Occupancy and the Funding Gap: What Nursery Managers Miss
Rolling occupancy above 85% and a clear view of your funded-hours shortfall are the two numbers that determine whether your setting survives 2026. Here's how to run them.
With the 30-hour expansion for working parents of 9-month-olds now fully rolled out, most UK settings are seeing more funded hours and less paid income than ever. The settings that will still be trading in 2027 are the ones whose managers can answer two questions on any given Monday:
- What is our rolling four-week occupancy, by room?
- What is the per-child shortfall between our hourly cost and the funding rate we receive?
If you can't answer these two, the rest of your business plan is guesswork.
Rolling occupancy, not headline occupancy
Headline occupancy ("we're full!") hides the truth. Rolling four-week occupancy — actual attended sessions divided by capacity across the last 20 operating days — is the number that matches your wage bill.
Aim for 85%+ in baby and toddler rooms, 90%+ in preschool. Below that, staffing costs eat your margin before you notice.
Track it weekly. A four-point drop, sustained for a fortnight, is your early warning — not the end-of-month P&L, which is already too late.
Your true hourly cost
Add these together for one operating week, then divide by attended child-hours:
- Total staff cost including on-costs (pension, NI, holiday accrual)
- Rent or mortgage, apportioned weekly
- Utilities, insurance, food, consumables
- Management time and admin
- A realistic sinking fund for refurbishment (2–3%)
Most UK settings land between £6.80 and £9.20 per child-hour. If you haven't calculated yours in the last six months, you are almost certainly under-quoting parents on fees.
The funding gap, per child, per week
For each funded child, the shortfall is:
(Your true hourly cost − funded hourly rate) × funded hours per week
For a 30-hour child in a setting costing £8.10/hour, funded at £6.15, the shortfall is roughly £58.50 per week — over £2,200 across a 38-week funded year.
You close that gap in three places:
- Charging for consumables, meals and enhanced sessions where allowed
- Selling stretched offer at a top-up rate to families who want year-round care
- Filling the unfunded hours around funded sessions with paying children
Two numbers on the office wall
Print two numbers and put them where you sit:
- This week's rolling occupancy, by room
- This week's funding gap per funded child
Update them every Monday. Every strategic decision — new session structure, new fee schedule, new hire — should reference those two numbers. If it doesn't, you are decorating, not managing.
