Community businesses in the north of England are often losing money on delivering public sector contracts to keep services running at a high enough standard, according to a new report from Durham University.
The report, which was published today and funded by the community business body Power to Change, says that many community businesses are using income from other areas to subsidise the work and others are being priced out of delivering public sector contracts.
"The value of public sector service contracts is being driven down while expectations of service delivery are also often being raised," the report says.
"The consequence is that community businesses choosing such contracts often lose money to maintain or enhance the quality of service offered to their community."
The research is based on qualitative research with 24 community businesses in Bradford, Hartlepool and Middlesbrough.
The report says that many contracts, particularly in larger council areas, are getting bigger and more complex.
This means that community businesses are being priced out of the market unless they work in partnership or as subcontractors.
The study says relationships between the private sector and community businesses are primarily about "complementary interests" and being mutually beneficial for both organisations involved.
Work between community businesses and other third sector organisations is good if the two organisations are in different localities, the study says.
But in areas where the local public sector fails to encourage collaboration in the third sector there are "lower expectations" of working in partnership, according to the report.