Amid policy and tax changes, ‘transactional activity has surged’ in childcare & education markets, says Christie & Co

THE WIDER CHILDCARE & EDUCATION MARKETS

In the first six months of 2025, the UK childcare and education markets demonstrated strength and resilience, with robust buyer demand matching a growing supply of businesses coming to market. A diverse and active buyer pool - including individual investors, institutional funds, and charitable organisations - is driving acquisition activity, often with a focus on aligning investments with ESG goals.

The anticipated rise in Business Asset Disposal Relief from 14 per cent to 18 per cent in April 2026 is prompting many owners to consider their exit strategies, contributing to buoyant market conditions. Despite operational pressures such as rising National Insurance Contributions and wage increases, many businesses are adapting successfully, though fee sensitivity remains a challenge in some sectors.

Encouraging macroeconomic indicators, such as 0.7 per cent GDP growth in Q1 2025 and inflation easing to 2.8 per cent, indicated improving financial conditions and continued market confidence. While Consumer Price Index inflation increased to 3.4 per cent in May, it is expected to remain around this level for some time. Stable interest rates and the potential for future cuts could further stimulate development and acquisition activity.

CHILDREN’S DAY NURSERY MARKET

The first half of 2025 saw heightened activity in the day nursery market, as operators responded to recent government policy changes. This has created opportunities for both consolidation and strategic exits.

Buyer interest remains strong across all price points and business sizes, with demand for both leasehold settings (making up 53.2 per cent of deals in H1 2025) and freehold settings (making up 46.8 per cent of deals in H1 2025). Notable transactions include Kids Planet Day Nurseries’ acquisition of the Perfect Start Group, marking a strategic expansion into southern England.

Not too dissimilar to what was seen in 2024, the average capacity of day nurseries sold by Christie & Co so far in 2025 has ranged from an average of 49.8 places for independents to an average of 88.7 for corporate groups.

In the first half of 2025, there was a shift in the number of day nurseries purchased by different buyer groups. Appetite from the buyer group comprising independents and first-time buyers increased, making up 28.8 per cent of sales in H1 2025, compared with just 15.4 per cent in the same period in 2024. Similarly, Christie & Co saw a slight drop in corporate and large group activity, which made up 55.8 per cent of sales in H1 2025 compared with 70 per cent in H1 2024.

The common theme that has run through all day nursery sales in 2025 so far has been the competitive tension and heightened level of interest experienced across the board from a range of buyers.

CHILDREN’S SOCIAL CARE MARKET

The children’s social care property market remains robust, with properties benefiting from C2 or C2a use commanding premiums over those with standard residential (C3) use. This trend is driven by sustained demand from local authority commissioning teams and providers expanding services to keep children within their communities.

In Wales, the Health and Social Care Act - now law - makes it the first UK nation to ban profit in fostering and children’s residential care services. This legislative shift is prompting providers to restructure, with many seeking expert guidance to navigate the transition.

Despite a quieter first half of 2025, Christie & Co saw a surge in children’s care business owners actively reviewing their preparedness for sale, focusing on legal, financial, and operational considerations, through the eyes of alternative operators, buyers, and investors. Buyer interest remains strong, particularly for high-quality, established providers in England, with many entrants motivated by a genuine commitment to improving outcomes for children and young people.

INDEPENDENT SCHOOLS AND SEND SCHOOLS MARKETS

The UK’s independent and special educational needs and disabilities (SEND) school sectors are undergoing significant changes in 2025, driven by new government policies and evolving market dynamics.

From January 2025, the introduction of VAT on private school fees has created uncertainty across the independent school market. A recent High Court ruling upheld the Government’s decision, prompting schools to reassess financial models and trading strategies. Rising operational costs - including increased pension contributions, energy bills, and National Insurance contributions - have further strained profitability, leading to a wave of school closures and consolidations.

Despite these challenges, schools that have proactively adapted through fee subsidies, site consolidation, and enhanced marketing remain attractive to buyers. Sales activity has focused on smaller schools, with strong interest from SEND providers repurposing sites for specialist education.

Meanwhile, the SEND sector continues to show resilience and growth. Demand remains high, supported by political focus and investor appetite. The Children’s Wellbeing and Schools Bill and anticipated reforms to the SEND funding framework are expected to shape future operations, and while government investment aims to expand SEND provision in mainstream schools, private sector involvement remains critical, particularly for high-needs services.

THE FINANCE LANDSCAPE

According to Christie Finance, the lending appetite for the UK childcare and education sector remains strong, underpinned by favourable economic conditions, stable interest rates, and supportive government policies. A key driver is the upcoming policy change from September 2025, which will entitle all children in eligible working families to up to 30 hours of funded childcare per week from nine months old. This is expected to significantly boost demand across the sector. The broker also noted that lenders are showing a growing interest in supporting businesses that contribute positively to society. The childcare and education sectors align well with the priorities of ethical investors and lenders who are actively seeking purpose-led businesses.

Courteney Donaldson, Managing Director – Childcare & Education at Christie & Co, comments, "The first half of 2025 saw exceptional momentum across the childcare and education sectors, significantly outperforming previous years and, indeed, surpassing our predictions. While we anticipated increased activity and consolidation, the scale of market engagement has exceeded expectations. Despite OECD forecasts suggesting the UK would experience the slowest growth among developed nations, the childcare and education markets have defied this trend. Transactional activity, capital values, and buyer appetite have all surged. Notably, businesses are achieving 96 per cent of asking price, and we anticipate double-digit price growth by year-end.”

Nick Brown, Director & Head of Brokerage – Childcare & Education at Christie & Co, says, “As announced in Rachel Reeves’ 2024 Autumn Budget, increases in Business Asset Disposal Relief (BADR) from 10 per cent to 14 per cent effective 6 April 2025, prompting more day nursery business owners to consider their exit strategies, has undoubtably contributed to 2025’s buoyant market conditions. Heightened activity in the sector is expected throughout the remainder of this year, and we anticipate an incredibly busy Q1 2026 as a result of the further BADR increases to 18 per cent effective 6 April 2026. Despite operational pressures, such as rising National Insurance contributions and wage increases, many businesses are adapting successfully, though fee sensitivity remains a challenge.”

For the full ’Childcare & Education Market Review 2025’ which also includes a Q&A with Daniel Goodman, Head of Developments at The Harkalm Group, visit: https://www.christie.com/sectors/childcare-education/childcare-and-education-market-review-2025/

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For further information on this press release, contact:
Phoebe Hill, Associate Director – Corporate Communications
P: 07540 063 598 or E: phoebe.hill@christie.com

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