The short version
- Local councils in England have paid over £125 million annually for unlawful child care placements due to a severe shortage of registered beds.
- Unregistered facilities are increasingly staffed by agencies like Prospero Health and Social Care, drawing operators from unrelated industries such as construction and security.
- Regulators have begun prosecuting illegal operations after years of reluctance, citing safeguarding concerns and criminal activity within the unmonitored sector.
Local authorities across England are spending more than £125 million each year to place vulnerable children in care homes that lack official registration with Ofsted. An investigation by The Guardian and the Bureau of Investigative Journalism has uncovered a widespread system where councils pay private companies for unlawful placements because there are insufficient legal beds available for at-risk youth. Over the past two years, payment records indicate that more than 480 private firms received £250 million for approximately 1,800 such placements. This spending represents a significant diversion of public funds into an unregulated market that operates outside standard safety inspections.
The shortage of appropriate accommodation has created a lucrative opportunity for businesses to profit from the desperation of local councils. Many of the children involved require intensive, around-the-clock supervision due to trauma or behavioral issues that pose risks to themselves or others. The high demand for specialized care has driven up prices, with some councils paying more than £1 million for a single placement. Average earnings per placement exceed £150,000, a figure that has attracted entrepreneurs from sectors entirely unrelated to social work. Property developers, builders, security company executives, musicians, and former military personnel are now managing these illegal homes, drawn by the high financial returns.
Prospero Health and Social Care, a London-based nursing agency, has emerged as the largest player in this unregistered market. The company was paid £7.6 million by fourteen councils over two years to staff eighty-six placements in unregistered children’s homes. Prospero has openly advertised for child support workers specifically for “unregistered settings” in England and Wales. While the company states it only supplies staff and does not operate the homes itself, Ofsted maintains that agencies can be held responsible if their personnel manage the home day-to-day without council oversight. The watchdog asserts it has the power to prosecute anyone running an unregistered facility, regardless of whether they are an agency or a direct operator.
Safeguarding concerns have mounted regarding these unmonitored environments. Seven of the fourteen councils that paid Prospero reported receiving complaints about its care workers. Between January 2024 and April 2026, there were forty-four allegations that staff members had harmed or posed a risk to children. Sixteen of these allegations were upheld, while four were deemed unfounded. The outcomes for the remaining cases are either pending or unknown. Prospero argues that an upheld concern does not automatically mean harm occurred and notes that no local authority has terminated its relationship with the company due to safeguarding issues. The company also clarified that the £7.6 million represented revenue for staffing services rather than placement fees or profits.
The financial benefits of this industry extend to the owners of major agencies involved. Prospero Group’s accounts show that owners Robert and Lesley Grays received more than £4 million in dividends over the past two financial years. The company operates eleven offices in the UK, with additional operations in Australia and New Zealand. Despite the controversy, Prospero maintains that responsibility for care planning and supervision remains with the local authorities. However, critics argue that the lack of registration allows these businesses to operate in the shadows, treating children as business opportunities rather than individuals needing protected care.
Regulatory bodies have historically been reluctant to shut down illegal settings because councils insist they have nowhere else to send traumatized older children. This dilemma has created a cycle where illegal homes persist despite being criminal offenses. However, growing concerns about criminal activity and safeguarding failures are leading to a tougher stance from regulators. Ofsted secured its first conviction for operating an unregistered home last month, signaling a potential shift in enforcement strategy. The previously unseen dataset obtained through freedom of information requests highlights the scale of the problem, showing that almost every council in the country has utilized illegal care facilities at some point.
Rachel de Souza, the children’s commissioner for England, described the findings as evidence of systemic failings. She emphasized that illegal children’s homes have been allowed to operate without proper inspection or registration for too long. The commissioner noted that huge amounts of public money are being spent on placements that lack accountability. The case of a teenage girl who was harmed in a succession of illegal placements in hotels, Airbnbs, and other properties underscores the dangers of this unregulated market. More than £40 million of public money has been paid to operators linked to care failures, including those involved in her case.
The situation highlights a broader crisis in the social care system for vulnerable children. The lack of registered beds forces councils into making difficult decisions that compromise safety standards. As regulators begin to take legal action, the industry faces increased scrutiny. However, without a significant increase in the number of legal, inspected homes, councils may continue to rely on unregistered providers out of necessity. The coming months will likely see more prosecutions and potentially stricter guidelines for local authorities regarding placement decisions. Until the supply of safe, registered care meets the demand, the risk of harm to children in these illegal settings remains high.
Sources behind this briefing
Go to the original reporting
- The Guardian World↗Councils pay more than £125m a year placing vulnerable children in illegal care homes in England
