Pupil referral units (PRUs) will find themselves competing with academies and free schools to run services for excluded pupils because of the Government's decision to "diversify" the alternative education market.
Charities and voluntary groups will be expected to educate pupils excluded from schools. According to last week's white paper, education secretary Michael Gove wants to "diversify" current PRU provision and has threatened to shut any which are unsatisfactory.
Less than half of alternative provision available at present is run by the voluntary sector. But in future, local authorities will be expected "to choose the best provision and replace" any which is not up to standard. Mr Gove will be able to specify what type of provider he wants to be used.
There will also be competitions so that "high-quality new providers" can enter the market. Exclusion and alternative education might be reorganised again in the future, the white paper says.
PRU heads have welcomed the proposals giving them self-governing powers, rather than being run solely by local authorities. They say the current situation creates extra bureaucracy - for example, not being able to employ their own staff.
But not all are convinced that academy status will bring many benefits. PRUs are already allowed to run a flexible curriculum and their pupil numbers would still be beyond their control.
Carol Bowery, head of The Meriton, a PRU for young underage parents in Bristol rated outstanding by Ofsted, was invited to become an academy in the summer. Ms Bowery then received another letter the next day withdrawing the offer because PRUs were not included at that point.
"If we are allowed to become self-governing I can't see any advantages in getting academy status, too," Ms Bowery said. "We already involve local businesses and entrepreneurs in our curriculum, as well as the local college and schools.
"The quality of private provision you can buy in at the moment is not good. PRUs already go out of their way to add an extra dimension to the curriculum and to provide personalised learning, but the Government doesn't seem to understand this."