Key facts
- Councils in England are spending more than £125 million annually on illegal care homes.
- Over 480 private companies have been paid £250 million for 1,800 unlawful placements in the last two years.
- Prospero Health and Social Care received £7.6 million for staffing 86 placements in unregistered children's homes.
- Catalyst Care Ltd was fined £92,000 for operating three unregistered homes.
- The number of identified illegal homes has risen from 144 in 2020 to 710 this year.
Councils across England are spending over £125 million annually on taxpayer money to place vulnerable children in illegal care homes, according to an investigation by The Guardian and the Bureau of Investigative Journalism (TBIJ).
The investigation uncovered a rapidly expanding industry of businesses profiting from a shortage of beds in Ofsted-inspected homes, with over 480 private companies receiving £250 million for 1,800 unlawful placements in the past two years.
Operating an unregistered children's home is a criminal offense, yet nearly every council in the country utilizes these illegal facilities. Regulators have been hesitant to shut them down due to a lack of alternative placements for traumatized, older children whose behavior can be challenging. However, growing concerns about criminal activity and safeguarding failures have prompted a tougher stance, leading to Ofsted securing its first conviction last month.
The data reveals that over £40 million has been paid to operators linked to care failures, including those involved in the abuse of a teenage girl placed in various unregistered settings. Some placements, requiring round-the-clock supervision, have cost councils over £1 million for a single child. Entrepreneurs from diverse backgrounds, including property developers, builders, and musicians, are drawn to the high earnings in this sector.
Rachel de Souza, the children's commissioner for England, described the findings as indicative of systemic failures, stating that illegal children's homes have operated in the shadows, treating children as a business opportunity.
Prospero Health and Social Care emerged as the largest player, paid £7.6 million by 14 councils for staffing 86 placements in unregistered homes. The company states it supplies staff but does not operate the homes, with responsibility lying with the local authority. However, Ofsted notes that agencies could be held responsible if their staff are present daily without council personnel. Prospero's owners received over £4 million in dividends in the past two financial years. Safeguarding complaints have been raised about Prospero's staff, with 16 upheld allegations of harm or risk to children between January 2024 and April 2026.
The number of unregistered care settings has surged, with Ofsted identifying 710 this year, up from 144 in 2020. One in ten children in care are estimated to live in illegal premises. Recent scandals have led to a crackdown, following the exposure of a 15-year-old girl's abuse in an unregulated home. Last month, Catalyst Care Ltd was fined £92,000 for operating three unregistered homes, and its directors are now banned from financial interest in children's homes. Ofsted also highlighted criminal activity, with SafeSpace4U, linked to organised crime, under criminal investigation.
Some providers exploit a loophole allowing children to stay in unregistered facilities for 28 days on holiday. However, firms are allegedly misusing this rule for long-term accommodation. Map Adventures and Creative Outdoor Group (Cog) are among companies identified as exceeding the 28-day limit, with one former care worker alleging a boy lived in a tent on a farm for four months.