Demand remains for children’s social care businesses throughout the UK say Christie & Co
Today, specialist business property adviser, Christie & Co, has released its Childcare & Education: Market Insight Report 2024 which analyses the childcare markets so far in 2024, including the UK’s children’s social care market.
The report begins with an analysis of leasehold versus freehold childcare and education business sales. The proportion of leasehold sales increased in the first six months of 2024, with the split in H1 2024 sitting at 78 % leasehold and 22 % freehold, up from 67 % and 33 % respectively in 2023. There are a number of factors which contributed to this, including an increase in the number of sellers choosing to retain their properties and enjoy a rental income stream. With the cost of capital having increased, some buyers also prefer to take on a new lease rather than acquiring the underlying freehold interest in the property which, in some locations, would command a substantial expense.
Children’s Social Care
In the last five years, the population of looked-after children in the UK increased by 9 % (NSPCC, Statistics briefing: children in care, January 2024)
From 2023 to 2024, there was a 12 % increase in the number of children in secure children’s homes (Department for Education, Children accommodated in secure children’s homes, May 2024)
In the first six months of 2024, the children’s social care market in the UK provided very little stock available to buyers due to operators continuing to expand their businesses organically and build on the high placement demands. Demand for high-acuity complex children’s services, including both residential places and associated educational placements and provision, has continued to rise, with corporate and regional operators remaining incredibly keen to acquire.
As of October 2023, Ofsted began registering supported accommodation providers, giving essential oversight of supported accommodation for children in care and care leavers aged 16-to-17 years. Under the new regulations, it is now an offence to provide supported accommodation without having a registration application accepted as ‘complete’. Christie & Co notes that, as of March 2024, there are over 800 services that still need to be registered and then inspected by Ofsted, which will no doubt have a huge impact on operators and the timeliness of the services they can provide to those in need.
In Wales, the government has established its Transformation Children’s Services Programme which aims to have more children supported to remain with their families, meaning fewer children and young people entering care. The programme is set to run until April 2026. Additionally, in May 2024, the Welsh government published legislation to end profit-making from the provision of children’s care placements in Wales. The Health and Social Care (Wales) Bill would permit only not-for-profit organisations and councils to provide fostering, children’s homes or secure accommodation placements. With the private sector providing 87 % of children’s homes and 35 % of fostering placements in Wales, the Welsh government has dropped its original plan to require compliance from all providers by April 2027 to “mitigate disruption” to the lives of children in existing placements.
The Labour Party’s 2024 manifesto promises a £95m investment in Young Futures Hubs. The Party has stated that “every child should have a loving, secure home” but little detail has been given regarding how the Party will handle the growing pressures in children’s social care and the crisis in local government to fund increasing costs.
Advocates across the sector continue to call for greater investment in more high-quality homes in the right places to address crisis placements, as well as talks to support young people leaving care. It is yet to be confirmed whether Labour will keep the pledges made by the chancellor in the 2024 Spring Budget, which include £45m to create 200 more children’s home placements and an additional £120m for the refurbishment and rebuilding of secure children’s homes. Demand remains particularly strong for both closed homes with C2 use and CLD as operators look to build their portfolios and see great potential in these properties.
Operational homes, single assets, and groups remain highly sought after, including operational homes with permitted multi-occupation, albeit we have seen an increasing number of such homes being operational with solo placements supporting children and young people with increasingly complex needs.
The Funding Landscape
A recent Christie Finance sentiment survey revealed that 86 % of funders/banks surveyed have a positive outlook for the year ahead. Christie Finance says that, whilst many lenders view the childcare sector as a worthwhile funding opportunity, their willingness to support operators is largely dependent on factors such as occupancy levels, sustained profitability over an extended period, and a secure regulatory framework.
Christie Finance has also witnessed a 50 % increase in funding queries in the last 12 months. Enquiries related to first-time buyers looking to acquire a setting, experienced operators looking to buy additional nurseries to expand their groups, as well as businesses purchasing assets, completing refits and fulfilling their cashflow needs. Many groups in the sector have been looking to expand rapidly across all parts of the UK, resulting in operators dipping into cash reserves or looking for alternative funding options.
Julie Kitson, director at Christie & Co, comments, “Demand for businesses continues to rise across the children’s social care sector in the UK. We expect to see this persist in the second half of the year, across the whole pathway of the sector due to the consistently high referral streams. We are looking forward to the rest of the year, working with operators, buyers and funders in this complex, but highly sought-after sector.”
For the full Childcare & Education: Market Insight Report 2024, visit: https://www.christie.com/news-resources/publications/childcare-education-market-insight-report-2024/
