Thursday, 4 December 2008

More on charitable income in the UK

More news not good news

A item on yesterday’s Conductive World ended with a promise to peep into the UK's charitable press to try for a deeper understanding of the present situation.
I’ve now seen enough for the moment. Here’s what, with the help of Gill Maguire, I found there.

…could smart charities come out of recession in better shape than they went in?

The outlook is not good. As charities prepare their budgets for next year, many will be reflecting on how times have changed. Even relatively recently, they remained upbeat about the future.

When the National Council of Voluntary Organisations asked charity leaders in August about their plans, 61 per cent expected to increase spending next year and 42 per cent intended to take on more staff… By mid-October, a survey by the Charity Commission showed four out of 10 charities had been affected by the credit crunch, with a quarter reporting a fall in donations. Of those, one in 12 had been forced to make redundancies. Since then, things have only got worse.

The aricles goes on to detail some high-profile disasters in over the last couple of months. Icelandic banks figure large, with Cats Protection losing £11.2m in an Icelandic bank. What was it doing with that amount of money anyway? Luckily, though, it is unlikely that any CE charity anywhere in the world has had the sort of money worth risking in a dodgy bank! Corporate sponsorship is ‘drastically down’, so are legacies (hit by falling house prices) but again it is likely that CE in the UK is not overly dependent on such sources.

More worrying for some, particularly perhaps for the smaller operations, is individual giving:

The great unknown, though, is the impact on individual donations.

Most experts expect to see some reaction from donors, even if it hasn't yet materialised. Pegram, for instance, points out that the NSPCC is fairly dependent on small, regular donations, and thinks these could be vulnerable. "If there are widespread redundancies, it's relatively easy for people to go through their bank statements and chop off non-essential standing orders," he says. ‘We're worried we might be one of them. Oxfam, too, says individual donations are the most likely area to suffer. Cancer Research UK admits it's a possibility and says it forecasts fundraising income will fall by 4 or 5 per cent over the next year.
… etc.

Qualified grounds for possible cheer?

On the plus side, there are two areas in which charities might see gains. One is charity shops, which are reporting an increase in business as consumers look for bargains. The downside, however, is that clothing donations tend to fall in a recession: Cancer Research UK and Mind have already warned that stock levels in their shops are declining.

And how many CE centres run charity shops? I know of one and there may be others, but not many.

The other upside is government funding, which accounts for a greater share of the sector's income than it did during the previous recession and could cushion falls in income elsewhere…

That is, of course, dependent upon ofering a service that the local state agencies actively want. There are indeed a few services in that lucky position but they are certainly a minority. And moreover …

Here again, though, there are risks. At a local level, recessions in the past have seen councils cut discretionary spending, including grants to the sector. That could happen again, particularly if freezes in council tax go ahead. Nationally, a future Conservative government could rethink any plans Labour has to spend its way out of the recession.

The only cash charities can really count on, therefore, is what they save by cutting costs or projects.

So cheer up

But it's not an entirely bleak outlook. Some charities build up reserves during the good years and put off difficult decisions that can't be avoided in a recession. .. ‘You often come out fitter and leaner than when you went in.’

It seems unlikely that most CE services in the UK have ‘build up reserves during the good years’. Financially speaking, what good years?

But many, maybe most have ‘put off difficult decisions that can't be avoided in a recession’ (no there’s a persistent theme for you!) . Maybe they will now grsp some of these nettles:

So you could think of it like a good workout. Or, if you prefer, a trip to the dentist: you may well feel better afterwards, but it will probably hurt a little.

So, there’s the good news!

This rather leaves the choice, for those services that make it through, of ‘leaner and fitter’ or… even leaner.

The fata are still not, however, small-grained enough to tell us specifically about the economics of CE in the recesion. I have, though, found one small possible, public index for this and will return to it when I have evaluated it further.


(2008) Charity income is feeling the pinch, Third Sector, 3 December

Sutton, A. (2008) Charitable income in the UK, Conductive World, 3 December


  1. Andrew

    Here charity is not a way to develop our group. No chance. So be happy to have it, thats wonderful!


  2. I was indeed very glad to have the British mechanism of 'charity'. It is far from perfect, and has got less so over the years.

    I wouldn't want to be starting up now along the charitable road!

    Nevertheless, where would CE be, in the UK and a whole lot of other countries without this?

    The problem is that 'without this' looks like being more and more the way that things might be here.

    I do not know precisely how you finance things at Com Amor but maybe how you do things in Brazil might be something that we could look to to see what ways forward there are to us in the UK and some similar countries over coming years.

  3. It appears to be happening in US too - not just UK