LaingBuisson has published the seventh edition of their Children’s Services UK Market Report(1).

Highlights include:

  • The total value of independent children’s residential care provision and independent foster agencies in England is projected to reach £3.751 billion in 2024/25 – out of a total spend across all sectors of £5.696 billion(2) (3)
  • The total value of children’s residential care is projected to be £3.502 billion in 2024/25. Of which, the market value of independent providers is expected to reach £2.700 billion
  • Actual (reported) spend on independent providers of children’s residential care has increased by more than 10% in real-terms in every year since 2019/20
  • Nearly 90% (89.4%) of all children’s residential care placements were in independent sector settings in 2023/24 – up from 70.5% a decade earlier (2013/14)
  • Only 16% of all registered children’s home places (2,390 out of 14,470 registered children’s home places) are supplied by the public sector
  • The total value of foster care is projected to be £2.194 billion in 2024/25. Of which, the market value of independent providers is expected to reach £1.051 billion
  • The number of foster care placements for looked after children has declined for two years in a row and fallen below 2020 levels (56,390 placements in 2024 compared to 56,950 in 2020)
  • The use of for-profit Independent Foster Agencies (IFA) has declined – with placement volumes declining 2.3% between 2023 and 2024. However there was a 20.3% increase in the use of not-for-profit (IFA)

The value of independent sector services providing care for looked after children in residential care or foster care environments has continued to grow, according to research published by LaingBuisson.

With limited alternate supply, placements in independent sector children’s residential care (which includes children’s homes, secure units, semi-independent (supported) living accommodation, residential schools, and other ‘residential care homes’) has continued to grow – reaching 14,540 placements in 2023/24. This comes despite an overall decline in the total number of looked after children in the same year.

Independent sector providers supplied nearly 90% of residential care placements in 2023/24 – continuing a trend that has seen their proportional share of volumes increase every year since LaingBuisson started recording data in 2009/10.

For-profit providers are the dominant supply source within the sector – 10,771 registered places across 2,857 registered children’s homes, whilst local authorities supply 2,390 places across 454 homes, and not-for-profit providers offer 1,309 across 174 homes.(4)

For-profit children’s home providers offer the smallest places per home ratio of any market segment – an average of 3.77 places per home. This compares to 5.26 in the public sector and 8.02 in the not-for-profit sector.

Expenditure on independent sector providers of residential care have been growing well above inflation – with real-term increases of more than 10% in each of the last five years. Actual reported spend growth between 2022/23 and 2023/24 was 23% – reaching £2.441 billion, a year-on-year increase of £568 million.

Strong growth in the use of supported accommodation – reaching 40% of placements at March 2024 (6,250 placements) up from 18% at March 2015 (1,530 placements) – has not stemmed the use of children’s home placements outside of council boundaries that has continued to increase or shown any indicator of limiting overall expenditure.

The growth in the use of residential care placements is set against a continuing decline in the use of foster care placements, and declines in the supply available as the number of approved foster carers and approved foster places continue to fall back from highs seen in the mid to late 2010s.

There is a much more mixed market in foster care provision, with independent sector placements accounting for just under 40% of total placements. There has also been a strong rise in the use of not-for-profit foster agencies, which increased by 20% between 2023 and 2024 – to reach 4,630 placements. There was a decline in the use of for-profit foster agencies, which fell 2.3% over the same period. It is a much larger market segment – so still accounted for 17,900 placements in the year.

Report author, Tim Read said:

“LaingBuisson’s analysis demonstrates the public sector supply challenge that is driving use of independent sector providers in children’s residential care. The government has clearly indicated that it wants greater market diversity and a reduced reliance on for-profit providers. However it is a tightrope that it must navigate carefully. Analysis of supply shows for-profit providers offer the most appropriate sized accommodation and the cost of expanding public sector supply will far outstrip stated capital spend. Should private sector investment in the sector begin to waver in the face of proposed government interventions, it is unclear who will miss our more than the vulnerable children that the reforms are intended to support.

“The government appears to be pinning its hopes on successfully diverting volumes away through earlier intervention but attempts to increase foster provision are not reflected in falling supply and the growth of supported accommodation also does not seem to be making much impact on reducing costs”

– Ends –

Notes to Editor

LaingBuisson’s Children’s Services market report also detailed market information on adoption provision, spend on other selected areas of children and young people’s services and special education provision. Expenditure on these services are excluded from any of the market value information included in this press release. A separate press release is available detailing market information for special education provision.

LaingBuisson projects a market value for 2024/25 using historic outturn data reported by local authorities up to 2023/24 and forecasting growth on the basis of historic reported values, informed by time-series data of changes in the total volume of looked after children, placements in independent and public sector settings across children’s residential care and independent foster agencies. Analysis is informed by stakeholder conversations and background research.

Independent sector provision includes for-profit and not-for-profit providers and is based on local authority reported spend. Private pay provision in children’s residential care is expected to be negligible and any private pay foster agency provision is excluded from our methodology.

This excludes any provision not registered as a children’s home by Ofsted.