UK charities may face a black hole in income

If income levels continue to flatline, UK charities could face a £4.6bn financial black hole by 2018.

That’s the warning following a recent report. 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 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%.

However, 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.”

Charities looking at ways to develop and increase funding may find it helpful to discuss their options and financial issues with professional advisers that specialise in this area. For more information on how Milsted Langdon’s charities team can help, please contact us.

Posted in Charities.