In the lead-up to the Budget, and following the announcement of the £22 billion black hole in public finances, the childcare market experienced a frenetic level of activity as sellers channelled their focus into completing deals before the anticipated changes kicked in. This resulted in an unprecedented October, during which Christie & Co completed 45 nursery transactions — a level beyond the norm — from smaller single-asset sales to landmark deals such as the sale of Children 1st Day Nurseries on behalf of Margaret Mason OBE.
This heightened level of activity isn’t limited to the day nursery sector, as Christie & Co completed 144 transactions across the business landscape in October alone, echoing the seller sentiment of wanting to complete while still trading in certainty.
Within the Budget, the Chancellor, Rachel Reeves, announced an immediate increase in Capital Gains Tax (CGT). As a result, the lower rate of CGT has risen from 10 per cent to 18 per cent, and the higher rate from 20 per cent to 24 per cent. The Government will increase the Business Asset Disposal Relief (BADR) rate from 10 per cent to 14 per cent for the first £1 million of taxable gain in April 2025, and, from April 2026, it will deliver further reforms.
Reeves unveiled increases to the national minimum wage. Given the number of young and apprentice-age staff employed in day nurseries, these wage rate increases will potentially have a significant impact if these additional costs cannot be passed on through fee increases. In what is becoming a common theme, settings only offering care and education for preschool-age children will likely be hardest hit as they won’t benefit from the increased funding provided to younger children.
She also announced further changes to employers' costs through the increase of Employers' National Insurance contributions.
The further CGT changes in both April 2025 and April 2026, teamed with rises in National Insurance (NI) contributions and increased NLW, are all factors which could potentially lead to increased market activity. However, business owners will need to take time to consult with their accountants, tax advisors, and business property advisors. Insights from those discussions will enable them to contemplate their business acquisition or exit strategies, alongside how the Budget may impact their business operational performance in terms of revenue, operational expenditure, and earnings.
- To find out more about the impact of the Budget on the day nursery market, or help with your business planning in these challenging times, contact Courteney Donaldson: courteney.donaldson@christie.com / 07831 099 985
