More than half of charities now feeling impact of downturn

64% of largest charities are concerned that future work will be affected

Released 17 March 2009

New figures released today by the 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 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 Charity Commission’s latest Economic Survey of Charities illustrates the deepening impact of the recession on charities. 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.

Dame Suzi Leather, Chair of the Charity Commission, said:

“Clearly the impact of the financial downturn on charities is widening and deepening. Some charities still face that double whammy of a drop in income as well as an increased demand for services.

“The research tells us that the number of charities taking steps to mitigate the risks that the financial downturn brings has risen since we conducted our first research. However, not all charities are putting measures in place to protect their work and their funds. 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. Although this is not a step that should be taken lightly, it is important to remember that reserves are collected for this purpose – now is the rainy day they have been saving for.

“It is important that all charities do what they can to enable their work to continue. The Charity Commission is providing advice and guidance on a range of issues to help them find the best way forward at this very uncertain time.”

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 continues to provide charities with advice and support via its website – www.charitycommission.gov.uk – and its helpline – 0845 300 0218. The Commission is also involved in a number of projects relating to the economic downturn:

• Working with umbrella bodies and the Office of the Third Sector (OTS) to ensure that charities are kept up-to-date and provided with the information they need to react to the changing financial situation.
• Participating in the regional events that the OTS is arranging to offer advice to charities following the release of its action plan.
• Continuing to monitor developments that may affect charities as well as gathering information from large charities through its informal engagement programme.

You can view a copy of the Charity Commission’s latest Economic Survey of Charities, on our website.

End.

Notes to Editors

• The Charity Commission is the independent regulator for charitable activity in England and Wales. See www.charitycommission.gov.uk for further information or call our contact centre on 0845 300 0218.
• The survey of 1,003 charities in England and Wales was carried out by Carol Goldstone Associates in February 2009.
• The Charity Commission’s previous financial downturn research was carried out in September 2008. Its findings can be viewed here - http://www.charitycommission.gov.uk/news/crunch.asp
• * In the September 2008 research, charities were asked the extent to which they had been affected by the credit crunch. In February 2009 they were asked about the extent to which they had been affected by the economic downturn.

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PR 14/09