Special educational needs and alternative provision - M&A insights

Government bill for England’s high needs SEND support nears £11 billion

As the number of pupils requiring tailored support runs into the millions, public funds cannot keep pace.

The reasons for rocketing demand are myriad, including greater awareness and diagnosis of SEND conditions and a post-COVID rise in SEMH issues.

The 2024 Institute for Fiscal Studies report Spending on special educational needs in England: something has to change shows central government funding for high needs pupils currently totals nearly £11 billion in England alone. This is a 59% or £4 billion real-terms rise between 2015–16 and 2024–25.

The report details how the obligation to deliver the provision set out in a soaring number of EHCPs has the potential to run Local Authority budgets further into deficits, as indeed a number already are.

Only the ‘statutory override’ mechanism, a short-term accountancy workaround, and ‘safety valve’ agreements in some authorities is preventing many from declaring bankruptcy.

There is also concern that private schools, an option for many families with low acuity SEND children, will have had to close or raise fees due to the introduction of 20% VAT in early 2025. Our research shows that at least 65 independent schools closed in 2025, which may have a knock-on impact of children with SEND needs moving into the state sector.

Against this backdrop of rising demand, decreasing supply and funding scarcity, there is an urgent need for innovation, investment and system-wide improvement.

The ability of private SEND and AP providers to address these challenges is attracting interest from investors who want to back high-quality, sustainable provision.

What is the government doing and what does it mean for providers?

With the situation nearing tipping point, the UK government is exploring measures to secure funding and support for pupils who need it most.

While these changes are necessary, they also create uncertainty for service providers and investors, who are watching and following the space closely –

A move to central funding

Policy: From 2028, SEND (and related AP) costs will be managed within the overall government budget, removing immediate pressure from local authorities to directly fund services. It is not clear how the government plans to address historic deficits.

Impact on providers: This raises questions about how SEND provision will be paid for, such as whether there will be a return to centralised commissioning. This would favour providers of scale that can offer consistent quality (providing an impetus for existing providers to grow through consolidation).

Whatever the future model, it will certainly be introduced with caution and over time to avoid disruption to a system that involves vulnerable young people.

Schools white paper

Policy: In June 2025, the government committed to publishing a schools white paper, co-created with educators and families. The publication has been delayed several times and is expected in late February 2026.

Service providers and their backers are eagerly awaiting the contents to understand possible shifts in commissioning roles, future market structure, and regulatory requirements.

Though details of the white paper remain under wraps, it is expected to include –

• A simplified framework for SEND support, possibly in the form of a three-tier support system – universal, targeted intervention and specialist support. There is speculation that this would replace EHCPs
• The introduction of minimum standards for SEND provision
• More inclusive mainstream provision
• Improved early identification and intervention
• Improved workforce capacity and training

Impact on providers: The white paper is expected to impact different pockets of SEND provision. To hedge anticipated disruption, providers are mitigating risk by diversifying into different services and geographies.

At the same time, innovative operators are establishing different ways to meet needs, do social good, and establish new products, services and technological solutions.

Expanding abroad: In 2025 UK-based Witherslack acquired Danish specialist‑education provider Behandlingsskolerne ApS to expand its service model beyond the UK.

Adding capability: Keys Group added online/digital delivery of speech and language therapy to its family of services through the acquisition of Mable Therapy.

Profit caps

Policy: The Children’s Wellbeing and Schools Bill requires certain providers of children’s residential care to share detailed financial information with the government to enable oversight and detection of “excessive” profits.

If the government judges that providers are making unfair profits, the law includes a “backstop” provision that – if enacted by the Secretary of State – would legally limit how much profit they can retain. How this could be effectively implemented is unclear and the likelihood of this backstop being used currently appears low.

Impact on providers: Though the government has said it does not currently plan a blanket profit cap on private SEND schools, it has left open the possibility that a cap on profits and/or fees might be considered in future as part of its broader package of SEND reforms.

Potential profit caps aside, providers with the ability (and technology) to clearly demonstrate value for money and positive outcomes will have a clear advantage.

Additional requirements on Alternative Provision

Policy: Following a consultation on strengthening protections in unregistered alternative provision, the government has confirmed it will be taking forward a new regime of voluntary standards, which will be put on a mandatory footing in future (“when parliamentary time allows”). The government also confirmed it would be setting a 12-week limit on full-time AP placements, to support the return of pupils into mainstream or special schools where possible.

Impact on providers: The government recognises that alternative provision will remain essential for some young people with complex needs, or for those whose needs cannot be adequately supported in mainstream settings. It also explicitly recognises that its 12-week limit will be subject to exceptions where it is in the best interests of the child. Government is looking to cement best practice in the space and to raise standards across the board. Providers demonstrating they are already providing high quality, aligned with the government’s new voluntary standards, will be well placed to capitalise on the direction of travel.

Review of mental health diagnosis

Policy: In December 2025, UK Health Secretary Wes Streeting launched an independent review to examine what’s driving the rising demand for mental health, ADHD, and autism services.

Though headlines concentrated on the controversial topic of overdiagnosis, it will also examine the role of early intervention, as such provided by SEND services. 

Impact on providers: In the short‑term this creates caution for assessment‑led providers. However, its parallel focus on early intervention and non‑medical support is expected to support and potentially expand demand for SEND, early‑help and community‑based provision, particularly where providers can evidence outcomes and preventative impact.