The report Children's Nurseries 2005, from Laing and Buisson, attributes the growth to increased demand from parents, aided by expanding capacity and a rise in nursery fees. The same report put the sector's value last year at just under 2.7 billion.
The number of childcare places has gone up by 17 per cent to 630,525, but the total number of children attending settings rose by only 13 per cent, while supply continues to outstrip demand.
The private sector was responsible for generating the vast majority of the revenue and is worth 2.8 billion. The voluntary sector is worth Pounds 215m and nurseries run by local authorities are valued at 140m.
Voluntary providers account for 7 per cent of the market and maintained sector settings make up 4.5 per cent.
More than 40 per cent of the nursery market belongs to small businesses offering 40 places or fewer. The largest area of growth in the past year was among nurseries offering 60 to 80 places.
Chains of three or more settings only account for 10 per cent of the market, but as these groups offer an average of 67 places each they account for a 14.5 per cent share of the total number of places. These groups operate a total of 1,360 nurseries and provide 91,500 places.
The report highlights the fact that an increasing number of new settings are offering 100-plus places. Such businesses currently account for 5 per cent of the sector. Laing and Buisson predicts that the average size of providers will continue to rise.
Despite high-profile acquisitions among the big chains in the last year, including Nord Anglia's buyout of Leapfrog Day Nurseries and most of the Jigsaw chain, the market remains fragmented.
The report predicts that fees, which have increased by 4.5 per cent in the last year, are likely to continue to rise, driven up by recent announcements of an increase in the national minimum wage for adults to 5.05 in October. Laing and Buisson estimates that if these increases translated directly into fees it would mean that parents would pay an extra 3 to 3.50 per week per child for a full-time place.
The report also said that previous increases to the national minimum wage have led to a 6 per cent increase in wages for unqualified staff who earn on average 5.16 an hour. The average wage for a qualified nursery worker in the UK is 6.61 an hour.
The average cost of a full-time nursery place in the UK is around 134 a week. Among private providers it is 137 a week, while maintained settings cost the least, at around 97.50 a week.
Voluntary provider fees cost around 115 a week.
The survey found that in January 2005, 17 per cent of full-time places were vacant. But the report notes that regional variations in vacancies mean some areas have reached saturation point.
Key findings of the report are:
* Total number of nurseries in the UK:13,570
* Total number of places: 630,525
* Total number of children attending each day: 545,950
* Average places per nursery: 46 to 47
* Average number of children per nursery per day: 40.
* The Laing and Buisson Children's Nurseries UK Market Report costs 495 and can be ordered at www.laingbuisson. co.uk or call 020 7833 9123.