We all know times are tough for small and medium-sized charities and now we have more evidence to prove it.

The 2023 Civil Society Almanac, recently published by the NCVO, paints a pretty gloomy picture for the supply side of the charity sector with falling funding, fewer charities and reducing contribution to GDP.

At the same time, the most recent CAF Charity Resilience Index report, published by the Charities Aid Foundation, offers scant comfort for the demand side with more than half of charities saying they are operating a full capacity and worrying about survival, and only half saying they are very confident they can afford overheads such as energy, buildings and supplies.

Is this a perfect storm for charities?

Digging a little deeper into the data included in these reports, it would seem so, particularly for smaller charities.

On the supply side, the Civil Society Almanac, which in fact covers the financial year 2020/21, reports:

• A small decrease in total number of voluntary organisations with the decline centred on small and medium-sized organisations, albeit with pandemic-inspired growth in micro organisations.

• Lower than expected numbers of charity closures but also a slow down in the rate of new charity registrations.

• A 6% decline in income for the sector (the first fall in over 20 years) despite a rare rise in statutory sector funding and an 8% reduction in overall spending. This income squeeze is particularly tough for small charities as larger charities take an increasing share of overall income.

• A sharp fall in income from the public and decline in investment income. This fall in public giving has a disproportionately high impact on small charities.

• A fall in the percentage of GDP contributed by the charity sector from 1% to 0.8%, albeit still amounting to £18 billion in total.

The big caveat to these figures is, of course, that 2020/21 was not a normal year; it was the first full financial year of the pandemic period. The figures will have been significantly affected by that and we will need to see what the long term impacts might be. That said, more recent evidence suggests that the squeeze on charity income has continued since the pandemic (see, for example, our summary of evidence compiled early in 2023).

On the demand side, we see in the CAF Charity Resilience Index (using survey data from September 2023) that:

• 59% of charities say demand as increased (31% say it has increased substantially).

• 41% say they cannot help anyone else and 12% are turning people away.

• Only half of charities say they feel confident they can meet demand both now and in the next year.

• 53% are worried about surviving in the current economic climate, 26% have cut services as a result (despite rising demand) and only 50% are very confident they can afford overheads.

• Only 27% have a plan to help them face the cost of living crisis despite only 30% feeling very confident in the security of their funding.

This all feels very depressing, and it is, but there are things every charity can do to improve their resilience and face these challenges including:

• Take a step back and look at where your organisation can improve resilience.

• Think about potential future scenarios and make plans for how you would respond to different possible challenges.

• Be smart about how you go about fundraising; our previous blog offered some tips for fundraising in tough times.

• Make a plan specifically to address the impacts of inflation, particularly energy costs (where those are significant for your charity). This should include taking advantage of Government support schemes (e.g. for energy costs), but should avoid creating an unsustainable dependency on such support (much of which is being withdrawn in 2024). For example, consider energy saving measures and reducing other property costs (e.g. by making more use of hybrid and home working).

• Despite rising demand and your inevitably strong desire to help more people, stay realistic, don’t stretch resources too thinly, risking poor quality services and burnt out staff/volunteers.

We would be delighted to work with any charity or social enterprise to help you build the resilience of your organisation and plan for an uncertain future. To find out more about this or any of the issues raised in this article, please contact us at julian@almondtreeconsulting.co.uk to arrange free initial telephone discussion.