Hundreds of private companies in England received more than a quarter of a billion pounds in public money linked to unregistered children’s homes over the past two years, according to an investigation by The Bureau of Investigative Journalism.
The investigation, published on September 8, 2026, found that more than 480 private companies were involved in around 1,800 placements and received more than £250 million from local authorities. TBIJ describes the wider market as a £255 million illegal care industry.
The true scale may be substantially larger. Nearly half of England’s local authorities did not respond to the investigation’s freedom of information requests.
Operating or managing a children’s home in England without the required Ofsted registration is a criminal offence. Ofsted says unregistered settings can pose significant safeguarding risks because they operate outside the normal regulatory and inspection system.
Hundreds of companies received public money
TBIJ analysed payment records obtained from councils and identified hundreds of businesses linked to unregistered children’s placements.
At least eight councils paid companies more than £1 million for a single placement, according to the investigation.
Around £40 million was traced to companies associated with previous care failings. Some businesses involved in the sector were run by directors whose professional backgrounds included security, property, music and the military rather than residential childcare.
One company identified in the investigation was ultimately owned by an overseas private equity firm.
The findings do not mean that every company appearing in council payment records itself operated an illegal children’s home.
Some businesses provided staffing or other support to accommodation arranged by local authorities. That distinction is legally significant because English law criminalises carrying on or managing an unregistered children’s home, while responsibility in arrangements involving councils, property providers and staffing agencies can be more complex.
Ofsted told TBIJ that both councils and service providers may potentially be liable depending on the circumstances.
Shortage of registered care drives the shadow market
The growth of unregistered provision is closely connected to a shortage of suitable registered placements for children with complex needs.
Ofsted says local authorities frequently report that children are placed in potentially unregistered homes because they cannot find suitable registered accommodation. The regulator has warned that the problem is not simply a shortage in the overall number of homes: available places may be in the wrong locations or unable to meet the needs of children requiring residential care.
Official data confirm the scale of the problem.
Between April 2025 and March 2026, Ofsted opened 850 cases involving potentially unregistered children’s homes and supported accommodation.
Of those, 710 — 84% — were found to require registration. Another 120 cases had not yet been determined by the end of the reporting period.
Ofsted said in July that significant numbers of children in care, including some with the most complex needs, continued to be placed in homes operating without regulatory oversight.
Safeguarding concerns around staffing
One of the largest recipients identified by TBIJ was Prospero Health and Social Care, a London-based staffing agency.
Councils paid Prospero at least £7.6 million over two years for staffing connected to unregistered homes, according to the investigation.
Seven of the 14 English councils that had paid the company in connection with such placements told TBIJ that they had received safeguarding complaints involving Prospero workers.
Councils recorded at least 44 allegations between January 2024 and April 2026 that workers had harmed children or presented a safeguarding risk. Sixteen concerns were upheld and four were found to be unfounded, while the outcomes of others were either pending or unknown.
Prospero said an upheld safeguarding concern did not in itself establish that a child had been harmed.
The company also rejected the suggestion that it operated illegal homes. It said it supplies staffing services, does not own or provide accommodation and does not decide where children are placed. Responsibility for placements and care planning, it said, remains with local authorities.
Prospero also said its workers undergo enhanced criminal-record checks and safeguarding training, and that no local authority had ended its relationship with the company because of safeguarding concerns.
Children placed in hotels, Airbnbs and unsuitable properties
TBIJ examined the case of a high-risk teenage girl who was placed by Peterborough City Council in 13 unregistered settings.
A safeguarding review found that she had stayed in hotels, Airbnbs and properties described as “barren and inhospitable”.
Companies providing staff during some of those placements included Thornbury Nursing Services and CAMHS Professionals.
Both companies told TBIJ that they supplied staff rather than accommodation and did not operate the homes.
Peterborough City Council said it secured the properties and commissioned outside companies to provide care and support. It said unregistered placements were used only when regulated alternatives were unavailable and that monitoring visits were carried out.
Millions spent despite regulatory concerns
The investigation found at least 16 companies linked to care failings within its dataset.
Some individual placements generated exceptionally high bills.
TBIJ reported that Thurrock Council paid £2.7 million to DMC Consulting Services for two children placed in unregistered accommodation.
The council said it carried out rigorous quality checks on unregistered homes.
The investigation also identified companies providing temporary placements under arrangements sometimes described as 28-day respite or “holiday” care.
TBIJ found at least 10 companies offering these placements, with some children remaining beyond 28 days.
Ofsted told the Bureau that providing respite care or therapy does not automatically exempt a service from registration when its activities legally amount to operating a children’s home.
Enforcement is beginning to intensify
Ofsted has recently strengthened its approach to unregistered provision.
The regulator reported that investigators identified 710 unregistered children’s homes during 2025–26 and conducted five criminal investigations that resulted in prosecutions in two cases. New powers under the Children’s Wellbeing and Schools Act 2026 also allow Ofsted to impose financial penalties for operating illegal provision.
TBIJ reported that Ofsted secured its first conviction involving an illegal children’s home in September 2026, when Catalyst Care Limited was fined £92,000 for operating three unregistered homes in Kent.
According to the investigation, Catalyst had received more than £1.7 million from local authorities in connection with illegal homes.
A systemic failure, not simply rogue providers
England’s Children’s Commissioner, Rachel de Souza, told TBIJ that the investigation raised serious questions about the amount of public money being spent on placements where authorities could not guarantee appropriate safeguarding and quality of care.
The evidence points to a structural problem involving several parts of the system.
Councils are legally responsible for finding suitable accommodation for vulnerable children. In some areas, they say there are not enough appropriate registered places. Private providers and staffing companies have moved into that gap, sometimes charging very large sums, while Ofsted is left identifying and investigating unregistered provision after children have already been placed there.
The result is a market substantially funded by taxpayers but operating, in many cases, outside the inspection and registration framework designed to protect children.
TBIJ’s documented figures — more than 480 companies, around 1,800 placements and more than £250 million in council payments over two years — are therefore likely to represent only part of the national picture because so many local authorities did not provide data.
What the evidence establishes — and what it does not
The available evidence establishes that hundreds of companies received public money connected with unregistered children’s placements, that operating or managing a children’s home without required registration is an offence, and that Ofsted has documented hundreds of unregistered settings.
It does not establish that every company identified by TBIJ personally operated an illegal home, committed a criminal offence or provided unsafe care.
In several cases, companies maintain that they supplied staff or specialist support while local authorities remained responsible for accommodation and placement decisions.
That distinction is essential when assessing responsibility for individual providers.
Sources
- The Bureau of Investigative Journalism — “Revealed: the vast scale of England’s £255m illegal care industry”, September 8, 2026.
- Ofsted — Regulatory activity in children’s homes and supported accommodation, 2025–26.
- Ofsted — Unregistered children’s homes.
- Ofsted — Changing our approach to unregistered children’s homes, July 2, 2026.
