UK charities could face a £4.6bn financial black hole by 2018, if income levels continue to flatline, a report released on Wednesday has found.
The 12-month review into charity sector funding, by National Council of Voluntary Organisations (NCVO), said that while the rest of the economy has grown, the charity sector’s income is the same as it was in 2009.
The report attributed the shortfall to low growth in public donations, cuts to government grants and contracts, and rises in inflation.
“This report is a sharp reminder of the scale of the challenges facing charities at the moment,” said Sir Stuart Etherington, chief executive of NCVO and chair of the financial sustainability review panel.
“While the headline figures show the charity sector as a whole keeping its head above water, they mask the crushing blows that many small and medium-sized charities have sustained in recent years.”
Small and medium organisations saw the biggest falls in income and assets, and an overall decrease of 38% in their income from government sources between 2007 and 2013. The report highlighted that this decrease in funding comes at a time when there is an increased demand for charities’ services.
Lucy Chapman, executive director of fundraising at Samaritans, said: “In 2014, Samaritans responded to 5.3m calls for help from people struggling to cope, an increase of more than 100,000 compared with the previous year, and in line with an upward trend over the past five years.
“It costs approximately £4 for Samaritans to pick up a call for help, so with the demand for our services increasing we are always looking for new and innovative ways to fundraise. We rely hugely on the generosity of the public, who provide the majority of our funding, to ensure that we are there for people in need of our support.”
The report also draws attention to the distribution of funding in the sector. It finds that while overall income has flatlined since 2009, large and major organisations (those with an income of more than £1m) receive 78% of charity sector income compared with micro, small and medium organisations, which receive 22%.
Duncan Craig, chief executive of Survivors Manchester, told the Guardian Voluntary Sector Network: “Many of us in smaller organisations have dual roles, both in management/strategic and service delivery and it’s already difficult enough for us to get to the income table without having to find a way of pushing through the crowd to find out the table is even smaller than before.
“We don’t have the resources now needed to generate public donations – an income stream getting smaller and smaller; often don’t have the time or skill-set to develop the business cases needed to be in competition with the bigger organisations to get the contracts.”
With income from individual donations unlikely to fill the gap left by government grant cuts, Caron Bradshaw, chief executive of the Charity Finance Group, fears the sustainability of many organisations is in question.
“This review is an important reality check on the charity sector’s finances,” said Bradshaw. “In the wake of a budget with more spending cuts which will create greater demand for our services, this review finds charities’ finances in a fragile state. We cannot afford to ignore the multibillion-pound funding gap identified here, which requires partnership between government, funders and the charity sector.”
