Private equity benefits from promoting child care as the crisis engulfs it

One of Britain’s largest private childcare companies more than tripled its profits last year as it continued to benefit from the crisis in children’s social care.

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

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

It says it will invest its profits to increase its capacity to meet ‘unmet demand’ by recruiting more foster carers and opening new homes and schools.

In addition to its foster care organisation, Compass is one of Britain’s largest providers of children’s homes and education for young people with additional needs.

Private foster organizations make money by charging local governments for placing children in foster homes.

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

For-profit agencies are contracted by the state to recruit and train foster caregivers. These informal caregivers must undergo an assessment, a home visit and final checks by a foster panel.

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

Foster care, while usually driven by altruism on the part of the caregivers who care for children, is also a big and growing business.

According to education watchdog Ofsted, around 44 percent of all foster carers are involved through independent agencies.

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

The top two, 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 gobbled up by private equity firms, turning the sensitive field of child foster care into major corporations.

According to Ofsted, Compass provided 3,135 foster care places as of March 31 last year.

The company is also the fifth largest private operator of children’s homes in England, with 49 owned properties providing 251 places for children.

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

However, many are deterred by low wages and the lack of worker rights. Most foster carers are classified as self-employed and as such are not entitled to a minimum wage, sick pay, paid leave or pensions. Some depend on benefits to supplement their income.

There is growing anger among many foster carers, who accuse private operators of profiting from their labor while relying on the state to pay their bills.

The number of caregivers in England has fallen from 45,370 in 2021 to a ten-year low of 42,615 for the year to March 2024, according to the Fostering Network, a British charity.