An investigation by The Guardian and the Bureau of Investigative Journalism (TBIJ) has revealed that councils in England are spending over £125 million annually on placing vulnerable children in unregistered care homes. Over the past two years, more than 480 private companies have been paid £250 million for 1,800 unlawful placements of children. Operating a children's home without Ofsted registration is a criminal offense, yet almost every council in England has used such illegal facilities. Regulators have been hesitant to shut these down due to a shortage of legal alternatives, but recent concerns over criminal activity and child safety have led to a more stringent approach. Recently, Ofsted secured its first conviction against Catalyst Care Ltd, which was fined £92,000 for running three unregistered homes in Kent. The company had received over £1.7 million from local authorities for these illegal placements between 2022 and 2025. A dataset obtained through freedom of information laws shows that over £40 million of public money has been paid to care providers linked to past failures, including those involved in the care of a teenage girl who was harmed in a series of illegal placements in hotels, Airbnbs, and other properties. Some of these children require constant supervision and multiple carers, which can significantly increase the costs. At least nine councils paid more than £1 million for a single placement, with average earnings of over £150,000 per placement attracting entrepreneurs from outside the care sector. Analysis of the payment records shows that individuals from industries like property development, security, music, and the military are now running illegal homes. Rachel de Souza, the children's commissioner for England, said the findings highlight systemic failures, with children being treated as a business opportunity and large amounts of public money spent on placements that are not properly registered or inspected. Prospero Health and Social Care, a London-based nursing agency, is the largest player in the illegal care market. Over the past two years, the company was paid £7.6 million by 14 councils for staffing 86 placements in unregistered homes. Prospero stated it supplies staff but does not operate unregistered care homes, emphasizing that placement decisions and care remain the responsibility of local authorities. Ofsted says agencies could be held responsible for managing a home if their staff are on site day-to-day without council personnel present. Local authorities may also be liable if they book or rent unregistered accommodation where a child is living. The watchdog insists it has the power to prosecute anyone running an unregistered home, regardless of their background. Prospero Group's accounts show its owners received over £4 million in dividends in the past two years. Seven of the 14 councils that paid Prospero for staffing illegal placements reported receiving safeguarding complaints about its care workers. Between January 2024 and April 2026, there were 44 allegations that staff had harmed or posed a risk to children, with 16 upheld, four deemed unfounded, and the outcomes of the others unknown or pending. Prospero stated it referred these concerns to authorities and noted that no local authority had suspended its relationship with the company.