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Charities remain under significant pressure from the financial impact of the recession and the delivery challenges created by Covid

The September Covid Charity Tracker Survey run from 15-20 September, as Covid cases had begun to rise rapidly and new restrictions and social distancing requirements were expected. The number of employees on payroll across the economy had fallen by just under 700,000 since March[1] and the Chancellor had not yet announced the government’s intentions to extend employment support beyond October. While GDP grew for the third consecutive month since the last lockdown had been eased, output remained significantly below February 2020 levels.

This context continued to create significant pressure for charities - with the recession taking its toll on finances and the prospect of further lockdowns bringing fresh challenges in service delivery.

As in previous months, charities are overwhelmingly negative about their ability to deliver on their objectives

Consistent with previous months, charities overwhelmingly expected Covid to have a negative impact on their ability to deliver on their objectives over the next six months – nine in ten expect a negative impact.

While uncertainty about the future is the most universal concern, as Chart 1 shows, almost all charities are also concerned about the impact of the recession on their finances, and with more lockdown restrictions looming, nine in ten are concerned about the impact of social distancing on service delivery.

Chart 1. How concerned are you about these issues affecting your ability to deliver against your objectives? (15-20 September 2020, chart shows organisations that are ‘somewhat’ or ‘very’ concerned)

Note: n = 224, of which 71 are small charities and 153 are medium/large charities.

Source: Covid Charity Tracker Survey, 15-20 September 2020

And the economic outlook for many is getting worse, rather than better

Charities have almost all taken a financial hit: just 6 per cent said that they were not facing any financial challenges due to Covid and in June, PBE estimated the sector was facing a £10.1bn funding gap.

While some commentators hoped to see a “v-shaped” recovery once the wider economy started to re-open, since July almost half (47 per cent) of charities responding to our survey have further revised down their financial forecasts. The situation was most stark for smaller charities, with 58 per cent reporting downwards revisions compared to 42 per cent of larger organisations. Around a fifth reported that their forecasted income had improved since July, and just under a third reported that it had stayed the same.

As set out in Table 6 in the appendix, sources of income that have been most affected are public donations, fundraising and earned income (other than commissioned services), where more than half of respondents have seen these sources of income fall due to Covid, and around a third of organisations have seen these income sources fall by more than 25 per cent.

Grants from trusts and foundation have broadly held up, with about a third of organisations seeing a fall and another third seeing an increase. Around half of organisations have seen no change in income from corporate giving, government grants, commissioned services or investment income – though of these, government grants is the only income source where more organisations have seen income increase than decrease.

The picture is slightly different for smaller and medium/large charities – in particular, smaller organisations were more likely to see public donations fall by more 25 per cent (half of small charities reported this, compared to a quarter of larger organisations).

Income hits are translating into job losses

PBE has previously estimated that 60,000 jobs could be lost in the sector due to Covid. In this months’ survey, over a quarter of organisations told us they had made staff redundant, and a fifth reported that they expected to have to make redundancies when the Job Retention Scheme ends on the 31 October. Job losses appear to be more likely in larger organisations – a quarter expect to make further redundancies, compared to one in twenty small charities. Considering both redundancies and unfilled vacancies, 43 per cent of organisations told us they are cutting jobs.

This has serious implication both for short term service delivery capacity, with a third of organisations cutting service delivery roles, and for long term organisational sustainability, with one-in-six organisations telling us are cutting fundraising roles, as Chart 2 shows.

Chart 2. In organisation that reported jobs cuts, from which functions in your organisation have or are jobs being cut (either through redundancies or unfilled vacancies)? (15-20 September 2020)

Note: n = 224, of which 71 are small charities and 153 are medium/large charities.

Source: Covid Charity Tracker Survey, 15-20 September 2020. 52% of all charities (63% of small charities and 46% of medium/large charities) reported that jobs are not being cut in their organisation.

And with weaker finances and fewer staff, many charities will face real difficulties meeting demand for their services over winter

During the previous period of lockdown, charities stepped in to provide vital services – from food parcel deliveries to mental health support. Since then, many organisations have faced declines in income and staff losses. 

Asked what they anticipated would happen to demand for their services over the next three months if there was a further increase in cases and localised lockdowns, 55 per cent believe they would be unable to meet demand, either because of an increase in demand that they could not meet (29 per cent), or because of a fall in their own delivery capacity (26 per cent). Just over a fifth said that they would be able to meet any increase in demand for services, while 14 per cent said that they expected a decrease in demand.

Small charities were more likely to expect an increase in demand without the capacity to meet it (37 per cent compared to 25 per cent for larger organisations).

While more charities have accessed the government’s emergency support for frontline charities, few expect to take part in the Kickstart Scheme

Seven-in-ten organisations have applied for financial support from the government, including furloughing staff.  As Chart 3 shows, compared to last month more organisations told us they have both applied for, and secured, access to the government’s emergency funding for frontline charities. 36 per cent had applied and received the money this month, compared to 20 per cent in August, though four-in-ten had not applied and, as in August, one-in-ten had made an unsuccessful application.

Chart 3. For those organisations that have applied, gave you been able to access the Government’s Covid-19 emergency funding for frontline charities? (August to September 2020)

Note: August n = 455, September n = 224. Residual is “have not applied” (56% in August, 40% in September) or “don’t know” (not an available option in August, 4% in September).

Source: Covid Charity Tracker Survey, 15-20 September 2020

The government has recently implemented the Kickstart Scheme, which provides funding for employers to create six-month job placements for young people who are at risk of long-term unemployment. Organisations must provide at least 30 placements to benefit and can partner with other organisations to do so.

Our survey found that only one in ten charities expect to be able to make use of the scheme. A fifth said that they could provide fewer than 30 placements but did not have a partner to help them reach the necessary 30. And a third said that they didn’t have the resource to provide placements, potentially losing them valuable additional support.

Appendix included in the full results document.

[1]Earnings and employment from Pay As You Earn Real Time Information, UK: September 2020, ONS