UK Charities Feel the Impact of Financial Downturn

New figures released by the UK Charity Commission reveal the deepening impact of the recession on charities in England and Wales, with more than half reporting they have been affected.

In September last year, 38% of charities surveyed by the charity regulator said that they had been hit by the credit crunch; this figure has now risen to 52%, following one of the largest representative surveys to date.

The survey found that the majority (64%) of charities with an annual income of over £1m say that they are concerned that their services or funding might be greatly affected.

The report’s key findings are:

– 52% of the charities surveyed say they have been affected by the financial downturn; of these, 58% have experienced a decrease in income;

– 32% of charities say they have taken steps to combat the effects of the downturn;

– 64% of charities with an annual income of over £1m are concerned that the downturn is going to affect future work;

– Just 3% of charities say they have considered collaborating with another charity and 3% have considered merging.

The Chair of the Charity Commission, Dame Suzi Leather says the research shows that the number of charities taking steps to mitigate the risks that the financial downturn brings has risen since the Commission’s first research. However, not all charities are putting measures in place to protect their work and their funds.

Dame Leather says it is very surprising that more charities are not considering collaboration with others, as this can help them share expertise and costs.

Some charities report that they have drawn on reserves in response to the economic pressure.

As well as illustrating the effects the downturn is having on charities, the new research reveals some of the measures being taken to combat them:

– 32% have taken steps to limit the impact of the current financial climate, from reducing costs (14%) to increasing fundraising efforts (11%) or drawing on reserves (6%).

– Some charities have had to put other measures in place, such as cutting or holding off new services (5%) or reducing numbers of staff (2%).

In addition, the research revealed that charities’ experience of the effects of the downturn varies depending on their size:

– Charities with an annual income of £1m or more were less likely to have experienced a reduction in income than the other charities – 46% had done so.

For charities with an income of between £100,000 and £999,000 the figure was 65% and 60% for the smallest charities (those with an income of under £10,000).

– Only 23% of the smallest charities had put measures in place to combat the effects of the downturn, compared with 65% of the largest charities (those with an income of £1m or more).

– 14% of the largest charities had drawn on reserve funds; this figure dropped to 6% across all the charities surveyed.

The Charity Commission is the independent regulator for charitable activity in England and Wales. You can view a copy of the Charity Commission research at www.charity-commission.gov.uk/Library/common/downturn.pdf