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Childcare & Education

The return of confidence in the children's home market

During 2017, a noted increase in press coverage on the specialist childcare sector has been seen with a number of news reports focusing on the experiences of children within the care system and how they are – or are not? – supported.

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A main news story which was covered by BBC Breakfast News on 13 January about children’s homes often being more suitable for a child than foster care due to the multiple breakdowns of placements, raised a number of questions about which route is best for children who require a stable and supportive environment.  This was followed up by a further feature on ITV Granada Reports on 19 January which followed the same approach – that children are often being let down by the system. 

We have seen many changes in market conditions for the specialist childcare sector during the past 10 years – more notably since the economic downturn of 2007.  Whilst many sectors felt financial strains as a result of a slowdown in consumer spending, the care sector as a whole was deemed relatively ‘recession resilient’ due to its needs driven nature.  However, due to cost pressures being felt within Local Authority budgets and spending capabilities, this resulted in a tightening of fee levels with little to no increase in many areas and indeed a shift in how childcare placements were handled.

A number of children’s home operators experienced periods of uncertainty due to fee income and occupancy levels and as a result, in many cases when considering an exit, higher values could be sought through a residential sale as opposed to a going concern, resulting in the closure of a number of homes. Many of these were single site operations or in geographically challenging locations. Activity and demand for children’s homes acquisitions at the time was relatively limited as it was felt that occupancy pressures would continue, however 10 years on, we now find ourselves in a situation where despite the vast majority of placements for children remaining with foster care, confidence in the children’s home market has returned with provision arguably more in keeping with demand.  Coupled with the move away from some of the larger residential SEN schools to educational facilities with separate satellite children’s homes, the structure of provision has been changing.

The number of children who are reliant on the care system has been steadily rising and is now reported to be higher than any point since 1985. As a result, we expect the market to continue to demonstrate resilience and that activity will remain buoyant as existing operators, both regionally and nationally, focus on growth and quality provisions.  Across the full spectrum of specialist childcare – children’s homes, schools and foster care – there is high demand for acquisitions with small to large regional groups being a key focus.

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