Private capital benefits from foster care as crisis engulfs childcare

One of the UK’s largest private fostering companies more than tripled its profits last year as it continued to cash in on the children’s social care crisis.

Pre-tax profit at Compass Community Ltd, owned by private equity firm Cap10 Partners, soared to £10.8m for the year to March 2024, up from £3m a year earlier , according to recent accounts filed with Companies House. The company’s turnover rose to £139.7 million from £108.6 million the previous year.

Compass noted that the number of children in care was increasing and demand for its services had increased as a result.

It says it will invest its profits to increase its ability to meet “unmet demand” by hiring more foster carers, as well as opening new homes and schools.

In addition to its fostering operation, Compass is one of the largest providers of children’s homes and education for young people with additional needs in Britain.

Private fostering agencies make money by charging local councils to place children in foster homes.

Industry sources say their rates are double or triple what it would cost if councils did their own placements.

The State contracts with for-profit agencies to recruit and train foster caregivers. These carers must undergo an assessment, home visit and final checks by a foster panel.

They are then assigned a child based on the caregiver’s preferences, experience, and training. Around 57,000 children in England are in foster care.

Fostering, although generally driven by altruism on the part of the caregivers who take in the children, is also a large and growing business.

Around 44 per cent of all foster carers come from independent agencies, according to education watchdog Ofsted.

Compass, led by boss Bernie Gibson, is the third largest private foster care provider in England.

The two main ones, National Fostering Group and Polaris, are also owned by private equity groups.

Many foster care agencies started out as local and small-scale, but have recently been absorbed by private equity firms, turning the sensitive area of ​​foster child care into big business.

According to Ofsted, on March 31 last year, Compass offered 3,135 foster care places.

The company is also the fifth largest private children’s home operator in England, owning 49 properties offering a combined 251 places for children.

As for-profit companies have become an increasingly dominant presence, the number of foster carers has fallen to its lowest level in a decade. Around 6,500 more foster families are needed in England, charities say.

Many, however, are discouraged by low wages and lack of labor rights. The majority of foster carers are classed as self-employed and as such are not entitled to a minimum wage, sick pay, paid holidays or a pension. Some depend on benefits to supplement their income.

There is growing anger among many foster carers, who accuse private operators of profiting from their work while they depend on the State to pay their bills.

Fostering Network, a UK charity, said the number of carers in England fell to a ten-year low of 42,615 for the year to March 2024 from 45,370 in 2021.