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Independent Fostering in the UK - the effect of fee cuts in 2010
What fee freezes or reductions may mean for UK Independent Fostering Agencies (IFAs)
Published in Community Care 4/2/10
Like children’s home providers, IFAs are expecting placement fee freezes or reductions. With inflation at 2.9% this is a real cut. At the same time high standards are expected of IFAs as local authorities want to use only those with ‘outstanding’ or at least ‘good’ OFSTED ratings. This combination of rising expectations and lowered fees may have a dramatic effect.
The UK IFA scene is already changing. Some smaller agencies are struggling financially and with standards. Plimsoll UK, Market Analysts, say that 1 in 6 may face difficulties in 2010. There been many recent acquisitions of small and mid-sized agencies by larger ones, often with Private Equity backing. David Jones, Partner at Deloitte Corporate Finance, who has advised on many IFA transactions says, “We see strong interest from investors looking for good, responsibly run, social care companies. The independent sector can only expand and consolidate over the coming years, offering potentially good returns for investors as well as value and choice to commissioners.”
The surviving IFAs will necessarily be leaner and very efficient. Bigger organisations using their size and powerful financial backing to fund the infrastructure needed to achieve high standards. The downside is that some valuable local choice and diversity will be lost.
While the IFAs get more efficient, the Local Authority schemes could get costlier through already agreed pay rises and their lack of economies of scale.
Surprisingly then, cutting fees might bring speedier change and growth in the independent sector in 2010/11 and beyond, as best value considerations dominate the agendas of hard pressed councils
Stephen Vaudrey January 2010