Huge excess profits in UK children’s social care – new report

The UK’s Competition and Markets Authority (CMA) today has published its final report on Children’s Social Care. We have prepared a detailed analysis, which we also published today. Please see our report, and our accompanying Technical Note, and spreadsheet. We find that

  • The largest children’s care home companies made an average excessive profit of £ 22,000 per child per year from 2016-2020.
  • In total over £116m of excessive profits were made, on average, in children’s homes and in Independent Fostering Agencies each year from 2016-2020, or £584m over the 5 years. This is around a sixth of the average annual income received by the largest providers.
  • The CMA has ducked its responsibilities to children, failing to recommend limits on leverage and profit-making.

Our report was delayed by the Russian invasion of Ukraine, and news coverage has been heavily curtailed as a result. Nevertheless, the BBC covered our work here, and on television news, featuring our close partner Vivek Kotecha, a forensic accountant who carried out the main calculations in our report.

Our detailed submission to the CMA’s investigation, published last year, already provides a wealth of detail about high profits, leverage and fragility in the sector, especially among private equity firms. This second report of ours uses completely different accounting methodology to reach essentially the same conclusions.

Our recent article about private equity and market power looks at how competition authorities could potentially be tackling these problems, but lack the mandate to do so.