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Is your consultant ‘horizon scanning'

EHP Consultancy

Portfolio for legislative and regulatory compliance, commercial knowledge, operational and strategic

governance & management in children's social care UK

Is your consultant ‘horizon scanning’ to keep your potential business up to date with legal and regulatory developments? This is essential to embed strategic thinking and planning into your Ofsted application for opening a new children’s home where we ensure:

The delivery of appropriate placements to children and young people that best meet their needs

An effective regime of market oversight

Pricing that accurately reflects the cost of care

Future proofing of your investment

Production of a compelling business and financial model that is more likely to be approved by Ofsted.

At EHP Children’s Homes (Consultancy), we apply a level of strategic scrutiny and planning over and above any of our competitors; this update being an example.

June 2022 UPDATE

There are currently a record number of children in care. There are 80,850 looked-after children in England, out of a total of 100,000 looked-after children in England, Scotland and Wales. Around 16% live in residential settings in England (around 13,000) with an annual cost of around £5.7 billion.

In England, local authorities use a significant amount of private provision, with around 78% of places being provided by the private sector. Over the last 5 years, the private sector’s share of children’s homes in England has risen by 26% while the number of local authority homes has declined by 5%.

Needs are also shifting, with more placements required for older children, unaccompanied asylum seekers, and those with more complex needs.

Issues also include:

Children and young people being placed more that 20 miles from their home base (although occasionally for a justified reason);

Children separated from siblings – contrary to their care plans;

Children placed where they are unable to access the additional care, therapies (especially mental health support) and facilities they need.

The Competition and Markets Authority (CMA) undertook a market study into children’s social care in England, Scotland and Wales in March 2021, with the final report published on 10 March 2022, in response to concerns that had been raised regarding how the placements market was operating:

First, that local authorities were too often unable to access appropriate placements to meet the needs of children in their care;

Second, that prices paid by local authorities were high and, combined with an increase in looked-after children, was placing significant financial strain on local authority budgets. (The fifteen largest providers assessed by the CMA identify an average profit margin of 22.6% from 2016 – 2020, with an average weekly price of between £2,977 - £3,830.) Note, this was unlikely to include solo placements that often have a significantly higher weekly price.

The Independent Children’s Homes Association (ICHA) are working with the Department of Education (DfE), Ofsted and local authorities to address these issues. ICHA comment that the CMA report rightly highlighted that there are insufficient placements available in children’s homes, particularly for children with complex needs. However, they raise an important point that it should be acknowledged that this issue is predominantly made worse by an insufficient workforce.

As the membership body for children’s homes in England and Wales, the ICHA are taking action to address these.

Their actions include:

Undertaking a national workforce development programme including, for the first time ever, a national recruitment campaign;

Establishing a national programme of training and development for all levels of staff working in children’s homes;

Identifying where regulation related to qualifications can be changed to improve the skills and competencies of the children’s homes workforce;

Working with Ofsted to identify how the introduction of portability for Registered Managers could work to expedite the opening of new homes.

There is also a necessity to improve understanding of the needs of children and young people. This will improve the ability to match the needs of the child to a suitable service, and it will improve the ability of local authorities to plan for future need. To address this, ICHA have been working with multiple stakeholders to introduce the Child and Adolescent Needs and Strengths (CANS) assessment to improve understanding of needs, local authority forecasting and sufficiency strategies. More information here:

The ICHA believe an opportunity to investigate the demand side of the market equation was missed. The most sensible strategy to reduce the expenditure on children in care is to reduce the number of children coming in to care. However, this will require significant investment in social work and a reversal of cuts to local authority budgets; both appear highly unlikely.

The CMA found that the largest providers are making “materially higher profits” by charging “materially higher prices” than they would expect. Also, that some of the largest private providers are carrying very high levels of debt – their concern being that a failure of highly-leveraged (more debt than equity) firms could disrupt the placements of children in care.

The CMA have made recommendations to government that include (among others) recommendations to reduce the risk of providers exiting the market in a disorderly way, by creating an effective regime of market oversight and contingency planning.

It is clear in the CMA report that the evidence suggests that the cost to local authorities of providing their own homes is no lower than procuring placements from private providers, despite profit levels.

A key factor in determining how well any market functions is the ability of the purchaser to drive provision of sufficient supply at an acceptable price. The current shortfall in capacity of the placements’ markets represents a fundamental failure in market functioning. It is interesting to note that the CMA suggest that local authorities need to purchase placements that “closely match the needs of children, in the most appropriate locations, at prices that reflect the cost of care.”

A further CMA recommendation is the reintroduction of national procurement contracts that do not need to reflect local conditions – which appears somewhat contradictory. However, it is important to note some of those recommendations not being taken forward, including taking measures that directly limit prices and profits. This is to avoid reducing the incentives of private providers to invest in creating new capacity – or even in maintaining existing capacity.

CMA also recommend a review of regulation, e.g. the possible transfer of Registered Manager status from one home to another (at present, a Registered manager must re-apply as part of the registration of any new home if for a different service); review of planning requirements, e.g. making the planning requirements for where a home has a low number of residents as being the same as an ordinary domestic dwelling; greater resilience in the market, e.g. requirement that all providers to have measures in place that will ensure continuation of care in the event of business failure, and the creation of an oversight regime capable of assessing the financial health of the most difficult to replace providers with a warning to placement authorities if a failure is deemed to be likely.

Providers should set out how they would organise their affairs to mitigate the risk of provision having to close in a disorderly way in the event they get into financial difficulties or insolvency, i.e. robust contingency planning. One important aspect being arrangements to ensure providers have the necessary time and financial resources to enable an orderly transition to closure or selling on the business as a going concern. This would require the maintenance of sufficient levels of reserves to continue to operate for an appropriate period of time in a ‘stressed’ situation.

The placement of children and young people in children’s homes is a competitive marketplace: both with securing placements and in cost. EHP Children’s Homes Consultancy work with you to help you reach your ambition of delivering high quality care and in meeting your realistic business and financial targets that satisfy Ofsted and local authority scrutiny.

There are other recommendations not included in this update but available in the full CMA report ( and type in: Children’s Social Care Market Study Final Report. The full ICHA media release available at Media Release ICHA Response to the Competition and Markets Authority (CMA) Report (10 Mar 22) ).

June 2022

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