Parents hoping for relief from sky-high childcare bills may instead face higher costs, as new research warns the Government’s flagship “free childcare” expansion is failing to keep pace with nursery fees and could make them worse in some areas.

A University of Bath Institute for Policy Research (IPR) study tracking prices over the past 18 months found nursery fees have risen fastest in areas with the lowest government funding. In “childcare deserts”, where three or more children compete for every available place, the surge in demand from expanded entitlements risks driving up prices for the hours parents still pay for.

Key findings

  • Funding gap for older children: In most of England, funding for three and four-year-olds is lower than the average hourly fee, forcing nurseries to plug the gap by charging more for younger age groups.

  • Bigger price hikes in poorly funded areas: Between March 2024 and March 2025, nurseries in the worst-funded half of the country raised fees significantly more than those in better-funded areas.

  • Sharp regional divides: London remains the most expensive region for childcare, followed by the South East and South West; the North East is cheapest.

  • Sector-wide squeeze: Analysis of one of the UK’s largest nursery chains, with around 300 sites, shows its prices broadly match competitors, suggesting a national rather than isolated issue.

Lead researcher Dr Joanna Clifton-Sprigg, University of Bath, said:

Free childcare is a bold and welcome move but without funding that reflects real costs, it risks falling short. Where funding is lower, we’re seeing faster price rises for the hours parents pay for - a pattern that could deepen regional inequalities.

Co-author Professor Kerry Papps, University of Bradford, said:

Unless funding keeps pace with nursery fees, the policy could backfire. In childcare deserts, the extra demand may push up prices for unfunded hours, wiping out savings for families who need them most.

The study used monthly price data from March 2024 to March 2025 from a large UK nursery chain, comparing it with the Department for Education’s 2024 Childcare and Early Years Provider Survey and prices from nearby nurseries.

The IPR team will continue to track the impact as the final phase of the policy is rolled out in September 2025.