Summary

As 2020 draws to a close, there has been much talk about the economic scars the UK – and indeed the world – will bear as a result of this year. After the 2008 financial crisis, it took years for real incomes and living standards to return to pre-crisis levels. The Covid pandemic has created the worst recession on record. The number of employees on payroll has already fallen by 782,000 and the Bank of England forecasts the peak in unemployment is unlikely to be reached until the spring or early summer of 2021. Turnover is down year on year for 49% of businesses in the country. There is a long road of recovery ahead for the economy.

But there are also increasing concerns about the social scars the UK is accumulating, from mental health and isolation to domestic abuse and fraud.  Charitable and voluntary organisations are a key component of the balm the country requires to soothe that social scarring over the months and years ahead. Yet these organisations are under substantial pressure, and this month’s Covid Charity Tracker reveals they anticipate that pressure will last well into the next year.

Charities are experiencing rising demand, with 63% reporting they currently face higher levels of demand compared to last year – and 15% facing more than 25% higher demand. We have identified five separate – though deeply interconnected – fronts through which this demand is likely being driven:

• Pre-pandemic problems: the ongoing sources of rising demand charities were experiencing prior to Covid
• Direct covid consequences: the immediate increase in and intensification of demand resulting from the pandemic
• Build-ups and backlogs: the pent-up demand that has not been serviced as a result of social distancing requirements, some of which has intensified need as a result of delay
• Crisis spillover effects: the ongoing increases in demand that result from the worsening economic situation
• Shrinking supply: the transfer of demand as a result of other service closures or cuts.

While a vaccine has been a cause for much optimism, and we may see the additional demand from the direct impacts of lockdown and social distancing diminish over the second half of 2021, few other demand fronts appear likely to decrease rapidly over the next year. The expectation in the charity sector is that demand will remain high: three quarters (75%) of charities expect to manage higher levels of demand over the coming year.

Meanwhile, resources in the sector are tight, which poses a difficulty for charities managing backlogs, spillover and the ongoing consequences of the pandemic. Throughout 2020, charities have reported decreases in their income from public donations, fundraising and earned income. Looking ahead, 83% of charities now forecast a decline in their income over the next 12 months relative to their pre-crisis expectations, and most charities (69%) think it will take more than a year to return to pre-crisis income levels.

This combination of multiple fronts of demand and declining incomes raises concerns about the capacity of the charity sector to help everyone who needs it over the next 12 months. Even more concerning is the prospect that, as it struggles with current demand, individuals see their circumstances worsen without intervention.

As the government considers how to soothe the social scars Covid has created, charitable organisations can be a core ingredient of the balm the country needs. But without additional resource to meet its multiple fronts of demand, the charity sector will not be able to fulfil its full potential to help everyone it can.

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Charities are facing increased demand for their services, and expect that demand to continue into 2021

In this month’s Covid Charity Tracker, almost two thirds (63%) of charities report currently experiencing higher levels of demand compared to this time last year and one-in-seven say they are experiencing an increase of more than 25%. Just under a quarter (23%) are experiencing less demand than this time last year.

Figure 1. What level of demand for your services are you currently experiencing, compared to this time last year?

This increased demand for services is expected to continue over the medium-term. 75% of respondents expect an increase over the next twelve months, and 38% expect that to be an increase of over 25% of their usual levels of demand. 18% believe demand will be lower next year than pre-crisis expectations (see Figure 2).

Expectations about future need are remarkably consistent over time. This month, most charities are predicting higher levels of future demand (over the next 12 months) similar to their predictions in May and June (for the next 6 months). The picture was slightly improved in August – potentially due to many social distancing restrictions being lifted at the time – but increased expectations of a vaccine have not, as yet, produced a similar bump in optimism.

