The day nursery market ‘continued to move forward in 2023’ despite challenges, says latest Christie & Co report

Overview​

The demand for high-quality nursery settings nationwide, from single assets to larger groups, remained strong in 2023. However, there is little doubt some of the challenges connected to the sector and the wider economy have impacted the market, says Christie & Co.

Workforce-related challenges continued to prevail and, in some cases, stifled providers’ ability to operate at optimum levels, or indeed to grow their businesses and expand capacity despite the Government’s childcare expansion initiative as announced in the Spring Budget. Nurseries need to attract more staff and this proved to be increasingly difficult for many throughout 2023, as wages and costs continued to rise. 

​Interest rate increases led to borrowing becoming more expensive which created a challenge for new entrants taking their first steps into the sector and for existing operators wanting to expand. Yet, despite the increased cost of capital, the UK day nursery market continued to move forward. During 2023, Christie & Co brought 236 day nurseries to the market - this comprised a mix of single settings and groups – and buyer interest was strong which continued to drive the market.

There was, however, a 27 per cent decrease in the number of day nurseries sold in 2023, compared with 2022, with the average size being 72 places, compared with 67 places in 2022. 44 per cent of Christie & Co’s 2023 deals were to corporate/large groups, a 16 per cent reduction on 2022 figures. 32 per cent of deals were to independent buyers independent buyers, a 20 per cent increase on 2022 figures.

Christie & Co also identifies other economic pressures, operational challenges, sector funding, and sustainability as key themes influencing the sector. Commentary on these topics can be found in the report.
 

Pricing

In 2023, an overall combination of economic shifts, funding challenges, cost pressures, margin erosion and the increased cost of capital all contributed to a market reset in 2023, resulting in a 3.3 per cent decrease in pricing across childcare and education businesses, which follows some aggressive positive index movements in prior years.

Market Sentiment

 As part of its annual sentiment survey, the company surveyed childcare & education professionals across the country to gather their views on the year ahead. Encouragingly, 44 per cent of people said that they are positive about the year ahead – an 11 per cent rise on survey figures reported in the previous year – while just 14 per cent feel negative. When asked about their sale and acquisition plans in 2024, 71 per cent said they are planning to buy and/or sell this year.
 

The Finance Landscape

​In 2023, Christie Finance witnessed a 26 per cent rise in the number of childcare and education finance instructions, with a significant increase in leasehold operators seeking funding to purchase the freehold premises, ultimately increasing the value of the business that can be utilised as a springboard to aid future expansion.

​Market Predictions

In 2024, Christie & Co expects:

• We are optimistic about the continued demand for high-quality settings across the country
• Further market consolidation with acquisitions and investment into groups and individual settings
• The cost of borrowing will become cheaper as rates and inflation fall 
• A continued loss in capacity as a result of smaller settings closing amid continued financial sustainability challenge
  
  Nick Brown, Director & Head of Brokerage – Childcare & Education at Christie & Co, comments, “The sentiment at the start of 2023 was that the year was going to be challenging, which indeed it was, but the market moved forward despite this. Key challenges are sure to continue throughout the sector this year, but there is definitely a more optimistic feeling around the 2024 market as we begin the year as we are already witnessing a healthy appetite and demand for high-quality assets across the country which has resulted in a strong pipeline of deals agreed already for the first quarter of  2024 and beyond.”
  

For the full Business Outlook 2024 report, which includes a video interview with Purnima Tanuku OBE and Courteney Donaldson, visit: https://www.christie.com/news-resources/business-outlook/2024/

For further information on this press release, contact:
Phoebe Burrows, Corporate Communications Manager
P: 07540 063 598 or E: phoebe.burrows@christie.com