Concerns about the role of private equity and for-profit homes in children's social care have grown significantly in recent years.
A Financial Times investigation published in May revealed that commercial incentives are playing a growing role in decisions about the care of vulnerable children, and regulation has struggled to keep up. The consequences for these children are profound, leaving them far from their original homes, placed in unsuitable placements run by investors with no experience in care, and pulled away from their education at the moments it matters most.
The total cost to the state for children's social care has reached £3 billion a year – an average of £384,020 per child.[1] That is around six times the cost of sending a child to Eton. And this enormous cost for the state is not translating into the quality of care that you would expect.
As a result, the Competition and Markets Authority (CMA) has now confirmed it will review the sector, following a request from the then Secretary of State for Education, Bridget Phillipson.[2]
What is the impact of privatising children's social care?
Commercial incentives in children’s social care have attracted private equity firms and other investors looking to make a profit. The result has been a sharp rise in costs with the most expensive placements exceeding £1 million a year and fees having risen by roughly two-thirds in real terms since 2015.[3]
England has one of the highest rates of private homes in children’s care in the world. Currently, 84% of places in care are run by for-profit private providers, compared with just 5% in France. In the past decade, the number of for-profit homes has more than doubled, going from 903 in 2014 to 2,247 in 2023.[4] The sector has also attracted a wide range of investors with no background in care – the Financial Times reported that plumbers, hairdressers and landlords have entered the market, all seeking potential financial gains.
The quality of care inside these homes has deteriorated alongside the rise in private ownership. Macie, who was sent to a home at 14, told the Financial Times that she was allowed outside for just 15 minutes a day unless she completed chores for additional time. She described her first home as depressing, with furniture glued to the floor. She was later moved to an unfinished house with no working toilet. Her education was also neglected, with staff actively discouraging her from completing her GCSEs as they did not want to do anything that had any physical or financial burden. Her experience reflects what happens when profit is prioritised over the basic needs of vulnerable children.
Because of the skewed commercial incentives, providers also tend to open homes in areas where property is cheap rather than areas where children need them most. For example, Lancashire has 17 times more care places than it has local children who require them while, on the other hand, four London boroughs have no private provision at all. This has resulted in half of all children in care being placed more than 200 miles away from home, and one in seven children moving three or more times a year.[5]
Map showing the regional variation between the number of care places available and the number of children requiring them [6]
Who is profiting most from children's care homes?
The five largest owners of children’s homes in England are all privately owned:
Amalfi Midco Limited (CareTech): 220 homes
G Square Healthcare Private Equity LLP (Keys): 156 homes
Picnic Topco Limited (Esland): 68 homes
HCS Group Limited: 59 homes
Liberi Topco Limited: 52 homes
The two largest, Amalfi Midco and G Square Healthcare, together account for 9% of all places in children’s homes and are both backed by private equity.[7]
Ofsted found that the 15 largest providers averaged operating profit margins of 22.6% on children’s homes between 2016 and 2020, with weekly placement fees rising from £2,977 to £3,830. Fees in children’s social care have increased at a rate of around 3.5% above inflation each year.[8]
These levels of return show that parts of the industry are generating excessive profits from the care of vulnerable children.
How have UK regulators responded?
In early 2025, the then Secretary of State for Education, Bridget Phillipson, formally wrote to the CMA requesting a review of the children's social care market. The CMA accepted the request and confirmed it will launch a market investigation, expected to begin in the summer of 2026 with a final report due by 2027. The investigation will examine whether the structure of the market, including the rise of private equity backed providers, is working in the interests of children and local authorities[9].
This is not the first time the CMA has looked at this sector. In 2022, the CMA conducted a review which found that the market was not functioning well, highlighting rising costs, a lack of suitable placements and insufficient competition[10]. However, meaningful reform did not follow, and the problems have since got worse.
The children's social care investigation follows a pattern of CMA market investigations into what it describes as "essential markets", including road fuel, infant formula, dentistry and veterinary services. Similarly, in both the dentistry and veterinary markets, the CMA found that an influx of private equity led to rising fees and declining quality for consumers. Vulnerable children are now experiencing the same consequences.
Ofsted, the regulator responsible for inspecting children's homes, has also acknowledged that the current system is not working. It has stated publicly that the regulatory framework is "bent out of shape", struggling to keep pace with the rapid growth of privatised homes.
It remains to be seen what action the CMA will take following its market investigation, but the coming years will certainly show whether policymakers can rebalance the market and restore the fundamental alignment of children’s care with long-term interests of children rather than short-term financial incentives.
[1] How England’s vulnerable children became a gold mine for investors
[2] Letter from the Chief Executive of the CMA to the Secretary of State for Education
[3] How England’s vulnerable children became a gold mine for investors
[4] CYP Now - Study charts commercialisation of children's homes in England - CYP Now
[5] How England’s vulnerable children became a gold mine for investors
[6] Commercialisation and care sufficiency: the privatisation of children's homes in England - The Lancet Public Health
[7] Main findings: ownership of children’s social care providers in England 2025 - GOV.UK
[8] 'Dysfunctional' care market needs overhaul to tackle high p - Community Care
[9] Letter from the Chief Executive of the CMA to the Secretary of State for Education
[10] Children's social care study - GOV.UK
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