Market overview

Download PDF
Shutterstock 177305516

The UK children’s services market was valued at £15.4bn in FY191 and is primarily focused on three areas: special education, residential care and fostering.

A highly fragmented market with a small number of large-scale players makes the market compelling for a buy-and-build strategy. Private providers support c.63% of the market2 and this value is increasing.

  • Residential care consists of c.600 children’s homes providers in England, of which the top 10 providers only supply c.19% of the national capacity.
  • Special education in England is operated by the independent sector and has over 500 special schools and over 100 special colleges.
  • Fostering is a £2.2bn market, with c. 56,268 children under care. One-third are managed by private providers and two-thirds by local authorities3. The sector is highly fragmented with 152 local authorities and 295 fostering agencies2.

The consolidation drive has gathered pace in recent years as investors capitalise on the benefits of scale in the market, including:

  • Sharing best practices and know-how
  • Building broader, long-standing trust-based relationships with local authorities and children’s commissioners
  • Accessing operational synergies – functional headcount, office consolidation, back office etc.
  • Ability to provide a “one-stop care pathway solution”
  • Access to UK public sector subsidised programmes
  • Balance private sector or lower/higher acuity service exposure
  • Access to higher-margin residential high acuity specialist services
  • Potential to expand geographically at a national level or via a strategic entry into the UK market

Favourable demographics

The UK children’s services market is experiencing favourable market dynamics underpinned by a growing population of under 16-year-olds which is being outpaced by the number of children requiring residential care, fostering, and special education. As of 31 March 2018, 95,855 children in the UK were being looked after in care, representing 9% growth in the past five years, and 28% in the past 10 years1.

The number of children cared for in residential settings has risen by c.17% in the past five years, providing significant opportunities for reputable providers. Recent Ofsted intervention (closing unregistered care homes) will further improve these opportunities.

The number of residential schools in England is also growing with 20-25 new school developments registered in 2017 and 2018, driven by the prevalence of children with care plans. In March 2019, there were 499 special schools and 106 special colleges operated by the independent sector in England.

The number of children in foster care has risen by 8% in the past five years with one-third placed by independent fostering agencies. The Government is rolling out plans to ensure local authorities and the independent sector work collaboratively to ensure sufficient high-quality fostering placements, for example by providing seed funding for joint recruitment drives.


Children’s services are funded and delivered by 152 top-tier local authorities in England through demand-led services which they have a legal duty to provide, such as protecting children from harm and taking responsibility for looked-after children.

In 2019, the Ministry of Housing, Communities and Local Government noted that total revenue expenditure by all local authorities is budgeted to be circa €106.1bn (£95.9bn) in 2019, 1.6% higher than the budget for 2018. Of this, children’s social care received the biggest percentage and actual increase, bringing its total to circa €9.5bn (£8.6bn).

Although children’s services cater to less than 10% of the child population, they account for a growing majority of local authorities’ spend on children. The wider local authority provision for children also includes Sure Start, a programme targeted at parents of children under the age of four living in the most disadvantaged areas. The aim is to deliver a wide variety of services which are designed to support children’s learning skills, health and well-being.

Government initiatives

The political sensitivity of care for vulnerable children, alongside growing demand and complexity of care needs, means that even against the backdrop of steep cuts to local funding since 2010, spend on children’s services has remained protected. Whilst there are concerns over the impact of a further funding reduction for local government, children’s services remain the highest priority for local authorities and, due to their very defensible funding, are likely to benefit from the same level of political protection in the coming years.


The Government has identified a heightened level of risk to vulnerable children as a result of the societal pressures caused by the Covid-19 pandemic. Therefore, the Government has responded by introducing new funding as well as temporary amendments to the Children Act 1989 with the aim of improving response times and building fostering capacity to support increased demand.

Such amendments include:

  • Additional circa €3.5bn (£3.2bn) emergency funding for local authorities to place children
  • Enhanced DBS checks and fast-tracked emergency checks, free-of-charge, to allow for accelerated recruitment of care workers
  • “Get Help with Technology” scheme to provide laptops / tablets to care workers to help maintain virtual contact with children and families during lockdown
  • Ofsted prioritisation of applications for registration of children’s homes and requests to increase the approved number of places
  • Additional funding provided to three care leaver charities (Become, Drive Forward Foundation, Care Lever’s Association) to provide extra support to help care leavers mitigate loneliness and isolation upon leaving the care environment during COVID-19

In addition, The Care Planning, Placement and Case Review (England) Regulations 2010 has been amended to ensure that children are moved quickly into placements in times of emergency. In cases where it has not been possible to prepare a placement plan before a child is placed, the Government has removed the requirement for a formal placement plan to be prepared within five days of the start of the placement. Approvals for foster carers have also been extended to non-connected persons and placements can now last up to 24 weeks.

UK Government2
Financial Times3

View all publications