UK charities are facing a £10.1 billion funding gap over the next six months as a result of COVID 19, with incomes expected to drop by £6.7 billion at the same time as demand for their support rises by the equivalent of £3.4 billion, according to new analysis from charity Pro Bono Economics (PBE) released today.
The analysis draws on PBE’s latest weekly charity tracker survey, covering 261 civil society organisations across the UK. Nine-in-ten (88 per cent) of those responding say they expect Covid-19 to reduce their income over the coming six months relative to pre-crisis plans, and well over half (59 per cent) say they have had to “significantly” reduce their activity in response.
Many charities have sought additional funding, with half (50 per cent) saying they’ve applied for emergency support from non-government sources and more than one-in-three (37 per cent) applying for a share of the £900 million of support earmarked for the sector by the government. But PBE points out that such sources are not available to all, noting that one-in-ten (12 per cent) of charities say they “expect” to cease operating altogether before the start of December.
The anticipated income hit sits alongside a sharp increase in demand for the services of many charities. The PBE survey shows that 72 per cent expect demand to rise over the next six months in response to the crisis
To meet this surge in demand, PBE estimates that the sector would require an additional £3.4 billion of resource. The estimated £6.7 billion income hit is therefore generating an overall funding ‘gap’ of some £10.1 billion the charity says – resulting in unmet need for help across the country.
PBE says that small charities, with incomes of less than £500,000 a year, are especially exposed to the income squeeze. Its survey suggests that close to two-in-three (63 per cent) organisations in this group have already reduced their activity in a significant way, approaching half (45 per cent) say they’ve grown more pessimistic about their situation over the past week, and that one-in-eight (13 per cent) expect to go out of business within six months.
Matt Whittaker, Chief Executive of Pro Bono Economics, commented:
“Charities and other civil society organisations play a vital role in the day-to-day lives of many millions of us – and even more so at times of crisis. That contribution is too often taken for granted, leaving the sector subject to chronic policy neglect. If we don’t funnel more resource to charities in the coming weeks, it’s clear that many will struggle to survive.
“The fact that one-in-ten charities expect to go under in the next six months is on its own a shocking enough statistic. But once we add in the significant constraints being faced by many of those organisations that do survive, we’re looking at a huge hit to the overall capacity of the sector – with implications for all of us.
“The significant scale of the support being provided by government is of course very welcome – as is the generous help being provided by the public in the form of donations and volunteering – but it’s not enough. Charities’ incomes are under great strain at precisely the same time that demand for their assistance is rising, generating a £10.1 billion funding gap that translates into huge unmet demand.”
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NOTES TO EDITORS
About Pro Bono Economics
PBE helps charities and social enterprises understand and improve the impact and value of their work, matching professional economists who want to use their skills to volunteer with charities. Set up in 2009, PBE has helped more than 500 charities large and small, covering a wide range of issues including mental health, education, employment and complex needs.
PBE is supported by high-profile economists, including Andy Haldane (Bank of England), Sir Dave Ramsden (Bank of England), and Clare Lombardelli (HM Treasury) as trustees, and Diane Coyle (University of Cambridge), Kate Barker, Lord Jim O’Neill, Robert Peston, Martin Wolf and Lord Adair Turner as patrons. Lord Gus O’Donnell has chaired PBE since September 2016.
About the weekly charity tracker
The weekly survey is designed to take the temperature of the civil society sector as the COVID-19 crisis continues to unfold, monitoring the pressures being faced by charities and voluntary organisations across the country and understanding how the picture is changing over time. This edition of the survey was conducted online on 2 and 3 June 2020, with 261 respondents.
The respondents were split between 94 ‘small’ charities (annual income of less than £500,000), 132 ‘medium’ sized charities (income between £500,000 and £10 million), 32 ‘large’ charities (income of £10 million or more), and 3 ‘other’.
Funding gap methodology
The £6.7 billion income drop estimate is calculated by combining survey responses to the question: ‘What impact do you expect Covid-19 to have on your organisation’s income over the next six months relative to your pre-crisis expectations?’ with baseline income data taken from the NCVO, UK Civil Society Almanac 2019.
The £3.4 billion estimated increased in spending required to meet today’s elevated demand is calculated in a similar way. The PBE survey question: ‘Roughly what impact do you expect Covid-19 to have on demand for your organisation’s services in the next six months relative to your pre-crisis expectations?’ is combined with NCVO, UK Civil Society Almanac 2019 data on spending on charitable activities.
NCVO, UK Civil Society Almanac 2019: https://data.ncvo.org.uk/about/almanac-data-tables/
- 90 per cent of charities say the crisis will negatively affect their ability to meet their charitable objectives in the coming six months.
- More than half (58 per cent) say their level of concern has remained broadly unchanged in the past seven days, but one-in-three (31 per cent) say they have become more pessimistic.
- Two-in-five (40 per cent) say the impact social distancing is having on their ability to deliver their services is the single biggest negative impact of Covid-19 right now, compared with 28 per cent who cite the impact on fundraising and 24 per cent who point to the effect it is having on their ability to plan for the future.
- Nearly all (97 per cent) say they have taken some form of action in response to the financial challenges raised by the crisis:
- 61 per cent have furloughed staff under the government’s Job Retention Scheme;
- 59 per cent have reduced their activity in a significant way;
- 56 per cent have sought funder flexibility on their spending plans, project delivery and reporting requirements;
- 42 per cent say they have drawn down on their financial reserves;
- 37 per cent have applied for support from the government’s charity-specific rescue package, up from 28 per cent last week.