Local authorities are being forced to put children in unsuitable accommodation due to a shortage of suitable placements, a study has found.

The initial findings of a study by the Competition and Markets Authority (CMA) on children’s social care shows a shortage of appropriate places, with many being too far away or requiring siblings to be separated.

The report also found private providers are often being paid too much money for placements due to this shortage.

Figures show the largest providers made an average operating profit margin of 23% in 2020, while fostering agencies made 19% on average.

'We are concerned this is a failing system, with children not being placed in the right homes while providers are being allowed to charge high prices and make big profits,' said Andrea Coscelli, chief executive of the CMA.

'Vulnerable children rely on these services, but too many are being placed in accommodation that does not meet their needs. And despite many placements not being suitable, local authorities, funded by taxpayers, are paying more than they should to provide them. The levels of debt we have seen being carried by private equity-owned firms is also a real concern due to the effect a firm in financial distress could have on the children in their care.'

The CMA in considering the creation of larger-scale national or regional bodies to help local authorities secure appropriate placements at lower prices or by taking over responsibility for placing children.