Financial bubbles are not random. There are predictable factors.
An analytical framework needs to be applied to Residential Child Care to see if it complies with the causes, and potential for consequences, of it experiencing a bubble. The consequences for children, staff and providers have to be addressed.
Bubbles, being speculative, can encourage overinvestment, overemployment and overbuilding, which ends up being inefficient for both businesses and society.
The situation needs to be looked at forensically. This should be one of the matters the Competition and Markets Authority consider in their current inquiry
Bubbles may facilitate innovation and encourage more people to become entrepreneurs. New registrations suggest new providers are attracted by secure returns on invest.
There have been reports from the ICHA ICHA Dec 2020 final and LGA Profit making and risk in independent children’s social care placement providers | Local Government Association reporting financial aspects of social care placements.
There are important aspects to be taken into account such as continuing occupancy.
There are also wider matters to be taken into account too.
Recovering from Covid Government injected funding has given confidence to financial markets. Stock market investors are projecting more than normalisation.
The ingredients for a mini-boom exist.
Into every sky comes a grey cloud. There are 3 reasons to worry, and these can affect Residential Child Care as it is a largely privatised sector.
- With economic recovery there is the risk of inflation. Inflation is important when considering a capped or constricting financial budget, the next Spending review will be crucial to have regard to children’s services.
- The symptoms of a bubble are notably present externally: over-evaluation, steep price rises, speculative investor behaviour. From an external position on children’s services it is possible to see these as present. If isolated they can be managed, it is the pattern that matters.
- The multiplicity of substitution for residential settings affects occupancy. Currently, referrals are many and vacancies few. This creates high occupancy. There are many projects, No Wrong Door roll out, Step down, Local authority homes that could affect occupancy.