Biggest independent children’s care providers make £300m profit – report

The biggest independent providers of children’s social care brought in profits of more than £300m last year, according to a report commissioned by the Local Government Association (LGA). 

It comes as councils face significant financial pressures in children’s services as a result of rising numbers of children needing increasingly expensive care. 

The report by Revolution Consulting found council spending on privately run children’s homes more than doubled in the past six years. 

In 2021/22, local authorities in England spent £1.5bn on independently-run residential care for vulnerable children – an 11% increase on the previous year – and up from £736.6m in 2015/16, representing a 105% increase overall.

At the same time, the aggregate fee income of the 20 largest independent children’s social care placement providers (excluding the recently delisted CareTech) was £1.63bn last year, up by 6.5% over the previous year.  

Figures show 19% of this was recorded as profit – amounting to £310m overall.  

The LGA, which represents councils, said it was wrong that some providers are making huge profits when money should be invested in supporting children. 

The number of children in need of support from councils is now at its highest level since before the pandemic, with 82,170 looked after children in England. 

The LGA called for greater financial oversight of the largest providers, warning that despite the data obtained in the report, visibility of financial information had made it difficult to provide a clear picture of the care provider market.  

The report also identified a significant amount of mergers and acquisitions taking place, which have led to concerns about the lack of knowledge of what impact such activity is having on children living in provision. 

This reinforced the need for greater transparency around ownership, debt structure and profit making, the LGA said.

Louise Gittins, chair of the LGA’s children and young people board, said: ‘What matters most for children who can’t live with their birth parents is that they feel safe, loved and supported, in homes that best suit their needs. While many providers work hard to make sure this is the case, it is wrong that some providers are making excessive profit from providing these homes when money should be spent on children.

‘As the report shows, spending on residential care placements for children has increased dramatically in recent years as councils have sought to find the best homes for record numbers of children in care, while mergers and acquisitions have seen some large independent providers grow significantly. 

‘Yet while councils are having to divert more and more money away from early help services and into homes for children in care, the largest privately-run companies continue to bring in huge profits. 

‘At the same time, there are growing concerns about the increasing debt levels of some of the largest providers, in particular those with private equity backing. 

‘Decreasing visibility of financial information makes it increasingly difficult to understand the financial health of these organisations that are largely funded by public money. Furthermore, regulations have not kept pace with the changing ‘market’, leaving regulators with limited powers to monitor the performance of large providers.’