Children’s homes report cautions government to be mindful of consequences of reductions in spending.

State of the Sector 2019 report:
Jonathan Stanley, ICHA, shares his concerns on reading the analysis.

We  need  all  homes  to  be  working  in  a  financial,  emotional,  professional environment,  where  all  feel  a  belonging,  experience  being  involved  with colleague commissioning caregivers, everyone working in a focused, child-led way,  effectively,  with  sensitivity  and  acceptance,  promoting  co-operation, attentive to others’ self-esteem. However, this report shows we are at a delicate moment for children’s homes.

There is continued resilience of provider morale despite the many challenges of operating in the children’s homes sector. Do not mistake this as being more than a short and small recovery from the recent years. There is still much to be done to assure the healthy sustainability of children’s homes’ provision in England. The report shows that national and local government should be mindful of the consequences of seeking any reduction in spending on residential child care. We  do  not  need  to  trigger  a  crisis  that  could  come from  unplanned reactive spreadsheet actions. Providers want to work with local authorities to plan the way forwards.

This report provides representative factual data that will correct errors of fact and interpretation. This is the necessary solid reference that acts as the focus for any research or comment. The data shows that profits are modest, far from the exorbitant claims made by some commentators. This report is a full stop to
the anecdotal and apocryphal.

The key findings and data of the report

The key findings and data of the report
•    As small providers still make up a large part of the overall market, it is therefore even more important for strategic commissioning approaches to recognise that stability of existing profitability is an important influence on the intent to invest in further capacity.
•    Demand forecasting of needs and numbers is seen as a positive way forwards for LAs and providers to work together. Close partnerships, open communication, is seen as bringing the potential for a more effective economic outcome  for  all  parties,  as  well  as  encouraging  investment  in  the required additional capacity and innovation.


Small increase in confidence but 59% of respondents are at best unsure about the market but this is more marked amongst the small providers, where 68% are, at best, unsure.

Referrals and occupancy are rising. The level of need is rising.  The matching of need to provision is a crucial factor.

Prices of placements

The  key  determinants  of  differential  pricing  are  related  to  the  individual child’s complexity of needs and the staffing and other resources needed to meet the needs.
•    All placements are costed according to individual need. The intensity of staffing and  other  resources  needed  to  meet  those  needs,  most  strongly influences price levels.
•    The most frequently used price is £3,875.
•    The average price is £3,722.
•    Range of £1,000 to £7,000.
•    The average in 2016 £3,273 per week.
•    There has been an increase of 3% per year, consistent with RPI increases in the same period, and only marginally ahead of CPI.

Turnover and Operating Profit

•    Just over half report increased income, but about a quarter report a decline.
•    Smaller providers fare worse, with about one third reporting increased turnover, and a further one third reporting decline.
•    The overall modest improvement in profitability does not match the turnover growth overall. Small providers fare worse than the larger providers with about one third reporting profit increases.
•    EBITDA shows a mean of 4.78% Small providers on average report profitability in a range 0.5 – 1.5% lower than the market, as a whole.


•    About  one  third  report  a  deterioration  of  reserve  levels  and  report  declining operating profit levels.
•    Smaller providers are more likely to report declining reserves.
•    There   are   more   providers   reporting   declining   reserves   than  increasing reserves.


•    9  out  of  10  providers  are  investing  in  their  existing  services  to  maintain  or enhance quality and outcomes.
•    65% of providers are considering additional capacity added to existing homes or invested in new homes.
•    Smaller providers are less likely to use external bank funding for investment, and more likely to need to rely on positive cashflow from profitability of existing operations.

Context and Quality of care
•    The National Audit Office report and some Select Committees have commented on the twin competing challenges of the increasing numbers of looked after children requiring children’s homes services and increasingly overspent local authority placement budgets.
•    Today around 75% of homes are privately funded, local authorities have less than 25%, and voluntary organisations are a very small %.
•    The  2018  annual  report  of  the  Chief  inspector  states  that  over  97%  of inspections found homes meeting Quality Standards or better, and over 80% Good or Outstanding.


Jonathan Stanley
ICHA CEO Emeritus
Direct contact 07734 484134
Email: Tel:
07794 779893

PO Box 16845,
Sutton Coldfield,
B73 9XG

Published by Residential Forum

The Residential Forum is to promote the achievement of high standards of care and support for children and adults living in residential care and nursing homes, supported housing, residential schools and colleges, hospices and hostels. It contributes to improving the quality of service to the public. Members of the Forum are people of standing and experience drawn from the public, private and voluntary sectors, as well as some who can speak for service users and carers.

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