Children’s homes run by private capital raise millions

Some of England’s largest private children’s homes have made more than £95 million in profits in the last three years, The Mail on Sunday can reveal.

The companies, which have been draining millions from the budgets of cash-strapped councils, include outfits controlled by private equity firms, as well as the daughter of a former City stockbroker linked to the fraud.

Data from regulator Ofsted shows private companies dominate the sector, with 83 per cent of children’s homes under their ownership. The appeal is that the industry is lucrative.

Last year, a report by news website This House revealed that the average cost of placing a child in care was £281,000 a year – five times that of keeping an adult in prison.

It followed a 2023 report by the Local Government Association which showed some councils were paying up to £63,000 a week to keep a single child in care.

But cost doesn’t always translate into better service. A 2022 study from the University of Oxford found that for-profit providers were “significantly more likely” to be rated as lower quality than public alternatives.

Private groups also violated more requirements and received more recommendations for improvement. This is despite the most recent Ofsted data from 2019 stating that eight of the ten largest private and voluntary children’s home providers had an above-average number of homes rated good or outstanding.

Of the 2,748 children’s homes in private hands, 18 percent are managed by the five main operators.

The second largest operator of children’s homes in England is Keys Group, with 116 establishments. It is owned by G Square Capital, a private equity firm based on London’s fashionable Savile Row. Between 2022 and 2024, Keys Group made an overall operating profit of £7.8 million.

Another private equity player is Netherlands-based Waterland, owner of Aspris, which operates 81 children’s homes. The company raised £14.6 million in 2023, according to its most recent accounts, reversing a £4.7 million loss from the previous year.

A large private operator is HCS Group, which operates under the name Hexagon Care Services. It runs 56 children’s homes in England. Hexagon is owned by Melissa Bell, 28, who took control of the company in 2016 when she was just 19 and a student at the University of Manchester.

She is the daughter of Paul Bell, a former City stockbroker who was previously arrested in connection with an alleged £21 million tax fraud. He later resolved the claims.

HCS made a profit of £6.9m last year after profits of £6m and £5.2m in 2023 and 2022 respectively. By 2024, the company has also paid £1.5 million in dividends, at least three quarters of which will have been pocketed by Melissa Bell, who controls more than 75 per cent of the business.

The largest operator by far is CareTech, a Hertfordshire-based company that owns 200 children’s homes (10 per cent of the total).

It is controlled by its founders, brothers Farouq and Haroon Sheikh, who led an £870m buyout of the company in 2022, delisting it from the London Stock Exchange. Farouq is an avid donor to the Labor Party and has donated thousands of pounds to support London Mayor Sadiq Khan’s campaigns.

CareTech, which also offers adult social care, made £25.5m of profits in 2022 and £12.2m the following year.

The invasion of for-profit companies into children’s homes comes after The Mail on Sunday revealed last month that three private equity firms running some of England’s largest fostering agencies had made a total profit of £ 40 million in 2023.

One of the largest private foster care providers, Compass Community, has had a similar impact on children’s homes, where it controls 49 properties.

Compass, owned by private equity firm Cap10 Partners, has made profits of almost £22 million in the last three years from foster homes and children’s homes, although it says it will invest that amount in increasing its capacity to meet growing demand. demand for their services.

Like children’s homes, private fostering agencies are becoming more dominant as council provision dwindles.

But the number of foster families is also shrinking, many of them discouraged by low wages and lack of worker rights, as most foster carers are classified as self-employed.