Income on the up, but challenges ahead for charity sector

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An annual study on the charity sector has revealed income rose for charities, but donations are falling and government grants stagnated

21st June 2019 by Gareth Jones 0 Comments

Income for charities is continuing to rise across the UK, but financial challenges could be on the horizon – a new report has shown.

The National Council for Voluntary Organisations' (NCVO) Civil Society Almanac reveals that total income for the charity sector increased by 2% to £50.6 billion for the financial year 2016/17.

However it also shows donations are falling and income from government has stagnated.

The data, drawn from charities’ annual accounts, shows that income from government to UK charities remained static at £15.8bn, but growth in other types of revenue meant it fell as a proportion of overall sector income to 31%, which is the lowest level since 2000/01.

Public donations accounted for almost half (45%) of all charitable income at £22.9bn, but there was a fall in earned income from the public and donations dropped by 2%.

A reduction in earned income – which is generated through fees paid for goods and services, membership subscriptions, sales from charity shops or fundraising events – has not been reported in the last five years.

Karl Wilding, director of public policy at NCVO, said conditions could be more challenging for smaller organisations.

Wilding, who will take over as NCVO chief executive in September, said: “The sector's income as a whole is still growing, which is positive, but it’s at a slower rate than we’ve seen recently. And it’s important to note the factors driving growth, assets and legacy income, are less likely to be things small charities have access to.

“Grant makers should be especially conscious of this, as they are a key way of distributing the proceeds of asset growth to those organisations which are asset poor. Greater collaboration, simpler access to grants and proportionate reporting requirements are a few examples of what will help here.

“The drop in public income reflects other findings we’ve seen and anecdotal evidence. Clearly lots of organisations were adapting their fundraising strategies at this point in time, preparing to meet higher data-protection standards, and doing a lot of internal work rather than launching donor-recruitment campaigns. I’m hopeful that re-focusing on the right sort of engagement with supporters will pay off in the long run.”

The number of people working in the voluntary sector fell slightly compared to the previous year, but has grown by 11% since 2010. In 2018, a total number of 865,916 people worked for voluntary organisations – however the report does not analyse the amount of hours worked by staff. More than half of the sector’s workforce is educated to degree level or higher and voluntary organisations reported the lowest incidence of skills gaps compared to organisations in other sectors.

Overall levels of volunteering have remained stable. More than one in five people volunteered at least once a month for a group, club or organisation. However, involvement varies for different backgrounds: formal volunteers are more likely to be older, well-educated and from higher socio-economic groups.

The sector’s net assets stood at a record level of £131.2bn, with growth in fixed assets outstripping growth in liabilities, despite significant growth in pension liabilities as a result of automatic enrolment and changes in accounting standards. However in Scotland, it is unlikely that investments and grant income have grown at same scale, as the sector is less dominated by large organisations.

In 2016/17, spending on grants grew by 5% to a new record high of £7bn. Over half (57%) of the money spent on grants stays within the voluntary sector, but notable amounts also go to individuals and other types of organisations like public sector bodies and universities. International development organisations receive by far the largest share (37%) of grant making from the sector.