In a new report, A Better Alternative: Reducing Child Imprisonment, it argues that custody can have "financial and operational attractions" for children's services departments.
The report says departments are not opposed to children under care orders who have offended being placed in prison, because they are not responsible for the placement during this period.
It also highlights that custodial remand in young offenders' institutions are financed centrally and local authorities only need to pay a third of the placement costs.
"While at a global level the cost of detaining large numbers of children is considerably greater than that associated with non-custodial provision, the material incentives for individual agencies within the youth justice system are not always consistent with that broader picture," it adds.
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