Private equity owns lion’s share of children’s foster services and is ‘bleeding the sector of money’

More than 40 fostering agencies in England providing homes for vulnerable children have been taken over by private equity companies since 2015, with fees in the independent sector now up to double the cost of local authority placements.

Three private equity (PE) companies in London – Stirling Square Capital Partners, CapVest and Cap10 Partners – are now the biggest players in the provision of foster carers for children in England, according to the most recent figures published by regulator Ofsted.

Analysis by The Observer of corporate filings reveals how dozens of fostering services in England have been bought and sold two or three times, moving from one private equity group to another. The bosses of these financial businesses, which specialise in extracting profit from corporate takeovers, are paid up to £13m a year.

“PE is looking at this as a goldmine that should be tapped into and it’s bleeding the sector of money,” said Robin Findlay, founder of the National Union of Professional Foster Carers. “It is making money on the back of vulnerable children.”

Financial documents drawn up by councils struggling with funding children’s services reveal a foster place in the independent sector can cost about £50,000 a year, compared with £26,000 for a local authority place. Council officials warn that in some areas, demand is outstripping supply.

Almost 82,000 children are in care in England, about two-thirds of them (67%) in foster care. The total value of the country’s foster care market is estimated at nearly £2.2bn, with agencies given the task of recruiting and supporting carers, who typically receive between £400 and £500 a week for each child.

The National Fostering Agency, now part of the National Fostering Group, was founded in 1995. The group operates a network of 30 fostering agencies supporting about 3,700 children. It was bought by PE company Sovereign Capital in 2006, then acquired by Graphite Capital in 2012, before being sold on again to Stirling Square in April 2015.

Stirling Square, which has offices in central London and Jersey, was co-founded by the Italian businessman Stefano Bonfiglio and has £3bn of assets under management. It is the biggest owner of foster providers in the independent sector.

PE company CapVest, which owns the Polaris network of foster agencies, children’s homes and schools, is the second biggest owner of foster agencies. Polaris was owned by Sovereign Capital from 2012, before being sold to CapVest in 2019.

CapVest was founded by the Irish business magnate Seamus FitzPatrick, former chair of Valeo Foods, owner of the Rowse Honey and Jacob’s brands. Its most recent filings show its highest-paid partner, believed to be FitzPatrick, was handed £12.7m in the year to 31 March 2025.

Compass group, which runs children’s homes, schools and fostering services, is now owned by Cap10 and is the third biggest provider of fostering places in the independent sector. It was bought in May 2024 from Graphite Capital.

Under the PE model, the holding companies typically amass large borrowing to fund acquisitions. The three main groups in the fostering sector have combined borrowings of about £500m, according to corporate filings. PE firms aim to make significant profits on the sale of a business.

A Competition and Markets Authority report in 2022 said the children’s homes and fostering market was dysfunctional. It found the profits margins of the largest companies of about 19% were higher than would be expected in an effective market.

Andy Elvin, chief executive of the charity Tact Fostering, the largest fostering charity in the UK, has called for an end to the “plunder” of public funds by PE groups. “Money that should be spent on the most vulnerable children in our society is being spent on paying off artificially introduced debt,” he said.

Martin Barrow, a former journalist who is a foster carer in West Sussex, said: “One of the biggest problems with outsourcing [to independent foster agencies] is that children are scattered across the country because the local link with care has been broken.” He said a significant number of children were placed more than 100 miles or more from their original family homes.

Scotland and Wales have already banned profit-making companies from involvement in the fostering sector.

The major providers of independent fostering services say they are typically rated as outstanding or good by the regulator.

A spokesperson for Stirling Square, which owns National Foster Group, said it had never taken a dividend and that fees were agreed through a local authority commissioning framework.

Tim Barclay, chief executive of National Fostering Group, said: “The costs associated with fostering are driven by the increasingly complex needs of children coming into care. Our focus is on long-term stability and better outcomes for children.”

Neil Morris, managing director at Compass Fostering, owned by Cap10, said its services offered value for money under contracts that were regularly reviewed. He said: “Compass provides high‑quality fostering for children with some of the most complex needs in the country. [Councils] consistently tell us that many of these children cannot be placed within their own provision, and independent agencies are therefore essential.”

Polaris Community, owned by CapVest, has been asked for comment.

Harvey Gallagher, chief executive of the Nationwide Association of Fostering Providers, said comparisons in fostering between the public and independent sector could be misleading because of additional costs for agencies involving recruitment, training and support for carers.

He said: “Private investment has in many cases enabled agencies to expand capacity, invest in specialist services and improve infrastructure such as digital systems, therapeutic support and foster carer training.”

A Department for Education spokesperson said: “We are taking action to reform the sector. Through the children’s wellbeing and schools bill, the secretary of state will have additional powers to cap profiteering in the children’s social care sector, including for independent fostering agencies.”