening payroll is the largest pre-opening cost after the premises. The qualifications staff hold also decide who counts in the ratios, under updated qualification standards that apply from 1 September 2026.

5. Choose the structure and treat VAT as a cost

A private company limited by shares is the usual structure, with every director and governing body member counted as part of the registered person. Childcare supplied by a registered provider is exempt from VAT rather than zero-rated, so a nursery cannot recover the VAT it pays on furniture, equipment, fit-out and services. Every supplier price below therefore costs the nursery its VAT-inclusive figure: a cot listed at £374.99 excluding VAT costs £449.99.

6. Complete the suitability checks under the 2026 rules

Everyone connected with the registration needs an enhanced DBS check with barred lists and must complete an EY2 form, and at least one person caring for children must hold a paediatric first aid qualification. The framework in force from 1 September 2026 tightened three points that affect an opening timetable:

• No start before the check: new employees may not begin work until their enhanced criminal record check has been received, so the DBS turnaround sits inside the recruitment timeline
• Volunteers: enhanced checks now extend to volunteers, including supervised ones
• Reporting: the threshold for notifying Ofsted of allegations has been lowered, and changes to the manager, nominated individual, premises or structure must still be reported within 14 days

7. Apply to Ofsted and allow for the timescale

Applications for the Early Years Register go through Ofsted’s online form, the fee is £220, and Ofsted aims to decide within 12 weeks, longer in some cases. A registration visit follows. Ofsted’s own guidance suggests allowing at least four months for a September opening, and no childcare may be provided until the certificate is issued. The fee is then payable every year on the anniversary of registration, and each additional setting carries its own approval and fee.

8. Fit out to the space and safer sleep requirements

The EYFS sets minimum indoor space per child by age, and from September 2026 the safer sleep requirements sit in the body of the framework rather than in separate guidance. Real prices from UK early years suppliers, VAT included because a nursery cannot recover it:

Item	Price including VAT
Basic wooden nursery cot with mattress	£449.99 at TTS
Folding rest mat	From £19.79 at Hope Education
Sleep pod with accessories	£387.59 at Hope Education
Mobile sleep mat store with ten mats	£1,020 at Pentagon Play

A baby room of nine under-twos needs a cot or safe sleep space for each child who naps there, alongside changing units, highchairs and the outdoor area the EYFS requires access to every day.

9. Recruit to ratio

Recruitment is the operational constraint: a nursery that cannot staff to ratio cannot take the child, however long its waiting list. Real openings show the scale. A conversion for 80 children planned for up to 20 staff, and a purpose-built 110-place setting opened with a team of 20 moving in and seven new jobs, roughly one member of staff for every four places once managers, cooks and cover are counted.

• Pay: the National Living Wage is £12.71 an hour at 21 and over from 1 April 2026, £10.85 at 18 to 20 and £8.00 for apprentices under 19 or in their first year
• Employer costs: employer National Insurance at 15% above £5,000 a year, offset by the £10,500 Employment Allowance, and none on apprentices under 25 up to £50,270
• Apprentices: for employers that do not pay the apprenticeship levy, a £2,000 hiring payment applies to apprentices aged 16 to 24 starting from 1 October 2026, on top of £1,000 for those aged 16 to 18

10. Fill the rooms and track occupancy

A nursery does not open full. Rooms fill one age group at a time, settling-in sessions come before regular hours, and each room only pays once it reaches enough children to cover its ratio staff. Nurseries offered for sale show what a filled setting looks like: one rated Good advertises 100% occupancy for up to 26 children, and others report relying on word-of-mouth referrals with no marketing at all. Occupancy by room, tracked weekly, is the figure that shows when the next member of staff can be hired.

Types of nursery business

Type	How it works
Full day care nursery	Open roughly 7.30am to 6.30pm, from a few months old, the most capital-intensive format
Pre-school or playgroup	Sessional provision for older children, lower staff cost because the ratios are looser above age three
Workplace or campus nursery	On an employer’s or institution’s site, often won by tender
School-based nursery	Run by or with a school; the government funded new nurseries in 300 schools from a £37 million capital pot, which adds local competition
Out-of-school and holiday club	On the Childcare Register where all children are over five
Childminding	A separate registration on domestic premises, the lowest-capital route into the sector

How much does it cost to open a nursery in the UK?

