UK competition watchdog to examine childcare market

Education secretary Bridget Phillipson is set to order the UK competition watchdog to probe the government-funded childcare market, as part of Sir Keir Starmer’s wider drive to tackle rising living costs. 

Phillipson will tell the Competition and Markets Authority to open an investigation into childcare providers as early as Tuesday, people close to the situation told the FT.

The probe by the regulator is expected to look into non-refundable deposits, hidden charges and other costs that hit parents with children at nurseries, they said.

The previous Conservative government introduced 30 hours of free childcare for working parents of 3- and 4-year-olds in England.

Last year ministers extended the policy to eligible working families from when a child turns nine months old until they begin schooling. That policy is now costing taxpayers £9bn a year.

Although many parents receive free childcare for their infants, the CMA will be asked to examine the extent to which they are still having to pay add-on costs, ranging from “consumables charges” to unspecified administration fees. Some providers in the market charge parents for meals, nappies, snacks and optional activities.

The CMA will also be told to examine whether private equity companies operating in the childcare market are pushing up costs, the people said.

Tom Smith, former CMA legal director and a competition lawyer at Geradin Partners, said the government and the regulator were looking at sectors that represent significant proportions of household expenditure.  

“They’ve recently investigated the vets sector, they’re currently investigating private dentistry, and now childcare is next,” he said. “The CMA’s goal will be to assess whether the private childcare sector is working well for consumers.”

Neither the CMA nor the Department for Education immediately responded to a request for comment on the review to be ordered by Phillipson.

Phillipson’s instruction will come as ministers race to restrain household costs at a time when the Iran crisis is creating global inflationary pressures, and seek to win back voters after Labour suffered dire results in elections this month. 

On Thursday Rachel Reeves set out a £300mn “Great Summer Savings” scheme, cutting the rate of VAT from 20 per cent to 5 per cent for attractions including fairs, zoos and museums during school holidays, alongside free bus travel for children.

In a statement to MPs, the chancellor did not mention efforts by the Treasury to persuade supermarkets to agree a voluntary price cap on essential goods — a proposal that was condemned by retail bosses.

Instead, she set out targeted cuts to agrifood tariffs, which the government said would lead to lower prices for products, including baked beans, marmalade and tomato ketchup.

The Treasury said the expected benefits to consumers would be more than £150mn a year. The figure is a tiny fraction of the £40bn that Britons spent on groceries in 2025, according to UK government data.

Reeves also signalled she would help the poorest households with their energy bills, expected to be targeted at people who receive welfare benefits. But that support will not kick in until October, when gas and electricity use begins to increase. 

A review by the CMA into government-funded childcare would not be the first intervention in the broader sector by the regulator, whose chair was forced out by ministers last year as part of their pro-growth agenda.

Its children’s social care market study, published in 2022, looked at fostering agencies and children’s homes. Scrutinising costs, profitability and ownership structures, the CMA found that the market was “not working well” and would “not improve without focused policy reform”.

Smith said the watchdog had “very wide powers to impose changes on the sector, including divestments and structural measures, and significant changes to business practices. It often also makes recommendations for legislative changes.”