The six biggest independent providers of children’s residential and fostering placements made £219m in profit last year, a new report has found.

New research by the Local Government Association (LGA) found some providers are achieving profits of more than 20% on their income.

At the same time, four of the seven largest groups of independent providers had more debts and liabilities than tangible assets.

The LGA warned that four in five councils have reported rising costs for fostering and residential placements for children in care due to coronavirus pressures, with some placement costs rising far beyond inflation.

Cllr Judith Blake, Chair of the LGA’s Children and Young People Board, said: 'The largest providers of children’s placements are growing rapidly and continuing to acquire other providers. The potential risks involved in their considerable debt levels is an issue that the Government must consider alongside greater financial support for children’s services.

'We cannot risk a Southern Cross or Four Seasons situation in children’s social care. Stability for children in care is paramount if we are to help them to thrive. An oversight scheme is needed to help catch providers before they fall and ensure company changes don’t risk the quality of provision.

'Providers should also not be making excessive profit from providing placements for children. What matters most is that children feel safe, loved and supported, in placements that best suit their needs.'

The LGA is calling for the review of children’s social care to consider the impact of increasing private equity and stock market involvement in the system.