Some of England's biggest privately-run children's homes have raked in more than £95 million in profit in the past three years, The Mail on Sunday can reveal.

The firms, which have been draining millions from the budgets of cash-strapped councils, include outfits controlled by private equity firms, as well as the daughter of a former City stockbroker linked to fraud.

Data from regulator Ofsted shows private firms dominate the sector, with 83 per cent of children's homes under their ownership. The draw is that the industry is lucrative.

Last year, a report by news website This House revealed the average cost of placing a child in care was £281,000 a year, five times that of keeping an adult in prison.

It followed a 2023 report from the Local Government Association that showed some councils were paying as much as £63,000 a week to keep a single child in care.

But the cost does not always translate into better service. A 2022 study from the University of Oxford concluded that for-profit providers were 'significantly more likely' to be rated of lower quality than public alternatives. 

Private groups also violated more requirements and received more improvement recommendations. This is despite the most recent Ofsted data from 2019 saying eight of the ten largest private and voluntary children's home providers had a higher-than-average number of homes rated good or outstanding.

Of the 2,748 children's homes in private hands, 18 per cent are run by the top five operators.

England's second-biggest children's home operator is Keys Group, with 116 locations. It is owned by G Square Capital, a private equity firm based out of London's fashionable Savile Row. Between 2022 and 2024, Keys Group made an overall operating profit of £7.8 million.

Another private equity player is Netherlands-based Waterland, the owner of Aspris, which runs 81 children's homes. The firm raked in £14.6 million in 2023, according to its most recent accounts, reversing a £4.7 million loss from the previous year.

A big private operator is HCS Group, trading under the name Hexagon Care Services. It runs 56 children's homes in England. Hexagon is owned by 28-year-old Melissa Bell, who took control of the firm in 2016 when she was just 19 and a student at the University of Manchester.

She is the daughter of Paul Bell, a former City stockbroker who was previously arrested in connection with an alleged £21 million tax fraud. He later settled the claims.

HCS made a profit of £6.9 million last year after hauls of £6 million and £5.2 million in 2023 and 2022 respectively. For 2024, the firm also paid out £1.5 million in dividends, at least three quarters of which will have been pocketed by Melissa Bell, who controls more than 75 per cent of the business.

The largest operator by far is CareTech, a Hertfordshire-based outfit that owns 200 children's homes – 10 per cent of the total.

It is controlled by its founders, brothers Farouq and Haroon Sheikh, who led an £870 million buyout of the business in 2022, removing it from the London Stock Exchange. Farouq is an avid Labour Party donor, having given thousands of pounds to support the campaigns of London Mayor Sadiq Khan.

CareTech, which also provides adult social care, raked in £25.5 million in profit in 2022 and £12.2million the following year.

The encroachment of profit-seeking firms into children's homes comes after The Mail on Sunday revealed last month that three private equity firms running some of England's largest foster care agencies had made a total £40 million in profit in 2023.

One of the biggest private foster care providers, Compass Community, has made a similar impact in children's homes, where it controls 49 properties.

Compass, owned by private equity firm Cap10 Partners, has made profits of nearly £22 million in the past three years from fostering and children's homes, though it says it will invest this into growing its capacity to meet rising demand for its services.

Like children's homes, private fostering agencies are increasingly dominant as local council provision falls.

But the number of foster families is shrinking too, with many put off by low pay and the lack of workers' rights, since most foster carers are classed as self-employed.