Social Enterprise UK has rounded on the decision by NHS Surrey to award preferred-bidder status for a £450m contract to a Virgin-owned private health provider over a social enterprise, claiming it jeopardises the government’s mutuals agenda.

NHS Surrey has confirmed that the Surrey Community Health contract, worth £450m over five years, will go to Assura Medical Ltd - which is 75 per cent owned by Virgin Group - subject to due diligence.  Assura saw off competition from Central Surrey Health, a social enterprise with income of £28m, as well as from the Surrey and Borders Partnership NHS Foundation Trust, to win preferred-provider status.

Peter Holbrook, chief executive of Social Enterprise UK, today said: “If Central Surrey Health, the government’s flagship mutual social enterprise, which has demonstrated considerable success in transforming health services, reducing waiting times and increasing productivity can’t win, what does this say for the future of the mutuals agenda?

“Central Surrey Health reinvests all the profits it makes locally. It is difficult to imagine how Assura, with shareholders expecting a financial return, could do more to benefit people in Surrey.”

Holbrook said it is not enough for government to simply open up markets to increased competition; it needs to create “fair markets that benefit society”.

He warned that some of the financial criteria used in contracts create an unequal playing field because social enterprises often don’t have the same financial backing as private providers.  

“Public sector workers will be understandably anxious about spinning out from the NHS and setting up a social enterprise on the back of this news,” Holbrook said. “The government needs to take action to reassure them that they will not be operating in markets weighted against them.”