Social enterprises mostly working in the public sector are making redundancies or turning away from public service markets in order to survive, says new report The Shadow State.

The Shadow State, which is commissioned by Social Enterprise UK and written by journalist Zoe Williams, finds that while social enterprises are growing and gaining confidence in consumer and business-to-business markets, research shows that the ones mostly working in public service markets are drastically low in confidence.

It says many are making redundancies or turning away from the public sector to survive. They cite public-sector procurement policy as one of their biggest barriers to sustainability.

The report blames local authorities who purchase from the lowest bidder on price and large-scale national contracts that only a clutch of the largest private-sector providers can bid for.

The report recommends that public bodies should be obliged to include social value in their commissioning and procurement and account for how this is generated to strengthen the Public Services (Social Value) Act which will come into force this January.

The report also calls for an independent contracting oversight body to scrutinise contracting decisions and prevent unfair competition.