Autumn Budget 2024: Have you started to appraise potential implications for your day nursery business?

Credit: Markus Spiske for Unsplash

On Wednesday 30 October 2024, the Chancellor of the Exchequer, Rachel Reeves, presented her first Autumn Budget to parliament. It began with the promise of economic growth that was delivered through a series of changes that will undoubtedly impact childcare and education businesses throughout the UK.

Lots of business owners had speculated what the Budget might bring, which contributed to a flurry of deal completion activity in October.

Here is a brief summary of how these changes could impact your business so that you can plan effectively to ensure the best for its future:

• You may have read about the increases to the National Living Wage (NLW), minimum wage, and employer’s National Insurance Contributions (NICs). Owners we have spoken to have reported anticipated increases in NIC increases alone ranging from £30,000 for some single settings, while a medium-sized regional group has muted NIC increases amounting to circa £300,000. An article published by The Times on 12 November commented “some nursery providers say they expect costs to rise by up to £1.9 million, which could push them into the red”. That article goes on to comment “Neil Leitch, chief executive of the Early Years Alliance, which is a provider of 40 nurseries, largely in deprived areas of the country, said they had calculated that the National Insurance rises would cost them £410,000 a year”.  Have you discussed these changes with your accountant, and have you appraised the potential impact these changes might have on your business; your levels of forward NICs, salary expenditure, and the potential impact on profitability/financial sustainability?
• With visibility over the levels of increased operational expenditure, you’ll be able to consider what actions may be necessary and determine the best course of action for your business, prompting reflection on questions such as: Can you raise fees to absorb some of the increased costs, or could you consider increasing consumable charges to recoup expenses, are there other areas of expenditure whereby costs savings could be made?
• In April this year, the Conservative Government confirmed that early years entitlement funding would be linked to inflation and staffing costs but, as of yet, no insights have been shared as to how these inflationary calculations will be determined. If funding rates fail to rise in line with inflation and additional staffing costs, as we have seen with previous funding rates over the prior decade, bridges between the income and associated costs of delivery are likely to erode at a rate far in excess of what has previously been experienced.
• Changes are also being made to Capital Gains Tax (CGT), with the main rate increasing from 20% to 24% effective from 30 October 2024. If you are considering a sale in the coming months or years, have you consulted with your accountant to assess your potential tax liability? Given that CGT rates are expected to rise in the next few years, it may be advantageous to expedite your plans should thoughts of retirement or the potential sale of your business be on your horizon.

The potential impact of the aforementioned changes highlights the importance of seeking appropriate advice for the future success of your business and, in looking towards the future, the potential impact in the event of a sale or your retirement when the time comes.

It is, in times of change, that you should turn to a trusted advisor to discuss the potential impact of these changes on your business and the reaction of the wider market.

At Christie & Co, our specialist Childcare & Education team takes pride in being well-connected with providers across the whole sector, which helps us understand the challenges being faced and the sentiment amongst individual nursery owners, regional operators, and large groups. This knowledge allows us to offer fair, balanced, and practical advice through building long-standing relationships so that when the time is right, you have a trusted contact to turn to that you know understands the sector.

If you’d like to discuss the market and what these changes might mean for you and the wider sector, please contact Courteney Donaldson: courteney.donaldson@christie.com / 07831 099 985