What the CMA Study Will Find in Your Numbers

The Competition and Markets Authority launched a market study into early years education and childcare in England on 1 July 2026. Responses to the statement of scope closed on 26 July. The sector is now waiting.

Most of the commentary so far has treated this as another consultation. It is not. The CMA has statutory powers to compel information, it can publish what it finds, and it can recommend structural remedies to government. The question for operators is not whether to engage. It is what the study is going to reveal about how the sector makes money.

1. The Study Is About Market Function, Not Quality

The CMA has been explicit that educational standards remain Ofsted's remit. Its five areas are access to high-quality services, affordability and funding, information and consumer choice, the role of public bodies, and cost drivers by provider type.

Scope covers nurseries and group-based providers across private, voluntary, not-for-profit and local authority settings, childminders including those in agencies, and school-based provision, for children from birth to school age. It includes self-funded places taken before a child qualifies for funded hours. It excludes nannies and informal care, and the devolved nations, though findings may be shared.

That last inclusion is the one to watch. Self-funded places before eligibility are where a large part of the sector's margin sits.

2. The Funding Gap Will Be Quantified in Public

The median income-to-cost ratio across all providers in 2025 was £1.01 of income for every £1 of cost. Around 26% of nursery class settings brought in less than £0.80 per £1 of cost. Around 30% of childminders were in the same position. Staffing runs from 70% of total cost for childminders to 88% for school-based providers.

The sector has argued funding inadequacy for years. What is different is that the CMA can compel the underlying data rather than rely on survey responses, and can publish a number that government has to answer.

If the study finds systemic underfunding, the recommendation will not be a uniform uplift. It will be a differentiated model that pays more where provision is harder to deliver. Groups whose economics depend on avoiding the harder provision should read that carefully.

3. Cross-Subsidy Is the Mechanism Under Examination

Cross-subsidisation is widespread and well understood inside the sector. Providers charge more for non-funded hours, or for younger children, to cover the shortfall on funded places. It is the reason a viable business can be built on rates that do not cover cost.

The CMA is looking at information and consumer choice alongside affordability. Put those two together and the question becomes whether families understand what they are paying for. A parent paying a premium for a two-year-old is, in most groups, funding a three-year-old's place. That is a defensible operating model. It is a harder story to tell once it is written down in a regulator's report.

Any group that cannot currently show its cost of delivery by age band, by setting and by local authority is in no position to defend its fee structure if the question arrives. Most cannot.

4. Ownership Structure Is a Named Question

Private equity backed providers more than doubled their share of registered places between 2018 and 2024 and now hold around 8%. Over the same period, not-for-profit places fell 8% and partnership provision fell 28%. Childminder numbers fell 39% between 2018 and 2025.

The CMA has said it will look at how different ownership structures affect outcomes. Capital has funded real expansion and real improvement, and the evidence will count for more than the narrative. But concentration in local markets is a legitimate competition question, and it is the one area of this study where the answer could change what deals get approved.

What to Do About It

The findings are the point at which options narrow. Before then there are three pieces of work worth doing, and each has value whatever the CMA concludes.

Know your cost per funded hour at setting level, by age band and by authority. Not the group average. The group average hides the settings that are losing money and the ones subsidising them.

Understand your own cross-subsidy. Which places carry the estate, how exposed that is to a change in the funded rate, and what happens to the model if differentiated funding arrives.

Test your SEND and access position. If the study lands on cold spots and differentiated rates, the groups that already serve harder provision will be positioned to benefit rather than to defend.

A market study is not a threat to a well-run group. It is a period in which the numbers become public, and the groups that already know their own numbers get to shape the conversation rather than react to it.