Figure 2. Roughly what impact do you expect Covid-19 to have on demand for your organisation's services relative to your pre-crisis expectations?
6 month forward look May-June and August, 12 month forward look November

The demand for charities’ services appears to be forming on multiple fronts

Given the ongoing economic challenges and rising levels of unemployment triggered by Covid, it is important to understand where the demand stems from. One of the ways of identifying this is to understand the individuals that are requesting charitable services: is demand originating from a widening pool of clients in need, or driven by existing clients needing more support than previously?

39% of charities report that increased demand had been driven by both. One-in-five say it is due to existing clients needing more help, and one-in-ten say it is due to new clients. This implies both that the pandemic and economic crisis has led both to more people needing support, as well as need being greater where it exists. This could suggest that economic and social problems are becoming deeper and more widespread.

Figure 3. In the last six months, has any increase in demand for your services as a result of the Covid crisis been from existing clients needing more help, or an expanding group of clients needing help?

Examining what charities have reported anecdotally, survey data and wider trends, five separate but deeply interconnected fronts of demand emerge.

Figure 4. The five fronts of demand on charity services

Pre-pandemic problems - The ongoing sources of rising demand charities were experiencing prior to Covid

Even before the pandemic, four in five charity leaders stated that demand for their organisation’s services increased in 2019. A prime example of this is homelessness in England. There has been a rapid growth in rough sleeping over the last decade, as well as other forms of homelessness such as those living in temporary accommodation. “Core homelessness” (the most extreme homeless situations) rose from 120,000 people on a typical night in 2010 to 153,000 by 2017, and many housing charities struggled to cope with the increases in need.

While public funding for housing vulnerable people has increased, charities working with rough sleepers in England have warned that they still anticipate this pre-crisis trend will continue.

Direct Covid consequences  - The immediate increase in and intensification of demand resulting from the pandemic

Both the pandemic and the subsequent lockdowns had major impacts on our way of life, which have resulted in direct – and often immediate – increases in demand for charitable services. Many people experiencing loneliness have cited Covid as one of their main concerns for their wellbeing and more than half of adults reported a worsening of their mental health during the first lockdown. Domestic abuse charity Refuge also reported that calls to their helpline were up 80% in June, as lockdown trapped women at home with abusive partners, and common escape routes such as the school run were cut off.

One commonly raised direct impact of the pandemic is a new form of demand: for the technology required to access services at all. The vulnerable and disadvantaged groups many charitable organisations serve have substantive overlaps with the 5.3 million people in the country who do not have regular access to the internet – disabled adults, for example, were substantially less likely to be recent internet users in 2019 (78% vs 95% of not disabled adults). 66% of charities were delivering work remotely by mid-July but this required investment to achieve.

Build-ups and Backlogs - the pent-up demand that has not been serviced as a result of various levels of social distancing requirements, some of which has increased demand as a result of delay

Services being put on pause has created a backlog that needs to be handled in parallel with new need. Our previous Covid Charity Tracker found that 89% of charities were concerned about the impact of social distancing on their service delivery, and 27% of charities have cancelled services this year because either they or their users didn’t have the necessary skills or technology.

In many cases, these backlogs and gaps in service risk creating more severe problems further down the line. A key example stems from the millions of healthcare appointments that were postponed or cancelled during the peak of the crisis, including almost 26,000 patients who did not start their cancer treatment when it was identified as necessary. Many charities provide essential and supplementary health and support services for those suffering from medical conditions, including cancer. These delays in the detection and treatment of illnesses may lead to a higher need for their support.

But these backlogs are not limited to health. Charities involved in family mediation, domestic abuse and youth offending have all anecdotally warned of fewer opportunities for early intervention leading to greater demand for more substantial intervention further down the line.

Crisis spillover effects - The ongoing and accelerating knock on demand that results from the worsening economic situation

The Covid crisis sent the UK into the most sudden and severe recession ever recorded, and the economic impacts are likely to remain for some time. Lower income households were at drastically higher risk of seeing their sectors shut down, while many of those on higher incomes were able to save money on travel expenses by working from home and entertainment. The impacts are already being felt in a direct and serious way: benefits claims spiked and tens of thousands of people have had to rely on food banks for the first time.