No official UK average start-up cost exists for a nursery. What can be stated is what the regulator charges, what the statutory cost base is, and what real openings and sales show:

Item	Published figure, England
Ofsted Early Years Register	£220 to join and £220 a year after, with the Childcare Register free at the same time
Childcare Register only	£114; a reduced Early Years Register fee of £35 applies to small-scale provision
Business rates	Rateable value × 43.2p below £51,000, 48.0p from £51,000 to £499,999
Premises, examples	£87,500 a year for 7,216 sq ft; £84,498 a year for 2,830 sq ft in London
Equipment, example	£449.99 a cot, VAT included and not recoverable
Staff	£12.71 an hour at 21 and over; employer NI 15% above £5,000, less the £10,500 Employment Allowance

Reported openings show the range: a purpose-built 110-place nursery cost £980,000, of which £680,000 was a bank loan, while conversions of existing buildings start from the purchase or lease of the building plus works, such as the £250,000 redesign of a former church for 70 places.

What nurseries sell for

Buying a nursery that already trades skips the registration wait for the setting, but the price reflects its earnings. Nurseries advertised through business brokers, in the figures their agents published:

Places	Reported turnover	Reported earnings	Guide price
Up to 26	£266,233	EBITDA £65,617	£100,000, leasehold
32	£240,000	Adjusted net profit £62,000	£100,000, leasehold
46	Not stated	EBITDA £77,000	£300,000, leasehold
86	£680,000	Adjusted net profit £135,000	Offers invited
67, London	£1.38 million projected	EBITDA £450,000 projected	£2.475 million, leasehold

Turnover runs at about £7,500 to £10,200 a place outside London on these listings and about £20,600 a place in the London example, and guide prices range from about 1.5 to 5.5 times reported earnings. The gap is the area, the Ofsted grade, the lease and how much of the earnings depend on the seller working in the business.

Opening a nursery on a lower budget

The lower-capital routes avoid a purpose-built setting: a pre-school or playgroup in a hall with sessional hours and looser ratios, a nursery in a building already in Class E use, or childminding as a separate registration on domestic premises. Start Up Loans lends up to £25,000 per applicant at a fixed 7.5%, unsecured, well short of a full day nursery but enough for some sessional settings.

Nursery franchise opportunities in the UK

Franchising in the UK is governed by general contract law, with no franchise statute and no statutory pre-contract disclosure, as set out in what a franchise is. Nursery franchising is established here, with Monkey Puzzle, Banana Moon and others operating networks of individually owned settings. None of them publishes entry terms on its own public pages, so any precise figure circulating for a nursery franchise comes from a third party rather than the brand. Where the regulatory responsibility sits matters more than the fee:

• The franchisee is the registered person: registration, the nominated individual and the manager are all the franchisee’s, and the Ofsted grade attaches to their setting
• Expansion is gated on performance: Ofsted inspects a provider that applies to expand before its first inspection, and is likely to refuse approval where the provider is graded needs attention or worse
• Cancellation is collective: where Ofsted cancels a registration, including for non-payment of fees, the cancellation applies to all settings under that registration

The practical difficulties operators report

• Ratios against wage rises: staffing levels are fixed by law while the wage floor rises each April, so pay increases cannot be absorbed by thinning cover
• Funded rates are set by the council: a large share of income arrives at an hourly rate the provider does not set, on the council’s schedule
• Recruitment gates growth: a room opens only when qualified staff are in post, and since September 2026 only once their DBS check is back
• Premises cost before income: rent, conversion and pre-opening payroll all run during a registration process of 12 weeks or more
• New competition from schools: government capital is funding nurseries in schools, adding places in some areas
• A published grade: the inspection outcome is public and directly affects enrolment, expansion and resale value

The bottom line

A nursery is cheap to register and expensive to run. Ofsted charges £220 and takes about 12 weeks, but the ratios fix the staff cost of every child-hour, councils set the rate for funded hours, and VAT on every purchase is a cost the nursery cannot recover. On illustrative figures, ratio staff take about £4.79 of each under-two hour and £1.79 of each hour for a three- or four-year-old, against 2026/27 funded rates of about £11 to £12 and £6. Occupancy by room and the age mix decide whether the setting pays, and a share sale, not an asset sale, is how a trading nursery changes hands without stopping.