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Pro Bono Economics, Charity Finance Group and the Chartered Institute of Fundraising monitored how charities are weathering the storm through a monthly Covid Charity Tracker, run in conjunction with Civil Society Media. This briefing note presents the findings from the first wave, which ran from 3 August to 7 August and drew 455 responses from charities working across the UK and beyond.

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Summary

While life in the UK is still very far from normal and the threat of a second wave remains material, it is evident that the most immediate aspects of the health crisis associated with coronavirus are starting to fade. In its place, the economic crisis is moving increasingly centre stage. Last week’s GDP data showed that the UK has entered the deepest recession since records began: relative to its pre-Covid peak, output per person was down 22.4 per cent in the second quarter of the year.0F[1] In contrast, the cumulative peak-to-trough contraction in GDP per capita recorded in the wake of the financial crisis – itself a ‘once-in-a-generation’ shock – amounted to 7 per cent (and took six quarters to accrue). Both the scale and pace of the current downturn truly are unprecedented.

While the hope is that the easing of lockdown restrictions will prompt a recovery in GDP that will also be sharp (and is likely already underway), the expectation is that the economic hangover will take some time to clear. For example, the projections contained in this month’s Monetary Policy Report from the Bank of England suggest we won’t see the restoration of the pre-crisis level of GDP per capita until the second half of 2022.1F[2] The Office for Budget Responsibility (OBR) has projected that the UK’s unemployment rate will peak at 11.9 per cent at the end of this year – roughly three times its pre-crisis rate – and that it will fail to fall back to prevailing levels before the end of the OBR’s forecast horizon in 2025.2F[3]

As the health crisis lingers and the economic crisis tightens its grip, so too can we expect the country’s social crisis to build. Millions of people are already, or soon will be, contending with challenges in relation to their jobs, their incomes, their ability to maintain credit repayments, their housing situation, their personal relationships, their caring responsibilities, and their physical and mental health and wellbeing. And such challenges are likely to fall unevenly, with the risk that they widen pre-existing inequalities in relation to race, gender, age, income and health. Many of our country’s most vulnerable residents will once again find themselves disproportionately exposed.

In the face of this triple crisis, civil society has played a crucial role – continuing to provide vital services up and down the country, and rapidly developing new ways of working in order to deal with the changed circumstances of lockdown and physical distancing requirements. And, as so often in times of national need, the country’s social capital has become fortified. Volunteers have stepped forward in record numbers, neighbours have reached out to each other and communities have formed new coping mechanisms and support structures.3F[4]

But charities and civil society organisation have had to operate under extraordinary pressures of their own. Weekly surveys run by Pro Bono Economics (PBE) throughout May and June highlighted the difficulties charities were facing in meeting growing demand for their help while contending with serious constraints on their resources. They showed too that many organisations feared the worst was still to come. Their responses pointed to the possibility of a £10.1 billion funding gap opening up in the sector over the second half of 2020, comprising a £6.4 billion drop in income relative to pre-crisis expectations and a rise in demand for support amounting to £3.4 billion.4F[5] Survey data from the Chartered Institute of Fundraising (IoF) and Charity Finance Group (CFG) supported a very similar conclusion, with a projected 12-month drop in income of £12.4 billion – almost precisely double the six-month figure estimated by PBE.5F[6]

The three organisations have now come together to launch a new monthly Covid Charity Tracker, run in conjunction with Civil Society Media. This briefing note presents the findings from the first wave, which ran from 3 August to 7 August and drew 455 responses from charities working across the UK and beyond.

The survey was open to all and the responses have not been weighted in any way, meaning caution must be taken when drawing sector-level conclusions: the country’s numerous micro-sized charities are almost certainly under-represented for instance.6F[7] Nevertheless, we are confident that the results provide a good indication of confidence across the charity sector in the UK. Tellingly, where questions from the earlier PBE weekly survey – a questionnaire that was filled in by well over 1,000 organisations over the course of its existence – have been repeated, we have uncovered very consistent responses.

It is of course in the DNA of charities to deal with difficult circumstances, and the Tracker identifies numerous examples of innovation and dedication. Around one-in-three respondents told us they had collaborated more with charity sector partners as a result of Covid-19, and one-in-ten said they had collaborated more with businesses. Three-in-four said they had made greater use of digital or tech.

There is evidence too of flexibility and support from funders and from government. Two-in-three have made use of the Job Retention Scheme, and two-in-five plan to make use of the Job Retention Bonus. Many have also applied for support from the government’s emergency funding for frontline charities – though fewer than half of those charities that have applied have the money in the bank.

But the August Tracker points also to a widening gap between need and what charities are able to provide. Approaching nine-in-ten are expecting a decline in income this financial year, and one-in-four think it will take more than two years to return to pre-crisis income levels. Crucially, the sector looks set to lose a significant proportion of its staff. Based on the survey responses, we estimate that around 26,000 jobs (or 2.8 per cent of the pre-Covid charity sector workforce) have already disappeared. Once furlough ends, survey responses indicate that number might approach 60,000 (or 6.6 per cent of the workforce). Staff cuts may already be biting in the sector, but it would appear that we are yet to reach the halfway point.

That is bad news for many thousands of individuals, but it is of course terrible news for the UK more generally. Three-in-five charities told us they expect to scale back their activity in the coming six months, yet two-in-three expect demand for their help to rise. All this points to significant unmet need.

The survey also highlights how the crisis is provoking different challenges across different parts of the sector. Smaller charities expect to face the largest declines in income, while larger charities are more likely to be gearing up for redundancies. Worryingly, there is some indication too that charities working primarily with black, Asian and minority ethnic (BAME) communities are disproportionately likely to be expecting increased demand, yet are also disproportionately likely to expect to have to scale back their activity.

Overall, it’s very clear that the challenges faced by the charity sector in recent months are far from over – indeed, the situation is very likely to get worse before it gets better. Weathering the storm and continuing to play a vital role in helping the country cope with its three-fold health, economic and social crises, will almost certainly require more financial support from government. But it will also be aided by building on some of the positive trends the Tracker has identified around innovation and collaboration and, ultimately, by involving charities and civil society more closely in the policy making process in order to move them to the centre of the country’s Covid-19 recovery plan.

[1] J Scruton, GDP first quarterly estimate, UK: April to June 2020, ONS

[2] Bank of England, Monetary Policy Report, August 2020

[3] OBR, Fiscal Sustainability Report, July 2020

[4] For more on the social impacts of, and responses to, coronavirus, see ONS, Coronavirus and the social impacts on Great Britain, various.

[5] Pro Bono Economics press notice, “Charities facing £10.1 billion funding gap over the next six months”, 9 June 2020

[6] Chartered Institute of Fundraising press notice, “Charities are facing a £12.4 billion shortfall in income for the year due to impact of coronavirus”, 19 June 2020

[7] Of the 455 responses: 58 came from charities with (pre-Covid) incomes of less than £100k a year; 101 came from those with incomes of £100k to £500k; 58 came from organisations with incomes of £500k to £1 million; 172 came from those between £1 million and £10 million; and 66 came from charities with annual incomes of £10 million plus. Respondents were also asked if they worked primarily with BAME communities: 46 of the 455 total said that they did.