Social enterprises are increasing trade with the public sector while outperforming mainstream businesses, according to a report.

Figures published in The People's Business report from Social Enterprise UK reveal 38% of social enterprises – businesses which do not prioritise profit - have reported increases in turnover over the last year, in comparison to only 29% of SMEs.

There are currently 70,000 social enterprises in the UK, contributing £18.5bn to the economy and employing almost a million people.

According to the report, the proportion of social enterprises trading with the public sector rose to 52% in 2013, twice the proportion of SMEs.

Of social enter working mainly with the public sector, 34% said procurement policy was a principal barrier to their sustainability, a rise from 25% in 2011.

The survey found 29% of all social enterprises saw increases in their level of work with the public sector over the past year. For almost a quarter of social enterprises, trade with the public sector is their main source of income, an increase from 18% in 2011.

While only 37% of questioned SMEs said they expected turnover to increase in the next two years, this applied to 63% of social enterprises and marked a six point growth on 2011.

Chief executive of Social Enterprise UK, Peter Holbrook, said: ‘Social enterprise is steadily proving that it has an important role to play in bringing about an economic recovery and lasting social change. Entrepreneurs are using business to regenerate and rebuild their local communities, often where it's needed most urgently to tackle the causes and effects of deprivation.'