Half of charities fear running out of cash within months

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A new study has shown the extent to which charities face a fight for their future, with demand surging but income falling rapidly #NeverMoreNeeded

3rd June 2020 by Gareth Jones 0 Comments

Half of Scottish charities face a fight for survival as they fear they could run out of cash within six months.

Research complied by the Scottish Council for Voluntary Organisations (SCVO) reveals the extent to which charities are being put under pressure by surging demand but falling income as a result of the coronavirus pandemic.

The study analysed data from 27 surveys and briefings which were carried out between March and May by organisations such as ACOSVO, the Charities Aid Foundation (CAF), Food Train and Foundation Scotland.

It shows that around half of charities think they will run out of funds in six months, and a third of organisations have less than three months’ worth of their funding in reserves.

It also reveals the extent to which Scottish organisations are relying on furlough to help support them through lockdown. On average between 15% and 30% of staff have been furloughed, which equates to between 16,000 to 32,000 of the sector’s 108,000 paid staff.

Survey respondents said they fear far-reaching and long lasting economic impact as businesses struggle to recover from Covid-19, including the charity retail. Themes running through the concerns aired include uncertainty over what happens when reserves get used up, the furlough scheme is wound up, and government emergency funding is withdrawn.

And this is all against a backdrop of a rise in demand, with frontline services report exponential increases in demand. For example, Food Train has seen a 51% increase in referrals from for older customers looking for food deliveries. According to NCVO, 43% of charities they surveyed in March reported an increase in demand for their services, while 52% plan to reduce services. CAF research in April found that one in four charities have seen an increase in demand for their services because of the crisis.

David McNeill, director of development for SCVO, said charities are facing a perfect storm of reduced income but increasing demand.

He said: “It is clear is that while there has been a colossal and inspiring adaptation to support people through the lockdown period, many voluntary sector organisations are likely to face the perfect storm of reduced income and surging demand over the coming months.

“As predictions point towards some significant economic and social challenges as we begin to exit lockdown, organisations will be facing a greater demand for services which support those who have lost jobs, have seen their financial situations change, have faced abuse at home, are struggling without regular childcare or education, and much more.

“The initial response from the Scottish and UK Governments has been focused on the immediate needs of organisations who have had a sudden drop in income or can provide vital support to communities during the crisis.

“Funders have been collaborating more than ever, working innovatively to ensure emergency funds can be accessed quickly by those most in need and allowing existing funds to be used flexibly.

“In the coming months, organisations will need support from all funders – including Holyrood, Westminster, local authorities, independent grant and trust funders and members of the public – to help them as much as they can to survive.

“We know the voluntary sector has been Never More Needed than at this time, and SCVO will continue to champion the absolutely vital work that organisations are carrying out and work with funders to ensure the sector can continue to support communities during and after the coronavirus pandemic.”

A Scottish Government spokesman said: “Charities across Scotland provide invaluable services and we recognise the difficulties they are facing.

“We have allocated more funding to the third sector than we have received in consequentials from the UK Government. As part of the £350 million Welfare and Wellbeing Fund, we have provided support to a range of organisations, including charities, to help them respond swiftly and according to local need during the COVID-19 pandemic.

"This includes a £25 million Third Sector Resilience Fund which is providing immediate financial support and advice to third sector organisations who expect to have cash flow issues in the months ahead.

“The £50 million Wellbeing Fund is supporting hundreds of third sector organisations across Scotland that have expanded their work to provide vital assistance for communities at risk in the face of Covid.

"In addition, eligibility for the £10,000 Small Business Grant was extended to include properties in receipt of charitable rates relief on 12 May, widening access to charitable businesses which meet the necessary criteria.”

More information on funding to support charities through the crisis can be found on the Coronavirus Third Sector Information Hub.