An investigation by the Guardian and Bureau of Investigative Journalism found that councils in England are spending more than £125 million a year placing vulnerable children in unregistered care settings.

Freedom of information data identified around 1,800 unlawful placements over two years, with more than 480 private companies receiving £250 million from local authorities.

The use of unregistered provision has grown substantially amid a shortage of suitable registered placements for children with complex needs. Ofsted identified 710 illegal homes in 2026, compared with 144 in 2020, with around one in 10 children in residential care thought to be living in illegal settings at any given time.

The investigation raised concerns about safeguarding and the cost of placements, with at least nine councils paying more than £1 million for a single placement. More than £40 million was paid to operators linked to care failures.

Ofsted has begun taking stronger enforcement action against unregistered providers, securing its first conviction in August 2026. Children’s Commissioner Rachel de Souza said illegal homes had been allowed to operate “in the shadows”, with children treated as a business opportunity while significant public money was spent on placements that were not properly registered or inspected.