Local authorities are being forced to put children in unsuitable accommodation due to a shortage of decent placements, a study has found.

The initial findings of a study by the Competition and Markets Authority (CMA) on children's social care found a shortage of appropriate places, with many youngsters placed too far away or requiring siblings to be separated.

Figures showed that the largest providers still made an average operating profit margin of 23% in 2020 while fostering agencies made 19% on average.

Chief executive of the CMA, Andrea Coscelli, said: 'We are concerned this is a failing system, with children not being placed in the right homes while providers are being allowed to charge high prices and make big profits.

'Vulnerable children rely on these services, but too many are being placed in accommodation that does not meet their needs.

'And, despite many placements not being suitable, local authorities, funded by taxpayers, are paying more than they should to provide them.

'The levels of debt we have seen being carried by private equity-owned firms is also a real concern due to the effect a firm in financial distress could have on the children in their care.'

President of the Association of Directors of Children's Services, Charlotte Ramsden, said it was ‘wholly wrong' that ‘excessive profits' were being made by some providers ‘on the backs of vulnerable children'.

Chair of the Local Government Association's children and young people board, Cllr Anntoinette Bramble, said 'members are increasingly concerned about the balance of provision, in particular the growth and market share of the very largest providers, which limits councils' ability to manage the market and ensure the availability of placements to meet the needs of the children they care for'.