The schools inspectorate Ofsted has launched an urgent inquiry into a sharp rise in the number of primary-age children – some as young as five – being excluded from school and placed in institutions that can be unregulated, “unkempt and unsafe”.

The chief inspector of schools in England, Amanda Spielman, told the Guardian that some children were being removed from mainstream schools because their needs and behaviour were seen as “too challenging”, and were being placed in alternative provision (AP) “with little thought of their futures”.

She has called on the government to make it a legal requirement for all AP to be registered, warning that inspectors have found pupils in unregistered settings playing video games all day in unkempt and unsafe buildings where staff do not appear to care whether they attend or not. Some “exist on the edge of the law”, she said.

Ofsted inspectors have reported visiting schools in caravans and on industrial estates. Local authorities can pay annual fees of £30,000 or even more to private and sometimes unregistered providers.

According to Ofsted, the number of pupils taken out of their primary school and referred to alternative educational settings has risen 27% in the last four years, and there are more than 7,000 pupils aged 11 and under being taught in AP.

While the reasons behind the increase are unclear, there are fears the figure will rise further in the coming months as many vulnerable children struggle to adapt to the demands of the school day after disruption caused by the pandemic.

Writing for the Guardian, Spielman said: “Every child, regardless of their background, deserves a good education and the chance to reach their full potential. But some children – often the most vulnerable – just don’t get that. While most children have been back in the classroom since September, some children with behavioural, emotional or health problems are instead in alternative provision instead of a normal school.”

AP is for children who struggle with conventional education or whose needs cannot be met by mainstream schools. Many come from deprived backgrounds, some have families affected by alcohol and drug abuse as well as mental illness, and 80% have special educational needs and disabilities (Send).

“Sometimes it is a useful short-term fix for excluded pupils, serving a valuable purpose in re-engaging them in education; sometimes it does a good job of teaching young people right through to age 16,” said Spielman. “But I am concerned that it is sometimes used just to move on children whose needs and behaviour are deemed too challenging, with little thought of their future.”

According to Ofsted, the overall number of children in AP has increased 14% over the last four years. Spielman said: “I’m particularly concerned that the number of primary-age children referred to AP has risen by 27% since 2017 – there are now over 7,000 under-11s in AP. We’re seeing children as young as five attending AP settings, after headteachers have taken what must be an extremely difficult decision to exclude them from primary school.

“In light of this, I have commissioned new research to better understand the role that AP plays in the education system, and to find out why primary pupils are being referred to alternative provision in the first place. We will also explore how the pandemic has changed the AP landscape.”

The Department for Education (DfE) disagreed with Ofsted’s claim that there had been an increase in numbers of primary placements in AP in recent years, disputing the inclusion of placements in non-maintained special schools in its calculations.

A DfE spokesperson said the number of pupils in state-funded AP had gone down over the past few years, but added: “We are looking at reforms to incentivise more early support, and to ensure that those who are permanently excluded remain safe and supported, as part of the ongoing review of the Send system. This includes pupils in unregistered settings and in primary AP, though permanent exclusion of young children is rare.

“We are investing in programmes that support pupils to remain engaged in their education and training, and the chancellor has announced an additional £2.6bn to deliver new places and improve existing provision for pupils with Send, including those who require AP and special schools.”