In good times charities can sometimes reap the benefits of increased donations and goodwill as people tend to feel more, well, charitable.
Unfortunately and on a number of fronts, it might be hard to describe the first four years of this decade as good times and charities are beginning to bear the brunt of other economic hardships.
More charities are set to go into insolvency this year than in the previous four.
Number of insolvencies other social work activities without accommodation
|No. of Insolvencies
Looking at the number of insolvencies we can see that during the “covid years” they have consecutively decreased in each year from 2019.
However in 2022 insolvencies began to rise again by 56%. 2023 shows no sign of slowing down either with there being an average of 2.75 charities a week choosing to close their doors or being forced into insolvency by a range of external factors including falling donations.
Charity begins at home
In the latest data compiled by the National Council for Voluntary Organisations, it shows that the UK voluntary sector income fell by £1.8bn in 2020/21 in comparison with the previous year.
Total charity income also fell for the first time in 10 years, new figures show, highlighting the effects of the Covid-19 pandemic on the UK voluntary sector.
New data shows that the total UK voluntary sector income was £56.9bn in 2020/21, down £1.8bn from the previous year.
The reduction suggests that the voluntary sector is facing its own “long Covid effect”, which has left many charities vulnerable to the cost-of-living crisis.
The reduction comes despite a rise in income from the government, due in part to initiatives including the furlough scheme, which enabled many organisations to continue paying staff while services were closed due to the pandemic.
Data also shows public donations remained the largest income source at £26.4bn but this was down by 14% on the previous year.
Investment income fell by 15% to £4.5bn, but government income rose by 6% to £5.9bn. Total spending was £53.8bn.
Researchers concluded that the effects of the pandemic were more harshly felt by smaller charities, defined as those with an annual income of less than £1m.
With total funding for these charities fell by £4.6bn in 2020/21 compared with the previous year, while larger organisations’ income went up by £4.6bn over the same period.
No money, more problems
But what challenges are these charities facing that are leading to a drop in donations?
- Economic downturn
Individuals or businesses are increasingly likely to reduce their charitable contributions to help focus on their own financial stability.
- Global Events
Natural disasters, pandemics, or geopolitical events can divert public attention, as we’re seeing at the moment, and more crucially resources away from regular charitable giving.
- Donor fatigue
Donors, especially individuals, have a limited capacity to give. If they are constantly bombarded with donation requests, they might reduce their giving or become fatigued by the sheer volume of appeals.
- Lack of Transparency/Corruption
Negative headlines are emerging more frequently about charities and directors indulging in activities that will bring unwanted attention to them and a reduction in donations to those charities with a cloud of malfeasance hanging over them – rightly or wrongly.
Donors want more transparency on how their donations are being used. Charities that fail to demonstrate their impact and financial responsibility will struggle to retain donors as a result.
It doesn’t matter if you’re running a charity, small, medium or large business, working exclusively with volunteers or employ a hundred people – we’re there to help when you need it.
We offer a free initial consultation for anyone with an ownership interest in a business or even within a charitable organisation to discuss what unique issues they face and how they can best get to grips with them.
Our experienced and knowledgeable advisors will work with them to understand the facts then look at a roadmap to recovery outlining the sensible, measured steps to take to get back on the path to success.