Research on the local third sector promotes too often doom-mongering. It gives the impression that all not-for-profit organisations are in the same boat – and that the boat is sinking.
Unlike most studies, which are small-scale snapshots, Third Sector Trends (pdf) spans 10 years in north-east England and Cumbria. Following an exhaustive first study in 2008, biennial surveys of at least 1,000 respondents have, since 2010, tracked changes in the sector’s fortunes. Now, 10 years’ worth of data shows that the third sector is better characterised in terms of continuity than dramatic change.
In north-east England, despite austerity, income for charities has remained fairly level. Over the last two years, 14% of organisations reported substantially rising income, while 18% fell significantly. A majority of organisations (67%) enjoyed income stability.
That is not to say life is easy. Many no longer have unrestricted core funding and find themselves chasing smaller pots of money, often in partnerships that are financially and emotionally expensive. Having to run faster to stand still is a common refrain among respondents. Still, fewer than 3% of organisations state that borrowed money is important to them.
Times are particularly hard for organisations based in poorer areas: they are twice as likely to be financially vulnerable than those in the richest areas. In the period 2014-2016, a quarter used reserves for running costs.
More than 30% of organisations that rely heavily on public sector funding are struggling, compared with just 15% of those funded from private or voluntary sector sources.
This is not, however, the situation of the majority of third sector organisations. Well-governed organisations understand that income fluctuations are inevitable and manage the consequences as skilfully as they are able. Almost a third of organisations based in poorer areas or funded mainly by the public sector are in a very strong financial position.
Almost nine in 10 (88%) organisations who applied to local grant-making foundations in the past two years were successful in winning at least one grant. For those applying to national grant-making foundations in the same period, more than seven in 10 (72%) were successful in winning at least one grant.
Money can be the cause of problems if organisations don’t properly assess the costs of accepting a grant or contract. Why take on an award that is too small to deliver what is required? What if the staff do not have the skills to do the work?
The study shows that one of the biggest problems that local third sector organisations face, ironically, derives from their ambition, because it intensifies competition for finite resources.
Some charity leaders set themselves up for a fall by being too optimistic about the future. Among organisations with an income above £250,000 a year, 42% expect income to increase, 30% expect staff numbers to increase and 50% expect volunteer numbers to increase - that is a big ask.
Ambition and optimism go hand-in-hand, but over the 10 years of study, third sector organisations are consistently too optimistic about future access to resources. Nobody wants to argue that charities should be less ambitious – but unattainable expectations breed collective disappointment and a belief that everyone is about to fall off the edge of a cliff.
However, the study suggests a vibrant, resilient voluntary sector in north-east England, accounting for 3%-4% of regional employment, with 150,000 volunteers delivering almost 11m hours of work.
Sending messages that the sector is in perpetual crisis is not only wrong, but is also a potentially dangerous strategy. Why would people want to invest their time, money and ideas on something that is falling apart at the seams?
Tony Chapman is professor of applied social sciences at Durham University and author of Third Sector Trends
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