Unemployment can have longer term impacts on peoples’ life chances, especially for those who have recently left education and need to start building their career.

Financial vulnerability also has knock-on impacts on other social issues and potentially for the long term, for instance through making it harder for domestic abuse victims to escape from their abusers, or through aggravating mental and physical health problems.

Shrinking supply - The transfer of demand as a result of other services closures

Our Covid Charity Tracker Surveys have shown that many charities are in difficult financial situations owing to the crisis. The most recent figures from NCVO state that one-in-ten organisations expect they are likely to have stopped operating by this time next year. A number, like the Norman Laud Association which provides respite care for children and adults with special needs in Sutton Coldfield, have already reported that they will have to close imminently if they are unable to close the funding gaps caused by their inability to fundraise during the crisis. Others still have closed, such as Age UK in Suffolk.

In the event that charities do close, this either means that demand for their services – potentially from people in great need – will go un-serviced, while some will be transferred to other charities or services. These surviving charities then risk having to meet additional demand, potentially while facing similar financial difficulties to the previous provider.

Charities will have to deliver more with less into 2021 and beyond

Charities are often advised to hold a few months’ operating costs in reserve, in case income is temporarily affected. Advisors tend to suggest anywhere between three and nine months’, depending on the charity’s own circumstances. Our survey finds that only a third have reserves of over six months’, and another third have three months’ or less.

Figure 5. How many months’ reserves do you currently hold? (August-November 2020)

Despite rising need, charities remain in a challenging financial situation. Looking ahead, 83% forecast a decline in their income over the next 12 months, relative to their pre-crisis expectations. Just over a third expect their income to decline by more than 25%.

Figure 6. What impact do you expect Covid-19 to have on your organisation’s income over the next 12 months, relative to your pre-crisis expectations?

Most charities (69%) think it will take more than a year to return to pre-crisis income levels – similar to what they told us in August.

Figure 7. How long do you expect it will take your organisation to return to pre-crisis income levels? 

Around a third of charities still have staff on furlough – and around a quarter of those said the reduced staffing means that demand is going unmet

Just under a third of charities still have staff on furlough using the Coronavirus Job Retention Scheme (CJRS) and intend to continue using it into 2021, while 10% intend to bring staff back from it this year. Overall, 39% of charities have furloughed staff – higher than the proportion of employers across the country that had done, so according to the latest available data in August (33%).

Figure 8. Following the recent extension of the Coronavirus Job Retention Scheme (CJRS) to March 2021, which of the below best describes your organisation’s use of it?

Of the 39% of charities that are making use of the furlough scheme, 63% say that they were able to meet demand, despite lower staff numbers. Nonetheless, almost 4 in 10 say that demand for their services is going unmet because they had to put staff on furlough.

Our Covid Charity Tracker in September found that charities were putting employees from a range of role types on furlough. Many of these were service delivery staff, but a proportion were also from fundraising, finance, HR, charity retail, or other roles. It is possible that the reason service delivery has not been directly impacted for many is because charities have opted to focus resources on delivering services now, at the expense of future income streams.

We also asked charities what difference it would make if furloughed staff were able to choose to volunteer back to the charity. A quarter said it would improve their capacity to deliver services, and a fifth said that it would give them more capacity to fundraise.

Conclusion

As the government considers how to soothe the social scars Covid has created, charitable organisations can be a core ingredient of the balm the country needs.

But in the context of the combination of multiple fronts of increasing demand and declining incomes, this report raises concerns about the capacity of the sector to help everyone who needs it over the next twelve months. Even more concerning is the prospect that, as it struggles with current demand, individuals see their circumstances worsen without intervention.

The trends that we have seen in both demand and income have been relatively consistent throughout this year. Now 2021 is shaping up to be a year of sustained high pressure for charities across the UK.

Download the results