Charities lack funds to meet demand

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Political uncertainty and economic downturn have left charities with major fears over the ability to meet their objectives

1st October 2019 by Gareth Jones 0 Comments

Political uncertainty and economic downturn is rife within the voluntary sector, as charities fear they no longer have the income to deliver their objectives.

A new study has revealed charities are not confident in their ability to generate the income needed to meet their charitable goals, fearing political uncertainty and an economic downturn at a time when they are being asked to do more following a decade of austerity.

The research by charity investment managers Brewin Dolphin, titled Charity Investment: navigating uncertain times, was conducted throughout June and July 2019 and is based on the views of 110 charity trustees and senior managers of grant-making and service-providing charities. Brewin Dolphin first conducted comparable research in the charity sector in 2017.

The study found half (50%) of charities are not confident that their funding levels will enable them to meet their charitable objectives in 2020.

A slowdown in the economy was considered the biggest risk to future income and the ability to meet charitable objectives for 45% of charities. And the number of charities fearing a global recession has more than doubled to 26% against just 11% in 2017.

Over a third (35%) said political uncertainty is among their primary concerns and low growth in markets was cited as the primary investment risk for nearly half (48%) of charities, followed closely by volatility (44%). 

Ruth Murphy, head of charities at Brewin Dolphin, said: “Charities are being asked to take on more every year and cracks are beginning to show, particularly for small and medium-sized charities.

“That half of the charities surveyed do not believe current funding levels and fundraising activity will allow them to meet their charitable objectives over the next year is worrying.  Grant-making charities can always cut their cloth accordingly by reducing the grants they make, but service-providing charities do not have that flexibility.

“Charities have long relied on their investments to provide much needed income, but political uncertainty, the volatility in the markets and the threat of a global recession very much preys on trustees’ minds.  Two years ago, just 11% of charities feared a global recession - that has now more than doubled to 26%. On reading the report in full, you are left with the feeling that charities are overwhelmed.

“But charities are resilient and are confident in their abilities to weather any storm as it comes.   Charities that do invest do so for the long term across various asset-classes and are well-placed to ride out fluctuations and volatility in the market.”

The study also found over three quarters (77%) of charities have investment policy statements which contain ethical criteria and 47% of organisations believed their trustees’ understanding of financial and investment knowledge to be good or very good.