This paper reports on placement and welfare outcomes for children allocated a social worker where there was a concern about parental misuse of drugs or alcohol. All files going for allocation for long term work in four London boroughs over on average one year were examined (290 families). Of the 290, 100 families with 186 children involved concerns about parental substance misuse. File studies were carried out at allocation and two years post-referral for these children. At follow-up only 46% of the children remained with their main carer, with 26% living in the wider family and 27% in the formal care system. Logistic regression found the factors associated with children remaining at home were parental heroin misuse, violence and one or more parents being a first generation immigrant; factors associated with children moving were the child being a baby identified as at risk of harm and particular combinations who misused and family structure. A rating of welfare outcome was made based on educational, emotional/behavioural and health development. At follow-up, 47% of children had no problems, 31% had continuing problems and 22% had problems in more areas than at allocation. Regression analysis found the factors associated with poor welfare outcome were children remaining at home, domestic violence, alcohol misuse and being a boy. The combination of a high proportion of children moving carer and poor outcomes for those at home suggests that attention needs to be paid to improving outcomes in this area.