Private equity raids children’s homes
Interest payments of £102 a week drain every care home bed while children in distress and disabled people left without hoists pay the price.
Two children’s homes rated good and outstanding fell into “high levels of distress” within a year of a private equity takeover, Ofsted found. Staff and children told inspectors they felt unsafe.
The homes belonged to Compass Community. Graphite Capital sold the business to Cap10 Partners on 9 May 2024. The decline followed the sale; it does not prove the sale caused it, and Cap10 denies standards fell. But the sequence is now part of the public record, and it sits inside a much bigger pattern that does not depend on any one buyer’s denial.
The debt that isn’t the child’s
Across the five largest private-equity-backed children’s care providers, interest payments now run at £102 for every bed, every week. That is money leaving a system meant to house and protect children, going instead to service the debt taken on when a fund bought the company.
Four of the seven largest independent provider groups have more debts and liabilities than they have tangible assets, according to evidence put to the House of Lords. Two mechanisms explain how that happens. In a sale-and-leaseback, a provider sells its own homes and rents them back, so a building the state once paid for outright becomes a landlord’s asset generating rent. In debt-push-down, the loan a fund takes out to buy the company is loaded onto the company itself, so the home providing care carries the debt of its own purchase.
What £100 buys
The Competition and Markets Authority found the fifteen largest children’s social care providers running average profit margins of 22.6%, with prices rising 3.5% above inflation every year, based on accounts from 2016 to 2020. More recent figures show the extraction has not slowed: for every £100 of public money spent on the four biggest independent fostering agencies, £21 was taken as profit in 2024.
An average residential placement now costs around £281,000 a year, up 25% in two years. Some councils pay £1m a year for a single child’s place. Total spending on residential care nearly doubled in five years, to £3.1bn in 2023-24.
New Economics Foundation analysis across three English regions found £256m in profit, £45m of it paid out as dividends, and £33.6m in interest, with up to 60% of that interest flowing to private equity and tax-haven entities. Directors were paid up to 60 times the average wage. Frontline care staff, meanwhile, sit below the real living wage.
“Far too much of it is leaking out of the system, extracted as profit,” said Leah Millthorne, associate director at the Centre for Local Economic Strategies, who co-authored the analysis. Rosie Maguire of the Centre for Thriving Places, the report’s other author, said the system is “unaccountable about where public money goes.” In the Lords, Lord Wood of Anfield called the children’s care market “completely broken,” with private equity firms “increasing their margins and carrying large levels of debt.”
When the machine breaks, someone goes without
Debt-loaded models do not just extract quietly. They fail. NRS Healthcare, which supplied roughly half of England’s hospitals with social care equipment and held contracts with 44 councils, went insolvent on 1 August 2025. Around 1,500 jobs were lost. Disabled and older people were left without wheelchairs and hoists, a collapse serious enough to force a Commons debate. Four Seasons, the care home chain, went under carrying £1.5bn of debt.
These are not isolated accidents. They are what happens when a service the state is legally obliged to provide, and that a child cannot simply walk away from, is financed like a leveraged buyout.
Not every private carer, but the model that dominates
Not all private provision is private equity, and not every PE-owned home is failing children. Some small, independent operators run good homes without extracting anything close to these margins, and the Public Accounts Committee has said as much. The target here is the leverage model specifically, not private carers as a category.
Nor is greed the only driver of high prices. Providers point out, correctly, that councils are bidding against each other for a shrinking number of places, and that scarcity pushes costs up on its own. That is true. It is also exactly what makes the extraction possible: a buyer with no competition and a statutory purchaser with no alternative is the condition private equity looks for, not an excuse for what it does once it finds it.
Private firms now run 83 to 84% of children’s homes in England and provide around 74% of places. Seven of the ten largest providers are private-equity owned. That is not a market with a few bad actors in it. That is the market.
Wales abolished it. Westminster hired a commissioner.
The Children’s Wellbeing and Schools Act, which received royal assent on 29 April 2026, gives ministers new powers to cap “excessive” profits and adds financial oversight of large providers. It excludes supported accommodation, the fastest-growing part of the system, from that oversight entirely.
Wales took a different route. From 1 April 2026, no new for-profit children’s care providers can register there. From 2030, no new placements will go to for-profit providers at all. The Welsh government has committed £75m to the transition.
Even the Guardian, having run the investigation that forced this story into the open, concluded that the answer is tighter transparency rules and a “beefed-up role for regional commissioners”, treating the fund managers as a market-design error rather than as parties who chose to load debt onto children’s homes and walked away with the returns. Wales looked at the same evidence and removed the profit motive from the equation. Westminster looked at it and hired someone to watch the machine run.
A nine-year-old in a home the state is legally bound to provide should not be the collateral against which a private equity fund borrows to buy that home. That is not a regulatory gap. It is the business model, and only one of the UK’s governments has actually decided to end it.
