Crisis for charities set to be deeper than expected, data suggests


The crisis will be deeper than originally thought for the sector, data from Charity Excellence suggests.

Charity Excellence’s monthly charity sector cost of living crisis update and forecast of the impact on charities began in August this year and uses Charity Excellence Big Data to provide an oversight of how well charities and voluntary organisations are responding to the cost of living crisis as well as what the future might look like. 

Its 1 December update suggests that the crisis will be both deeper and longer than Covid, primarily to the huge funding gap charities are experiencing, which is being made worse by inflation driving up costs and eroding the real value of income, the increase in demand and people challenges. Pressures on public sector funding pose an additional risk to charities reliant on public sector contracts. 

Looking at the areas of funding, demand, people and resilience, Charity Excellence’s update notes:

The funding position remains extremely serious but stopped worsening in the summer. This, it says, may be due to the increasing availability of crisis funds, but it does not have the data to be able to establish a causal link. 

The ability to meet demand and maintain service standards continues to decline, and based on other reports, is hitting those in the front line of fighting poverty hardest, such as food banks and advice centres.  

Having sufficient people has shown no significant decline.  However, it says, with the vast bulk of sector people being volunteers, this is more reflective of volunteering than staffing, and other reports show significant concerns about recruitment and retention. 

The most marked decline has been in near-term sustainability and liquidity positions (ability to pay bills), with a growing risk of charity insolvencies.

Charity Excellence highlights the impact of the crisis on the sector’s people as a growing problem, saying:

“Our people are often low paid/unpaid and significant numbers work in challenging roles, which the crisis will make more challenging.  However, few have access to organisational or union welfare support.  The financial situation is understandably getting most attention but, our only huge asset are our people, and we think this is a major and growing risk.”

In the near term, Charity Excellence predicts that the crisis will be at its worst in Quarter 1 of 2023, with significant risk of widespread charity insolvencies. Longer-term, based on sector resilience being largely driven by the economic conditions, it doesn’t expect to see any significant improvement until 2024.

The full update can be accessed on the Charity Excellence site.

More on Charity Excellence

Charity Excellence responds to growing economic crisis with ‘step change’ in free services August 2022

Charity Excellence Framework becomes registered charity October 2021

Charity Excellence offers others opportunity to have free funder database on their site July 2022

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